Retiring Senator Chris Dodd's financial reform bill is now open for debate in the U.S. Senate. For the next few weeks, the public will be treated to media sound-bite snippets of Senatorial debate on various aspects of the Senate version of the reform bill. The bill is supposedly designed to prevent a replay of the 2008 crisis, in which 75 years of Federal financial reform laws proved utterly useless in preventing the crisis.

Rule: Whenever Federal regulation fails to prevent the negative outcome that has just come out, Congress adds more regulation.

Rule: Whenever a Federal regulatory agency or Government-licensed monopoly (read: Federal Reserve System) fails to prevent a disaster, Congress then transfers more power to that agency. This usually is accompanied by an increase in its budget. Of course, Congressional authorization of an increased budget is unnecessary for the Federal Reserve System, which keeps whatever money it wants in order to fund its operations, and then decides, based on an audit by a firm hired by the FED and answering only to the FED, regarding how much money it will repay to the Treasury each year.

Result: Another unforeseen crisis, probably worse than the crisis that triggered the reform legislation.

We have seen it all before. We will see it all again. Congress never learns. Voters re-elect Congress. The bureaucrats understand this. The system rolls on . . . toward the cliff.

WHAT IS AT STAKE?

In February, 2009, Congressman Ron Paul introduced a bill to audit the Federal Reserve System. He has been introducing bills ever since the summer of 1976, his first six months in office (he was elected in a special late-term election). No bill of his had ever previously received a majority of votes.

In introducing his bill, he made this announcement:

I rise to introduce the Federal Reserve Transparency Act. Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation.

That was a frontal assault on the FED. It was clear that he had more in mind than just an audit.

Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed's susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.

He has been attacking the FED from his first months in office. He has long been known as the heir of populist Democrats, such as Wright Patman, whose name he invoked in his brief speech. But the populists are promoters of full Congressional control over money. They oppose both the gold standard and the FED. They want fiat money. Paul opposes the FED, opposes fiat money, and favors a gold standard.