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Fed money played no role in Watergate

David Gura Apr 4, 2012

Jeremy Hobson: Stocks are falling around the world this morning after notes from the Federal Reserve’s latest meeting showed only two of 10 voting committee members support additional stimulus. I’m talking about quantitative easing, when the Fed buys bonds to boost lending and spending and lower unemployment.

Paul Edelstein is with IHS Global Insight.

Paul Edelstein: Even though the Fed thinks that unemployment really isn’t going to fall any further, or much further than it has this year, support for another round of easing has slipped among the committee members.

Back in January, several Fed committee members supported additional monetary easing. Now that Fed news may be moving
markets, but it’s not the only Fed news we’ve got.

And Marketplace’s David Gura is here live from Washington to tell us about something a little juicier. Morning David.

David Gura: Morning Jeremy.

Hobson: So this item, I gather, comes from the Fed’s inspector general?

Gura: That’s right; so we’re learnign about the Fed’s history. First, we learned that the Federal Reserve was not involved in the Watergate burglary back in 1972; the cash used in the scandal did not come through the Federal Reserve. And second, there is no evidence the Fed helped Saddam Hussein, helped Iraq, get billions of dollars to buy weapons in the 80s.

Hobson: OK, all good to know — but why was the inspector general looking into this?

Gura: So, back in February of 2010, Ben Bernanke was testifying before the House Financial Services Committee. And Republican Congressman Ron Paul — one of the Fed’s biggest critics — made these two claims, about the Fed and Watergate, and about the Fed supposedly loaning money to Saddam Hussein.

And this is was Ben Bernanke’s reply, at the hearing back then:

Ben Bernanke: Congressman, these specific allegations you’ve made I think are absolutely bizarre and I have absolutely no knowledge of anything remotely like what you just described.

So at that hearing, Democratic Congressman Barney Frank — who was at that point the chair of that committee — asked for an investigation. So, the inspector general pores over documents and ultimately concludes in this report, Jeremy, there is no evidence of undue political interference with Federal Reserve officials in either of these cases. It’s just not true.

Hobson: Ben Bernanke probably breathing a sigh of relief this morning. Marketplace’s David Gura in Washington, thanks a lot.

Gura: Thank you.

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