Any number of things about Ben Bernanke's job could potentially keep him up at night.
But apparently the Federal Reserve Board chairman should rest well knowing that, according to the central bank's internal watchdog, no evidence points to the central bank's being involved in the Watergate burglary or arms sales to Saddam Hussein.
That was the conclusion of a March report — released this past week — by the Fed's inspector general Mark Bialek. The central bank's IG had investigated allegations by the Texas congressman Ron Paul of "undue political interference" at the Fed related to the 1972 Watergate scandal and Iraqi arms purchases in the 1980s.
"Specifically, regarding the first Watergate allegation, we did not find any evidence of undue political interference with or improper actions by Federal Reserve officials related to the cash found on the Watergate burglars," the report said.
The report originated from accusations that Paul, a Republican who is also running for president, made during a February 2010 hearing with Bernanke before the House Financial Services Committee. Paul claimed money used in the 1970s scandal, which forced President Nixon to resign, "came through the" Fed, and that the agency "stonewalled" investigators looking into the scandal. Paul also said the Fed "facilitated a $5.5 billion loan" to the former Iraqi dictator for him to buy weapons "from our industrial complex." Following his comments, Democratic Rep. Barney Frank, then the chairman of the committee, asked the Fed to look into the claims.
Bialek, asked by Bernanke to do the report, said there was no evidence indicating the Fed "stonewalled" the Watergate investigators. "The documentation we reviewed indicated that the board's decision not to provide information requested by congressional members and staff was consistent with the U.S. Attorney's Office for the District of Columbia advising the board to not disclose the information because such disclosure may impede the investigation and jeopardize the subsequent prosecution," the IG said.
As for the Iraq claim, Bialek said, "We did not find any evidence of undue political interference with Federal Reserve officials or any indications that the Federal Reserve facilitated a $5.5 billion loan to Saddam Hussein or Iraq for weapons purchases during the 1980s."
Yet Paul, Congress' most outspoken Fed critic, is not convinced. A statement emailed by his communications director, Rachel Mills, noted that Bialek was appointed by the Fed. The statement said Paul's allegations stemmed from research done by a University of Texas professor, Robert Auerbach.
"Prof. Auerbach has indicated that he is not at all surprised that an inspector general appointed by the chairman of the Federal Reserve would fail to find any evidence of wrongdoing on the part of his bosses, and in fact, would omit or overlook key pieces of evidence in his investigation," the statement said.