[Congressional Record (Bound Edition), Volume 160 (2014), Part 1]
[Senate]
[Pages 15-18]
[From the U.S. Government Publishing Office, www.gpo.gov]




 EMERGENCY UNEMPLOYMENT COMPENSATION EXTENSION ACT--MOTION TO PROCEED--
                               Continued

  Mr. REID. Mr. President, I ask unanimous consent the next vote be 10 
minutes in duration, the mandatory quorum under rule XXII be waived, 
and there be 2 minutes equally divided prior to the vote on the motion 
to proceed to S. 1845.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  There will be 2 minutes equally divided prior to the cloture vote.
  The Senator from Rhode Island.
  Mr. REED. Mr. President, on December 28, 1.3 million Americans lost 
their extended unemployment benefits. They are the first wave of what 
will be more than 3 million other Americans. These people have worked, 
they have qualified for unemployment insurance, they need help, and we 
have to help them. If we don't do that, not only will these families 
suffer, the economy will suffer. The CBO estimated we will lose 200,000 
jobs if we don't extend unemployment benefits, and 0.2 percent of 
growth.
  If we want to help working families--people who qualify because they 
worked and have to continue to look for work to be qualified--and our 
economy, then vote to at least let us go forward. Give us 3 months to 
work on issues, funding, and anything else, but don't throw these 
people off a cliff and leave them without anything.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. CORNYN. Mr. President, this is a serious issue, but if this was 
anything other than a political exercise, the majority leader would 
have rescheduled this vote when we did not have 17 Members of the 
Senate unable to be here and vote on this.
  I have no doubt as to what the outcome will be on this cloture vote, 
but I believe it is purely a scheduling matter. It ought to be 
postponed to a later time when we can have a real debate so we can look 
for a way to pay for this extension of unemployment benefits and how to 
get the economy growing again so people can find jobs. That is what 
people want; they want to work. They don't want unemployment 
compensation; they want jobs so they can provide for their families.
  Unfortunately, because of the timing of this vote, we know what the 
outcome is, and it is transparent that this is a political exercise and 
not a real effort to try to fix the problem.
  The PRESIDING OFFICER. The majority leader.
  Mr. REID. I ask unanimous consent that the vote be scheduled tomorrow 
at 10 a.m.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  The Senator from Arkansas.
  Mr. PRYOR. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mrs. SHAHEEN. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Vote Explanations

  Mrs. SHAHEEN. Unfortunately, I was not here to vote for Janet Yellen, 
the head of the Federal Reserve. Had I been here to vote, I would have 
voted to support her in that position.
  My flight was delayed, and so I did not get back in time for the 
vote. I want to make sure that the Record shows that I support her as 
the new chairman of the Fed.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Ms. WARREN. Mr. President, I was on the same flight with Senator 
Shaheen. I was looking forward to having the opportunity to vote for 
Janet Yellen to be Chair of the Federal Reserve. I am very disappointed 
I didn't get to formally vote for her, but I want to make sure that the 
Record reflects my strong support.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  The PRESIDING OFFICER. The Senator from Kentucky.
  Mr. PAUL. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Yellen Nomination

  Mr. PAUL. Mr. President, I rise today in opposition to secrecy, in 
opposition to the veil of secrecy that cloaks the money changing hands 
that takes place in the temple of the Federal Reserve. While the money 
changes hands, the monied class gets richer and the middle class gets 
shortchanged.
  It is more than time to part the curtain that hides the trillions of 
dollars that changes hands. There is a revolving door from Wall Street 
to the Treasury to the Fed and back again. We have former Secretaries 
of the Treasury who go from government to Wall Street pocketing 
hundreds of millions of dollars.

[[Page 16]]

  I have called repeatedly for transparency at the Federal Reserve so 
Americans can see what is being done with their money supply. Every 
time I call for transparency, people from both sides have said 
transparency would undermine Fed independence. The problem is that 
Congress created the Fed and Congress was intended to have oversight 
over the Fed, and as time has gone on we have lost that oversight, so 
independence has really led to abuse.
  Some say: Well, the Fed is audited each year.
  The investigator general who is responsible for auditing the Fed came 
to Congress in 2009, and here is what she had to say during a question-
and-answer session in a House committee. A Congressman asked:

       What have you done to investigate the off-balance sheet 
     transactions conducted by the Federal Reserve which, 
     according to Bloomberg, now total $9 trillion in 8 months?

  She fumbled, she repeated herself, she looked silly, and then she 
said:

       You know, I think it may be important at this point to--

  Yadda, yadda, yadda, and then several yaddas later, this bombshell 
from the auditor:

       We do not have jurisdiction to directly go out and audit 
     Reserve Bank activities specifically. So, really, there is no 
     audit of the Federal Reserve, so don't let anybody say that 
     we have an audit. No meaningful audit exists, and when the 
     primary auditor and overseer of the Fed was asked about $9 
     trillion, the inspector general had no clue what had been 
     purchased with the money.

  Is there a chance the Fed only has our best interests at heart? Sure. 
But when trillions of dollars change hands, wouldn't one want to know 
who got the money and whether anyone enriched themselves in the 
process?
  We know $9 trillion is over half of our entire national debt. This is 
money that ultimately becomes debt for all of us. It is being doled 
out, in secret, by our central bank. This is, in a sense, laundering 
money from the American people to bail out big banks and Wall Street.
  This month we learned that the Fed's official balance sheet has 
reached an astounding $4 trillion. To put that in perspective, the 
balance sheet of the Fed is now larger than the fourth largest economy 
in the world--Germany.
  Transparency at the Fed would not hurt the Fed, but a complete lack 
of transparency continues to hurt and cheat the rest of us. At the very 
least the American middle class deserves to know what goes on behind 
the curtain, what decisions are made, and how they benefit Wall Street 
and the monied class.
  Being secret and reckless with trillions of dollars is only the tip 
of the iceberg when it comes to the problems associated with the Fed. 
The history of the Federal Reserve has also been the history of the 
devaluation of the dollar. There was a time when the dollar was as good 
as gold. When the people grew restless or concerned that the government 
was debasing the currency, the people would simply express their 
displeasure by exchanging their paper for gold. Convertibility was a 
check and balance against Kings and Queens and any form of government 
that chose to spend money it did not have. When the government 
``borrowed'' from the currency by diluting its value, the people had 
recourse to protect themselves. Now, the great American dollar that was 
once backed by gold is backed by promises.
  For many decades the dollar was said to be backed by the full faith 
and credit of the Federal Government. Trust lingered from the 
historical evolution, from barter to a medium that people valued such 
as gold or silver. The trust that still exists today lingers from the 
thousand-year history when currency had inherent value and that if 
paper substitutes were used, they could always be exchanged for 
something of real value.
  After World War II we instituted a partial gold standard that allowed 
foreign countries to exchange their paper for gold--and exchange they 
did. During the 1960s, as the United States inflated and borrowed to 
pay for the war on poverty and the war in Vietnam, foreign countries 
became skittish and turned in their dollars by the millions. Nearly 
half of the gold reserves were removed by foreign countries in the 
space of a few years. President Nixon closed the gold window in 1971, 
and that was that. The last link to gold was severed. But make no 
mistake--the trust that remained in the dollar was derived from the 
historic trust engendered by convertibility of paper to gold.
  For decades the full faith and credit promise allowed the Fed to 
continue to inflate, and still the people remained relatively passive 
in their acceptance of an unbacked, completely discretionary paper 
currency--but not without hiccups. Inflation nearly got the better of 
us in the 1970s, and now debt threatens to do the same.
  Something profound, though, occurred in the past few years beginning 
with the panic of 2008. The Fed began to back the dollar with not just 
promises but perhaps really bad promises.
  Since early 2008 the Fed has added nearly $3 trillion to its asset 
sheet, and included among these ``assets'' is stuff that nobody else 
seems to want, such as bad car loans and nonperforming mortgages. 
According to Mauldin and Tepper's book ``Code Red,'' at $4 trillion, 
and roughly $55 billion in equity, the Fed is leveraged at about 77 to 
1. Think about that. That is an insane amount of leverage for any bank. 
The Fed is more leveraged than the balance sheets of Lehman Brothers, 
Bear Stearns, Freddie or Fannie, before those institutions essentially 
failed.
  Jim Rickards, author of ``Currency Wars,'' notes: The Fed is 
insolvent on a mark-to-market basis. . . . The Fed has wiped out its 
capital on a mark-to-market basis. Of course, the Fed carries those 
notes on its balance sheet ``at cost'' and does not mark them down to 
market, but if they did, they would be broke. The insolvency of the Fed 
will become a major issue in the years ahead and may necessitate a 
financial bailout of the Fed by the taxpayers.
  So the once-proud dollar that was once backed by gold, then backed by 
the full faith and credit of the world's greatest economy, is now 
backed by used car loans and underwater mortgages.
  But those who trust in paper say: Look. For 50 years now we have had 
no convertibility, and amazing improvements in productivity and wealth 
have occurred.
  Perhaps. But one might also argue that we are living on the borrowed 
plumage of the past, that our current acceptance of a paper currency 
rests on the glory of our industrial and monetary past. No one can tell 
for sure what the future holds, but I for one am concerned that the 
panic of 2008 may not have been an anomaly but a harbinger of something 
far worse. I am concerned we have papered over our problems in a sea of 
new currency. That quantitative easing has created an illusion of 
safety and security, but beneath the surface lurks a bigger and more 
malevolent future.
  Don't take my word for it. Listen to some of the economists who 
predicted the financial crisis of 2008.
  Economist Jim Grant recently said:

       From the United States to Europe and Asia, the world's 
     central banks are flooding markets with liquidity and pushing 
     deeper into unknown monetary policy territory and I feel this 
     journey will not end well.

  Nassim Taleb, author of the ``Black Swan,'' writes:

       Someone made a mistake lending and someone made a mistake 
     borrowing . . . and it is a mistake to transform private 
     problems into public debt. We are facing an environment with 
     a huge amount of debt. The next mistake is going to be to 
     overprint, which is going to be the way out for them, which 
     is why I fear hyperinflation.

  Yale University housing expert and recent Nobel Prize winner Robert 
Schiller:

       This financial crisis that we've been going through in the 
     last 5 years has been one that seems to reveal the failure to 
     understand price movement . . .

  Not shying away from his concerns that the Fed is simply inflating 
the housing bubble in America's largest cities, he argues:

       [Housing prices] are up 12 percent in the last year. That 
     is a very rapid rise in prices, and I believe it is 
     accelerated somewhat by Fed policies . . . the housing 
     market, it has its own momentum right now as people see it 
     coming back. We're sort of in the beginnings of another 
     housing bubble.


[[Page 17]]


  Since we abandoned the sequester budgetary caps, any pretense of 
fiscal discipline is gone. Politicians can attempt to obfuscate the 
truth with promises of spending restraint in the outyears, but 
everybody knows that the promise to cut in the outyears is a pipe dream 
and that all that really counts is the first 2 years of the Ryan-Murray 
plan that will add over $60 billion in new spending.
  What really causes China concern is not the new spending we are 
incurring but that the total new debt added over 10 years will be $7 
trillion. China's response to our fiscal lack of discipline was to 
downgrade our debt. Our $17 trillion debt is manageable only with the 
Fed buying it and only with low interest rates.
  China's Dagong Global Credit Rating said in their statement on the 
downgrade:

       The deal means only an escape from a debt default for the 
     time being, but hasn't changed the fact that the growth of 
     government borrowing has largely outpaced overall economic 
     growth and fiscal revenues.

  These are facts, and both sides--Republicans and Democrats--are 
ignoring the facts. China, when they downgraded us, said it, and we 
cannot escape this fact: The growth of government borrowing has largely 
outpaced economic growth and fiscal revenues. It is sad when the 
Chinese Government can see major economic problems for us that 
Washington continues to ignore.
  At current rates, we pay about $237 billion in interest payments. If 
interest rates rise by 1 percent, interest spending will increase by 
$1.2 trillion. If interest rates return to the norms of the 1980s, the 
taxpayer will be on the hook for an additional $6.17 trillion. If 
interest rates go to 10 percent, ``Katy, bar the door.'' The panic will 
be upon us.
  Most conservatives would be aghast if we talked about price controls. 
Conservatives realize, as most economists now do, that price controls 
lead to a glut if the price is too high and to bare shelves if the 
price is too low. The Soviet Union was brought low for that very 
reason. No one, no matter how wise, can determine the correct price of 
bread without a marketplace.
  Anytime a government tries to set prices, the consequence is 
disastrous. But many leaders who are quite aware of the destructive 
nature of price controls nevertheless advocate for allowing the Fed to 
set the price of money, for that is what interest rates are--simply the 
price of money. Like any other price, though, setting interest rates 
lower than the market rate of interest encourages more use of the money 
and more economic activity. But if the rates are kept below the market 
rate, we interrupt the feedback loop that informs producers that they 
are overproducing, and the bubble expands until overproduction has 
reached such a point that the correction is a catastrophe. That is what 
happened with the housing bubble. We kept interest rates too low for 
too long and the bubble grew and grew and grew and we are still 
suffering from that. And what are we doing now? Exactly the same thing.
  Jim Rickards explains this phenomenon:

       Market participants and policymakers rely on market prices 
     to make decisions about economic policy. What happens when 
     the price signals upon which policymakers rely are themselves 
     distorted by prior policy manipulation? First you distort the 
     price signal by market manipulation, but then you rely on the 
     ``price'' to guide your policy going forward. This is the 
     blind leading the blind.

  Politicians have been complacent in letting the Fed manipulate 
interest rates for many reasons. Many politicians are reticent to get 
involved in monetary policy. They are worried of being blamed if the 
economy sours with monetary reforms. Many politicians believe the 
economy is better off with the Fed than with the panics that occurred 
before the Fed. But perhaps the variations in the economy of late 
indicate just as much instability with the Fed as before the Fed.
  There is some truth to the fact that big debt and deficit financing 
in all likelihood require a central bank to pay the debt with inflated 
dollars, and there is some truth to this.
  John Mauldin and Jonathan Tepper's new book, ``Code Red,'' highlights 
this very point:

       In 2011, the Federal Reserve financed about three-quarters 
     of the U.S. deficit; in 2012, it financed over half of it; 
     and in 2013, it will finance most of it.

  We are on course to finance the entire U.S. debt in 2014.
  Now, for anyone imagining a day without a Fed, they would have to 
propose a government that would balance its budgets annually. Without 
fiscal restraint you cannot ever have monetary restraint. The opposite 
is where we are now. With fiscal irresponsibility, borrowing over $1 
million a minute, you need a compliant monetary policy, and that is 
exactly what we have.
  But there are consequences to massive debts and corresponding massive 
purchases by the Fed. The consequences can be gradual or abrupt. The 
gradual bankrupting of America is proceeding apace. We pay for it with 
new money created by the Fed.
  The result is a gradual loss of purchasing power. Over the past 100 
years, the dollar has lost 96 percent of its value. A nation can 
survive this gradual loss we have, but some would argue that the people 
hurt most are those who are least able to absorb rising prices--the 
poor and the elderly on fixed incomes.
  The other possible outcome is an abrupt loss of confidence in the 
currency. The panic of 2008 approached mass fear that the system was 
unsound. Reports that the emperor had no clothes were taken seriously, 
as even the soundness of money market funds was questioned.
  Our system of paper currency now backed by the promises of 
politicians, a $17 trillion debt, and used car loans and bad home 
mortgages is always one panic away from dissolution. When that day 
comes is uncertain. Can the Fed continue the legerdemain; can the Fed 
continue the illusion of wealth that comes with freshly inked money? 
Time will tell. But I, for one, want to know what the Fed is doing. Are 
individuals enriching themselves at the expense of the public? Does Fed 
policy enrich one group of individuals at the expense of another? What 
assets does the Fed hold? What informs their decision-making process?
  I, for one, want answers. I, for one, want transparency.
  President Obama's choice of Janet Yellen as the new head of the 
Federal Reserve is concerning due to the policies Ms. Yellen has 
promoted in her history at the Fed.
  The Federal Reserve's answer to economic crisis has long been simply 
to print more money, or what they call ``quantitative easing.'' It does 
not take a rocket scientist to figure out that printing money out of 
thin air is not sound long-term economic policy. But Ms. Yellen has 
been a major cheerleader for it. The Washington Post's Neil Irwin wrote 
that ``Yellen has been not merely an engineer of the Fed's policies of 
`quantitative easing' and `forward guidance,' but a consistent voice 
within the central bank to go further.'' Quantitative easing is not 
enough. She wants more.
  Will she go further? Will the same policies continue unabated? Those 
of us who think quantitative easing has gotten out of hand are now 
being asked to confirm a nominee who thinks the Fed has not done enough 
along these lines.
  The vote was overwhelming to confirm Janet Yellen, but I think we 
will rue the day that we endorsed quantitative easing.
  I believe the Federal Reserve is structurally flawed. I believe we 
need to be able to prevent or restrict any Chairman today or in the 
future from aiding and abetting the allies of banks and big government. 
As monetary historian Peter Bernholz wrote in his famous book 
``Monetary Regimes and Inflation'': ``. . . we draw the conclusion that 
the creation of money to finance a public budget deficit has been the 
reason for hyperinflations.''
  I see nothing in Yellen's past performance at the Fed that would 
indicate that her policies will be any different than what we see 
today. In fact, I see evidence that things may well get worse.
  I have introduced a bipartisan bill called Federal Reserve 
Transparency Act, known also as Audit the Fed. The purpose of my bill 
is to eliminate the

[[Page 18]]

current restrictions on GAO audits of the Fed, along with mandating 
that the Federal Reserve's credit facilities, securities purchases, and 
quantitative easing activities become subject to congressional 
oversight.
  Looking into what the Federal Reserve does with our money has 
significant support from both parties, many Members of which have heard 
the same concerns back home in their States and districts.
  Audit the Fed passed overwhelmingly in the House with 350 votes. 
Every Republican and 100 Democrats voted for it.
  The Federal Reserve is one of the most secretive institutions in our 
history. For decades, the people in charge at the Fed, politicians, and 
various ``experts'' have insisted that such secrecy was integral to its 
independence and effectiveness.
  But the results of complete secrecy have been Fed policies that are 
questionable at the least. This idea that the Federal Reserve is at the 
root of some of our economic problems is brandnew to many Americans 
precisely because we are not allowed to know what this powerful 
institution does behind closed doors--despite the fact that it has a 
direct impact on our lives.
  I can see no reason why the American public should not be allowed to 
see behind the veil of secrecy at the Fed. I will continue to do what I 
can to part that veil. I will continue to fight for a full and 
persistent audit of the Fed. Audit the Fed passed the House 
overwhelmingly, but we have been unable to get a vote in the Senate. I 
will continue to fight for that vote.
  Although I was delayed by the weather, I am here today to oppose 
Janet Yellen's nomination for two reasons. I believe she will continue 
the gradual destruction of the dollar's value and because I believe the 
time is now for a full audit of the Fed.
  Thank you, Mr. President.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________