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Source link: http://archive.mises.org/11734/fed-secrecy-in-the-watergate-years/

Fed Secrecy in the Watergate Years

February 25, 2010 by

At Congressional hearings, Ron Paul casually mentioned, in an exchange with Ben Bernanke, the rumors that the Fed somehow assisted in the Watergate coverup, and when Congress looked into it, they couldn’t get the information. He offered this only as a passing illustration of how little Congress can actually know about what is going on at the Fed and hence the case for a transparency act. Bernanke was outraged at the suggestion, calling it “bizarre.”

Just how secretive was the Fed during Watergate? Former Washington Post reporter William Greider in his book Secrets of the Temple tells of the Watergate era:

[Fed Chairman Arthur] Burns, for his part, tightened up on Fed secrecy. He abolished the long-standing practice of keeping verbatim minutes of the Federal Open-Market Committee meetings. These minutes were normally kept secret until five years had elapsed — and were unlikely to embarrass anyone so long after the fact. Even so, they were the only record of who said what in the private policy meetings, the central bank’s only decent accounting for history of how it had determined policy for money and credit. Arthur Burns discontinued the practice. In the future, the Federal Reserve’s secret deliberations would remain secret forever. FOMC minutes were reduced to mere summaries of its meetings. (pp. 345-346)


Dick Fox February 25, 2010 at 10:49 am

I would hope that Ron Paul would confront Bernanke and push him to resume keeping transcribed notes. If he is outraged at Paul’s comment and considers it “bizarre” then perhaps he could provide copies of the notes of past meetings.

Deefburger February 25, 2010 at 11:22 am

I do not expect anything from the Fed except marginalising any attempt to gain knowledge of the truth of the Fed’s behaviour as “conspiratorial”, “bizarre”, “kooky” etc.

I have noticed that the mainstream media pundits in their attempts at countering any claims of Fed culpability in anything can only dance around the issue or the facts, or both, waving their arms and declaring the whole question ridiculous. Not much substance goes into these statements and the bottom line is generally “We NEED the Fed”.

I have yet to find a need for them of my own. I for one have no need of them whatsoever.

Liberty if practised fully is not a comfortable state of being. These people expect others to feel more secure in the hands of someone else, in the control of someone else, and dependent upon someone else.

Liberty if practised fully is not a pretty sight. It is not organised by some higher form of being, like a bureaucrat, or central banking authority. It is a seething mass of human endeavour and trade. It is a headless, shapeless, uncontrolled chaos of human activity.

The Fed, and the Government, and their corporate livestock want us to be afraid of independence and self reliance. They want us to value the “safety” of their stockyards, the necessity of their systems and controls, and the beauty of their design and organisation. Any question of the validity of their claims of superior knowledge and understanding is marginalised and reduced to either foolishness or some other negative. As an illustration, they will point to the ugliness of Liberty, the chaos and confusion and lack of control as though having a cage around you is safer than no cage.

When I hear someone like Bernake say something like “bizarre” when pressed for truth, I am reminded of the lyrics to Pink Floyd’s “Wish you were here”.

“…Did they get you to trade your heroes for ghosts?
Hot ashes for trees?
Hot air for a cool breeze?
Cold comfort for change?
And did you exchange your walk on part in a war, for a lead role in a cage?”

David February 25, 2010 at 3:42 pm

The Senate’s official Watergate report also states that the San Francisco Federal Reserve Bank and the Los Angeles Federal Reserve Bank (Nixon was from California) were unable to tell investigators which commercial banks received scores of thousands of dollars in one-hundred-dollar bills that President Nixon used for hush money.


Chairman Bernanke characterized Congressman Paul’s question as “bizarre.” Standard tactic of the establishment: Ridicule rather than engage.

Hard Rain February 25, 2010 at 4:23 pm

Nothing to see here, folks. Move right along. The smoke and mirrors will all evaporate soon and you won’t believe you ever saw them with your own eyes.

Now, what’s Tiger Woods up to..?

Bruce Koerber February 25, 2010 at 5:08 pm

The CIA And The Federal Reserve Are Secret Collaborators.

Since the CIA operates in secrecy and conducts its own version of foreign policy and since it needs money for its clandestine operations what is to keep it from cozying up with the Federal Reserve which is also cloaked in secrecy?

First of all this collaboration cannot be proven correct or incorrect because of the secrecy of the Federal Reserve. There needs to be transparency.

The minutes of the meetings that Bernanke mentions cannot disclose the secret deals made with the CIA because that would take away the cloak of secrecy of the CIA.

What is evident then is that some of the meetings in which the Federal Reserve is involved are not reported to the Congress, ever – never. In that unregulated environment of moral hazard the unConstitutional coup flourishes. It operates secretly and launders money in whatever way it wants. No doubt the military industrial complex gets plenty and it has become the major player.

In other words, the unConstitutional coup is not much different than a military coup except that it is being done surreptitiously and systematically. The military industrial complex has usurped our Constitutional Republic and has turned America into an imperialistic and economic terrorist nation.

danny February 25, 2010 at 6:24 pm

I think this was a brilliant move on Dr. Paul’s part. While Bernanke and the mainstream will ridicule him, thousands of people are searching the internet for anything they can find related to this subject. The results will be posted on YouTube, LRC, and other sites and earn widespread audiences.

It will end up taking another notch out of the FED’s credibility (I use that term rather loosely).

Nick February 25, 2010 at 6:53 pm

@danny… I posted the links to several relevant news articles but, I’m guessing because of the links, it needs to be approved before it shows up.

Artisan February 26, 2010 at 4:54 am

The here advertised book however is a defense of Keynsian economics apparently, as one critic mentions…

“Traditional central bankers view combating inflation as their primary professional objective, which tends to favor creditors at the expense of debtors. Grieder suggests that in waging war on inflation the Fed in effect was waging war on the millions of ordinary Americans struggling to make end meets and keep their heads above water.”

Jeffrey Tucker February 26, 2010 at 7:52 am

Oh yes. The book is awful really – exhaustive but fundamentally wrong.

Darryl Schmitz February 26, 2010 at 1:57 pm

For at least a half-century, our federal government and the Federal Reserve could much more easily fly below the radar with their gross inefficiency, their secrecy and their blatant disregard for our Constitution masked by the built-up tangible value of our robust economy. Now that they’ve sucked all of the lifeblood out of our economy and much of our basic industry has fled overseas, they mistakenly assume they can somehow continue their obscene excesses and continue to evade detection. They are about to find out otherwise.

Simon9 February 26, 2010 at 6:33 pm

If Dr. Paul says the Fed practiced heightened secrecy during Watergate, no doubt it’s true. This guy does his homework. It’s always a treat to listen to him.

People have been ignoring Ron Paul, his observations and prescriptions for too long and look at where it’s gotten us.

Now they’re starting to listen as the mess worsens, even though Ben Bernanke and others of the system pooh pooh his statements. But is it too late?

It's never too late, Simon9 February 27, 2010 at 2:53 am

The FED, in partnership with the IRS, has in essence turned a lifetime of education, work, struggle, success, reward and retirement into real-life Monopoly. While the FED boys, who ever they are, churn out multicolored paper and place VALUE on “money” through clandestine meetings, the GOVERNMENT bellies up to the bar at this “VIP only” ATM to spread the paper around, pacify the population, plug holes in budgets, finance wars, fund crony programs, subsidize quasi-government businesses (like farming, etc), etc. MONOPOLY…our US Treasury and IRS buildings should be called the Parker Brothers Complex. HOWEVER, as American citizens, how would our lives change if TOMORROW we made the choice to play MONOPOLY, and stopped taking this very serious game of LIFE so seriously? WHY do we sweat so hard, work so much and worry so often about our families and our futures when the money in our hands has no value? GHANDI had the right idea… And Mr’s. Lenin and Stalin knew the score…we are acting like useful idiots if we allow this con game to continue.

Whys February 27, 2010 at 3:21 am

Lets be reasonable. Ron Paul is a lovable senile nut case, but hardly a super sleuth or anything else short of a die hard conspiracy theorist. That’s not to say our government isn’t deserving of a conspiracy theory or two, thus his lovableness, but that also doesn’t mean that every conspiracy some crack pot comes up with is true. Ron Paul appeals to the no holds barred revolutionary in each of us, but please allow our better judgments to hold sway. Keep the baby, throw out the bath water.

newson February 27, 2010 at 3:31 am

to whys:
perhaps you’d actually like to point out where ron paul is specifically wrong.

you’re short on argument, and long on ad hominem.

mikey February 27, 2010 at 11:27 am

Ron Paul is a lovable senile nut case…

I wish my mind was as sharp as his.He is extremely lucid, his logic rigorous.

Yours truly, February 27, 2010 at 3:28 pm

“Madame Speaker, I would like to enter into the record the following letter from Professor Robert D. Auerbach, a professor at the LBJ School of Public Affairs at the University of Texas. This letter provides additional information regarding remarks I made at yesterday’s Financial Services Committee Humphrey-Hawkins hearing, remarks which Federal Reserve Chairman Bernanke categorized as “bizarre.”

The evidence Congressman Ron Paul mentioned is well documented in my recent book, Deception and Abuse at the Fed (University of Texas Press: 2008). The head of the Federal Reserve bureaucracy should become familiar with its dismal practices.

First, consider the Fed’s coverup of the source of the $6300 in hundred dollar bills found on the Watergate burglars when they were arrested at approximately 2:30 A.M. on June 17, 1972 after they had broken into the Watergate offices of the Democratic Party. Five days after the break-in, June 22, 1972, at a board of directors’ meeting of officials at the Philadelphia Fed Bank, it was recorded in the minutes [shown on page 23 of my book] that false or misleading information had been provided to a reporter from the Washington Post about the $6,300. Bob Woodward told me he thought he was the Washington Post reporter who had made the phone inquiry. The reporter “had called to verify a rumor that these bills were stolen from this Bank” according to the Philadelphia Fed minutes. The Philadelphia Fed Bank had informed the Board on June 20 that the notes were “shipped from the Reserve Bank to Girard Trust Company in Philadelphia on April 3, 1972.” The Washington Post was incorrectly informed of “thefts but told they involved old bills that were ready for destruction.”

The Federal Reserve under the chairmanship of Author Burns not only kept the Fed from getting entangled in the Watergate coverup, which the Fed’s actions had assisted, it allowed false statements about bills the Fed knew were issued by the Philadelphia Fed Bank to stand uncorrected. Blocking information from the Senate and House Banking Committees [letters shown in my book, Chapter 2] and issuing false information during a perilous government crisis imposed huge costs on the public that had insufficient information to hold the Fed officials accountable for what they had withheld from the Congress. Had the deception been discovered the Fed chairmen following Burns may have been forced to rapidly implement some real transparency to restore the Fed’s credibility. That would have reduced or eliminated many of the lies, deceptions, and corrupt practices that are described in my book.

The second subject brought up by Congressman Ron Paul is the exposure of faulty examinations of the Federal Reserve of a foreign bank in Atlanta, Georgia through which $5.5 billion was sent to Saddam Hussein that a Federal Judge found to be part of United States active support for Iraq in the 1980s.

On November 9, 1993, several federal marshals brought a prisoner, Christopher Drogoul, into my office at the Rayburn House Office Building of the U.S. House of Representatives. The marshals removed the manacles. Drogoul took off his jump suit and changed into a shirt, tie, and business suit. He immediately looked like the manager of the Atlanta agency with domestic headquarters in New York City of Banca Nazionale. Drogoul had come to testify about a “scheme prosecutors said he masterminded that funneled $5.5 billion in loans to Iraq’s Hussein through BNL’s Atlanta operation. Some of the loans allegedly were used to build up Iraq’s military and nuclear arsenals in the years preceding the first Gulf War.” 1

Drogoul’s “‘off book’ BNL-Atlanta funding to Iraq began in 1986 as financing for products under Department of Agriculture programs.”2 The loans allegedly had been authorized by the U.S. Department of Agriculture. Since Drogoul told the committee he was merely a tool in an ambitious scheme by the United States, Italy, Britain and Germany to secretly arm Iraq in their 1980-88 war, the testimony was politically contentious and unproven. He was sentenced in November 1993 to 37 months in prison and he had already served 20 months awaiting his sentencing hearing.

U.S. District Judge Ernest Tidwell found that the United States had actively supported Iraq in the 1980s by providing it with government-guaranteed loans even though it wasn’t creditworthy. The judge said such policies “clearly facilitated criminal conduct.”3

Gonzalez was drawn to Drogoul’s answer about the Fed examiner who had visited his Atlanta operation. Gonzalez said that:

“At the November 9, 1993 Banking Committee hearing I asked Christopher Drogoul, the convicted official of the Banca Nazionale Del Lavoro agency branch in Atlanta, Georgia, how the Federal Reserve Bank examiners could miss billions of dollars of illegal loans, most of which ended up in the hands of Hussein.

Mr. Drogoul stated:

The task of the Fed [bank examiner] was simply to confirm that the State of Georgia audit revealed no major problems. And thus, their audit of BNL usually consisted of a one or two-day review of the state of Georgia’s preliminary results, followed by a cup of espresso in the manager’s office.”

Gonzalez was appalled at the of lack of effective examination of a little storefront bank and also appalled by the gifts exchanged by officers of the New York Federal Reserve and the regulated banks in New York City where the main U.S. office of BNL was located. A description of what followed is in my book.

The Fed voted in 1995 to destroy the source transcripts of its policy making committee that had been sent to National Archives and Records Administration. Chairman Alan Greenspan had the committee vote on this destruction, telling the members: “I am not going to record these votes because we do not have to. There is no legal requirement.” (p. 104 in my book.) Greenspan thus removed any fingerprints on this act of record destruction. Donald Kohn, who is now Vice Chairman of the Board of Governors at the Federal Reserve, answered some questions I had sent to Chairman Greenspan about this destruction. Kohn replied in a letter on November 1, 2001 to me at the University of Texas that they had destroyed the source records for 1994, 1995 and 1996, they did not believe it to be illegal and there was no plan to end this practice. That is one reason why the Federal Reserve audit supported by Congressman Ron Paul is needed. The Fed must stop destroying its records.

Unicron 6 February 27, 2010 at 5:33 pm

I love you Ron Paul.

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