The Progressive


A project of Common Dreams

For Immediate Release
Contact: Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167

The Fed, Watergate and Arming Saddam Hussein


Professor of public affairs at the University of Texas at Austin,
Auerbach is author of the book "Deception and Abuse at the Fed."

His book was the basis of Rep. Ron Paul's recent questioning of
Federal Reserve Chairman Ben Bernanke. Paul, who introduced the Federal
Reserve Transparency Act, which has passed the House with over 300
co-sponsors, noted allegations that the Fed was involved with covering
up some of the funding of the Watergate burglars as well as failing to
effectively examine a small Italian bank through which the U.S.
government sent Saddam Hussein funds in the 1980s. Paul also raised
questions about the Fed's disclosure policy. The Fed chairman
immediately dismissed the allegations: "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. As far as
the ten years [disclosure issue]: after five years, we produce
transcript of every word said at the FOMC [Federal Open Market
Committee] meetings." See video.

Auerbach said today: "The head of the Federal Reserve bureaucracy should become familiar with its dismal practices.

"First, consider the FedaEUR(tm)s cover-up of the source of the $6,300
in $100 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, on June 22, 1972, at a board of directorsaEUR(tm) 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.

"The second subject brought up by Congressman Ron Paul is the
exposure of faulty examinations by the Federal Reserve of a foreign
bank in Atlanta, Georgia through which $5.5 billion was sent to Saddam
Hussein that U.S. District Judge Ernest Tidwell found to have 'clearly
facilitated criminal conduct.'" Auerbach details allegations by
Christopher Drogoul, a prosecuted official at the Italian bank in
question, regarding the Fed's flawed examination of his bank.

In terms of making information public, Auerbach notes: "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." Auerbach's recent articles on the Fed include "Stop the Federal Reserve From Shredding Its Records."

Auerbach said today: "The bottom line is that the Fed is a very
secretive organization that is largely run by the big banks it is
supposed to be regulating. It should be opened up, not given more
powers such as the new consumer protection agency."

Background is available in a recent letter from Auerbach to Rep. Paul.

Excerpts from Auerbach's book,
which features a section on Watergate, including letters from the late
Sen. William Proxmire and others attempting get the Fed to cooperate
with determining the funding of the Watergate burglary.

Auerbach notes in his introduction that Milton Friedman, who had been
his academic adviser, had told Auerbach that he had been approached by
an individual trying to get him to stop Auerbach from investigating the
Fed when Auerbach worked in Congress. (Auerbach recounts that "Milton
Friedman wanted me to know that he strongly objected to this call and I
should continue my efforts.")

A nationwide consortium, the Institute for Public Accuracy (IPA) represents an unprecedented effort to bring other voices to the mass-media table often dominated by a few major think tanks. IPA works to broaden public discourse in mainstream media, while building communication with alternative media outlets and grassroots activists.