NEW YORK (
) -- For those who find Congress boring, Rep. Ron Paul (R., Texas), will be a welcome sight at the start of next year as he takes over the chairmanship of the Subcommittee in the House of Representatives that oversees the
Paul is the author of a book called "End the Fed," and though Paul wishes he could do just that, he told
magazine in an interview this week that he believes the Fed will end itself faster than Paul himself will be able to accomplish the task.
Paul believes strongly that government does far too much meddling. On his website, he hawks bumper stickers that read "Don't Steal: The Government Hates Competition."
interview, Paul blames the Fed for "depressions and inflations and financial chaos." He adds "the Fed creates money and hands it out for free and lets the banks make billions of dollars."
Paul's message has resonated of late with many Americans, and his views are in many ways consistent with those of the Tea Party, probably one of the more influential movements to come along in American politics in a generation or more.
Neither Paul nor the Tea Party would be nearly so popular were it not for the massive federal bailouts of the financial system in 2008 and 2009.
Though Paul hates the Fed's interest rate policies and quantitative easing just as much, it is the bailouts of big banks like
, as well as entities that weren't even technically under the Fed's mandate, like
that really rankle the American public.
"When you say 'Too Big To Fail,' most people hear, 'I'm too little to help,' and the Fed is the posterchild for Too Big To Fail: all the resources committed to helping the large and well-connected firms," says Vince Reinhart, scholar at the American Enterprise Institute -- a conservative think-take -- and former director of the Fed's division of monetary affairs.
But Reinhart says getting rid of the Fed would not be sufficient to kill the ability of the U.S. government to bail out its banks.
Rep. Ron Paul (R., Texas)
"The Fed basically can cut a check whenever it wants, therefore it tends to be the entity that exercises too big to fail, but they are separate," Reinhart says. He adds the phrase was originally used to talk about the ability of the
Federal Deposit Insurance Corp.
to resolve failed institutions. Without the Fed, he says, the Treasury could step in or the FDIC could choose not to shut down a large bank it determined was failing.
"Even if there were no Fed, if one weekend it became clear that
Bank of America
were insolvent they'd probably be Too Big To Fail, meaning the FDIC wouldn't shut them down."
Instead, Reinhart says, "the FDIC could make it clear if it needed to resolve this institution it would protect uninsured depositors, but the difference is the FDICs actions would be limited to the insurance fund whereas the Fed because it can create reserves out of thin air has unlimited scope."
While getting rid of the Fed may not be on the table, Larry McDonald, a former Lehman Brothers trader who wrote a book about the firm's collapse and head of McDonald Advisory Group, an asset management and research firm, argues dissent within the Federal Reserve, as well as attacks from Paul and other members of Congress, could nonetheless have a troubling effect on the markets.
"If people in the world see the Fed as in flux and not really unified, that can create a destabilizing event too. If these Fed governors are at each other's throats and Ron Paul's kind of stirring up the mix that could create a problem too."
Written by Dan Freed in New York
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