February 24, 2010

It seems in vogue these days to apologize for wrong doings. I am not really sure why Tiger Woods apologized on worldwide television to golfers, his wife, his mother, to me, to you…to the entire world, for what appears a personal matter, but I tell you who needs to apologize publicly is Federal Reserve Chairman Ben Bernanke. He needs to apologize for his snarky, condescending attitude toward Congressman Ron Paul when Paul ,

1. asked Bernanke about allegations that the Federal Reserve was involved in funneling money to Saddam Hussein, when Hussein was a favorite of the U.S.,


2. asked about allegations that the Fed was involved in transferring Watergate money.

Bernanke labeled the allegations “bizarre.”

Naturally, mainstream media took up on Bernanke’s cue, and are reporting Paul’s allegations without the back story. Here is the back story.

Fed chairman Bernanke simply doesn’t know Fed history as well as Ron Paul (Or the history conveniently slipped his memory). As far as Watergate, I always thought it was pretty common knowledge that the money ended up in the burglars’ hands through some pretty fishy means. Even wikipedia has part of the story:

[Watergate burglar Bernard] Barker had attempted to disguise the origin of the funds by depositing the donors’ checks into bank accounts which (though controlled by him), were located in banks outside of the United States. What Barker, Liddy, and Sloan did not know was that the complete record of all such transactions are held, after the funds cleared, for roughly six months. Barker’s use of foreign banks to deposit checks and withdraw the funds via cashier’s checks and money orders in April and May 1972 guaranteed that the banks would keep the entire transaction record at least until October and November 1972.

Wikipedia, also states:

Investigative examination of the bank records of a Miami company run byWatergate burglar Bernard Barker revealed that an account controlled by him personally had deposited, and had transferred to it (through the Federal Reserve Check Clearing System) the funds from these financial instruments.

Clearly, there were some very, very odd transactions that went down which may, or may not, have been abnormally facilitated by the Fed. Was this a normal Fed wire, or something more convoluted? My sense has always been that there was something a bit extraordinary about the way the funds went through the Fed system. It does smell, for sure, and to ask about it is not bizarre. It should be noted that the Fed chairman at the time was Arthur Burns, who would have sold his own children to a white slave ring if Nixon had asked. (In a recent report by Micahel Labeit, here at, Labeit details the speech of former Columbia University PhD student Walter Block, who during the speech reminisced about his years studying at the school ,Block specifically recalled how Arthur Burns in his class, instead of teaching, simply told stories of his dinners with Nixon.) Note, I don’t think Nixon, himself, necessarily asked Burns to help in the transfer of the funds, but Burns would very likely have responded positively to a request from a Nixon lieutenant, given his adoration of Nixon.

Here’s the late investigative reporter Sherman Skolnick reporting on the documents the Fed blocked Congress from seeing about its possible involvement with money sent to Hussein:

….in October, 1990, at the time of the Persian Gulf conflict, there was an unpublicized case in the Chicago Federal District Court (No. 90 C 6863). The Illinois Bank Commissioner sought an injunction against the Federal Reserve Board to stop them from turning over certain bank records to the House Banking Committee. The records were those of the Chicago branch of Italy’s largest [bank], Banca Nazionale del Lavoro, owned in part by the Vatican.

Called BNL, it had records of Iraqi strongman Saddam Hussein and his secret private joint business dealings with his partner, an American. A close crony of the Federal Reserve, Chicago Federal District Judge Brian Barnett Duff, ordered the return of any records from the Banking Committee, then headed by a Democrat,Rep. Henry Gonzalez (D., Texas).

The House Banking Committee was an intervening party-litigant in the controversy. Judge Duff so opposed the House Banking Committee’s efforts to get those records, that the Judge would not listen to the Committee’s attorney; did not want the attorney in the Judge’s courtroom, the Judge calling him an 800 pound gorilla showing no respect for the court.

In May, 1991, right after the War ended in the Persian Gulf, the case ended up in the Federal Appeals Court in Chicago; a court dominated by Judges tied to the major banks and cronies of the Federal Reserve.

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From what I understand,the Illinois Bank Commissioner filed against the Fed at the request of the Fed! What were they hiding? Ron Paul’s question wasn’t bizarre, it was Chairman Bernanke’s response that was bizarre, disrespectful and out of order. It’s time for an apology by Chairman Bernanke. And let’s see those Fed records about Hussein, the Chicago branch of BNL and the Fed!

Bernanke’s response of total ignorance reminds me of the time former Treasury Secretary for Economic Policy, Phil Swagel told me, with a straight face, he didn’t know what a gold swap was.

When it serves them, these guys have very forgetful memories. Thank the heavens there are people like Ron Paul around to remind them.

UPDATE Here’s more on possible Fed involvment in the Watergate money. From David T. Beito (Via LRC):

Well, it seems that Paul may have been onto something…or at the very least raised legitimate questions that deserve investigation. A few minutes on google news produced this 1982 story from the Milwaukee Sentinel by Richard Bradee of the paper’s Washington Bureau

“Police who searched the room the Watergate burglars used found $4,200 in $100 dollar bills, all numbered in sequence. Proxmire asked the Federal Reserve Board where the money came from. As he explained in a letter to the late Rep. Wright Patman (D-Tex.), chairman of the House Banking Committee: “I got the biggest run-around [from the Federal Reserve] in years. They ducked, misled, lied, and gave me the idiot treatment.”

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