United Liberty

There has been some concern in the blogosphere over the last several days that House Republicans leaders may snub Rep. Ron Paul (R-TX), who has been expected to become chairman of the Monetary Policy Subcomittee in the next Congress:

Officials at several major banks have privately raised concerns with Republican leaders that, by allowing Paul to become a chairman, his radical views would gain legitimacy, according to three bank lobbyists. Others are watching with great interest. “Congressman Paul has his own very strong views on things, and you’ve got to respect that,” says Steve Verdier, a lobbyist for the Independent Community Bankers of America, which represents smaller lenders and has fought efforts to weaken the central bank. “I think there is a strong consensus in the country to maintain the independence of the Fed,” he adds.

If he gets the subcommittee gavel, Paul says he plans a thorough review of Fed policy. Fear of inflation is what motivates him the most. Next to the doorway in his Washington office are six framed German bank notes dating from the 1920s hyperinflation era. The notes are sequentially dated “to show how quickly the zeroes were added onto the bills” as inflation skyrocketed, Paul says. The notes are arranged around a quote by one of Paul’s favorite Austrian School economists, the late Hans F. Sennholz, who Paul once met and calls “a tremendous influence on me.” Paul is a devotee of the Austrian School, which teaches that manipulating money supply and interest rates are responsible for history’s boom-and-bust cycles. “The Fed creates all of the bubbles and they create the inevitable bursting of all of the bubbles,” says Paul.

He believes his oversight role is long overdue. “There has been a politically cozy relationship between Congress and the Federal Reserve,” he says. That includes past efforts to keep him from heading the subcommittee. “Republican leadership, with the Fed’s influence, has been working to keep me away from this for a long time. That’s not going to happen this time.”

His prediction may be premature. Five GOP leadership aides, speaking anonymously because a decision isn’t final, say incoming House Speaker John Boehner has discussed ways to prevent Paul from becoming chairman or to keep him on a tight leash if he does. If Boehner, who will help determine who gets to chair subcommittees as early as Dec. 8, rejects Paul, he may have to contend with thousands of grassroots supporters and dozens of younger lawmakers who see Paul as a hero. Boehner, through a spokesman, declined to comment. “A lot of the older members probably think Ron is a little bit out of step,” says Representative Bill Posey, a Florida Republican and unabashed Paul fan. “The depth of his knowledge on monetary policy, his understanding of it all, is second to none.”

It shouldn’t surprise us that apologists of the Federal Reserve are doing what they can to keep Paul out of this role. As I’ve said before, he is their worst nightmare. No other member of Congress is going to have the ability to question Fed Chairman Ben Bernanke and have the knowledge to be able to come back at him when he gives non-answers or sidesteps a question.

If Boehner doesn’t follow the usual process, allowing the ranking member of a committee or subcommitee to become chairman in the next Congress, he is going to have to contend with a huge grassroots backlash.