I would like to enter into the record the following letter from Professor Robert D. Auerbach, a professor at the LBJ School of Public Affairs at the University of Texas. This letter provides additional information regarding remarks I made at yesterday’s Financial Services Committee … hearing, remarks which Federal Reserve Chairman Bernanke categorized as “bizarre.”
The head of the Federal Reserve bureaucracy should become familiar with its dismal practices.
First, consider the Fed’s coverup of the source of the $6300 in hundred dollar 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, June 22, 2003, at a board of directors’ 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. Bob Woodward told me he thought he was the Washington Post reporter who had made the phone inquiry. The reporter “had called to verify a rumor that these bills were stolen from this Bank” according to the Philadelphia Fed minutes. The Philadelphia Fed Bank had informed the Board on June 20 that the notes were “shipped from the Reserve Bank to Girard Trust Company in Philadelphia on April 3, 1972.” The Washington Post was incorrectly informed of “thefts but told they involved old bills that were ready for destruction.”
The Federal Reserve under the chairmanship of Author Burns not only kept the Fed from getting entangled in the Watergate coverup, which the Fed’s actions had assisted, it allowed false statements about bills the Fed knew were issued by the Philadelphia Fed Bank to stand uncorrected. Blocking information from the Senate and House Banking Committees [letters shown in my book, Chapter 2] and issuing false information during a perilous government crisis imposed huge costs on the public that had insufficient information to hold the Fed officials accountable for what they had withheld from the Congress. Had the deception been discovered the Fed chairmen following Burns may have been forced to rapidly implement some real transparency to restore the Fed’s credibility. That would have reduced or eliminated many of the lies, deceptions, and corrupt practices that are described in my book.
The second subject brought up by Congressman Ron Paul is the exposure of faulty examinations of the Federal Reserve of a foreign bank in Atlanta, Georgia through which $5.5 billion was sent to Saddam Hussein that a Federal Judge found to be part of United States active support for Iraq in the 1980s.
On November 9, 1993, several federal marshals brought a prisoner, Christopher Drogoul, into my office at the Rayburn House Office Building of the U.S. House of Representatives. The marshals removed the manacles. Drogoul took off his jump suit and changed into a shirt, tie, and business suit. He immediately looked like the manager of the Atlanta agency with domestic headquarters in New York City of Banca Nazionale. Drogoul had come to testify about a “scheme prosecutors said he masterminded that funneled $5.5 billion in loans to Iraq’s Hussein through BNL’s Atlanta operation. Some of the loans allegedly were used to build up Iraq’s military and nuclear arsenals in the years preceding the first Gulf War.” 1
Drogoul’s “’off book’ BNL-Atlanta funding to Iraq began in 1986 as financing for products under Department of Agriculture programs.”2 The loans allegedly had been authorized by the U.S. Department of Agriculture. Since Drogoul told the committee he was merely a tool in an ambitious scheme by the United States, Italy, Britain and Germany to secretly arm Iraq in their 1980-88 war, the testimony was politically contentious and unproven. He was sentenced in November 1993 to 37 months in prison and he had already served 20 months awaiting his sentencing hearing.
U.S. District Judge Ernest Tidwell found that the United States had actively supported Iraq in the 1980s by providing it with government-guaranteed loans even though it wasn’t creditworthy. The judge said such policies “clearly facilitated criminal conduct.”3
Gonzalez was drawn to Drogoul’s answer about the Fed examiner who had visited his Atlanta operation. Gonzalez said that:
“At the November 9, 1993 Banking Committee hearing I asked Christopher Drogoul, the convicted official of the Banca Nazionale Del Lavoro agency branch in Atlanta, Georgia, how the Federal Reserve Bank examiners could miss billions of dollars of illegal loans, most of which ended up in the hands of Hussein.
Mr. Drogoul stated:
The task of the Fed [bank examiner] was simply to confirm that the State of Georgia audit revealed no major problems. And thus, their audit of BNL usually consisted of a one or two-day review of the state of Georgia’s preliminary results, followed by a cup of espresso in the manager’s office.”
Gonzalez was appalled at the of lack of effective examination of a little storefront bank and also appalled by the gifts exchanged by officers of the New York Federal Reserve and the regulated banks in New York City where the main U.S. office of BNL was located. A description of what followed is in my book.
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. Chairman Alan Greenspan had the committee vote on this destruction, telling the members: “I am not going to record these votes because we do not have to. There is no legal requirement.” (p. 104 in my book.) Greenspan thus removed any fingerprints on this act of record destruction. Donald Kohn, who is now Vice Chairman of the Board of Governors at the Federal Reserve, answered some questions I had sent to Chairman Greenspan about this destruction. Kohn replied in a letter on November 1, 2001 to me at the University of Texas that they had destroyed the source records for 1994, 1995 and 1996, they did not believe it to be illegal and there was no plan to end this practice. That is one reason why the Federal Reserve audit supported by Congressman Ron Paul is needed. The Fed must stop destroying its records.
Robert Auerbach is Professor of Public Affairs at the Lyndon Baines Johnson School of Public Affairs, The University of Texas at Austin. He was an economist with the House of Representatives Financial Services Committee during the tenure of four Federal Reserve Chairmen: Arthur Burns, William Miller, Paul Volcker, and Alan Greenspan. Auerbach also served as an economist in the U.S. Treasury’s Office of Domestic Monetary Affairs during the first year of the Ronald Reagan administration and as a financial economist with the U.S. Federal Reserve System. Auerbach has been a professor of economics at the American University in Washington, D.C. (1976-83), and a professor of economics and finance at the University of California-Riverside (1983-93). He has written numerous articles, and two textbooks in banking and financial markets. He received two Masters degrees in economics, one from the University of Chicago and one from Roosevelt University, where he studied under Abba Lerner, and a Ph.D. in economics from the University of Chicago, where he studied under Milton Friedman.
1 Marcy Gordon, “Banker Imprisoned in BNL Case Tells Story to House Committee,” The Associated Press, November 9, 1993.
2 U.S. Newswire: “Former Executive of Atlanta Agency of Italian-Owned Bank Pleads Guilty to Conspiracy”, from U.S. Department of Justice, Public Affairs, June 2, 1992.
3 Peter Mantius, “Drogoul given 37 months Judge in BNL case also blasts actions of U.S. prosecutors,” The Atlanta Journal and Constitution, December 10, 1993, Section A, p. 12.
- Connecting the Dots of Big Data, Soaring Corporate Profits and Trade Wars
- U.S.: No Restitution to Syria
- Might Trump Ask Israel to Fund America’s Invasion-Occupation of Syria?
- Which ‘News’ Is Fake?
- How Wikipedia Lies
- Senator Tim Kaine’s Brief Run-In With the Law
- TheRealNews: Debunking the Myth of American Exceptionalism, with David Swanson
- On the Criminal Referral of Comey, Clinton et al: Will the Constitution Hold and the Media Continue to Suppress the Story?
- US Congressman: “In Briefing to Congress, [the Director of National Intelligence, Secretary of Defense and Secretary of State] Provided ZERO Real Evidence. Referenced Info Circulating Online”
- How the Guardian newspaper fulfills George Orwell’s prediction of ‘Newspeak’
- Poll Shows Americans Support the Invasion of Syria
- Our Strange Attraction to Self-Destructive Behaviors, Choices and Incentives
- An Alternative Explanation to the Skripal Mystery
- Talk Nation Radio: Scott Ritter: Syria and the Myth of Ethical Wars
If you wish to reproduce any essays from this site:
You may reproduce our essays as long as you give proper attribution (Washington's Blog) and provide a link to our site at the top of the post.
National Security and Copyright NoticesNational Security Notice
We are NOT calling for the overthrow of the government. In fact, we are calling for the reinstatement of our government.
We are not calling for lawlessness. We are calling for an end to lawlessness and lack of accountability and a return to the rule of law.
Rather than trying to subvert the constitution, we are calling for its enforcement.
We are patriotic Americans born and raised in this country. We love the U.S. We don't seek to destroy or attack America ... we seek to restore her to strength, prosperity, liberty and respect.
We don't support or like Al Qaeda, ISIS, the Taliban, or any similar or supporting groups. We think they are all disgusting.
The nation's top legal scholars say that draconian security laws which violate the Constitution should not apply to Americans.
Should you attempt to shut down this site or harass its authors, you are anti-liberty, anti-justice, anti-American ... and undermining America's national security.
We are not copyright pirates. We do not seek to destroy all copyright law.
Even the country's top copyright lawyers oppose draconian anti-piracy laws.
FAIR USE NOTICE: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of political, economic, scientific, and educational issues. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to:
If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.