Paul-phobia is almost as old as Paul-mania, especially among libertarians. The anti-Paul case consists of one simple argument—he sounds crazy—and one complex argument, which is that he's distracted libertarians and Tea Partiers by focusing their ire on the easily demonized Fed. Both of those factors were epitomized in February 2010, when he confronted Ben Bernanke with the allegation that the Fed "facilitated a $5.5 billion loan to Saddam Hussein and he then bought weapons from our military industrial complex" in the 1980s. Paul would later explain what he meant, but Bernanke used the moment to dress him down.
"Well, Congressman," said Bernanke, "these specific allegations you've made I think are absolutely bizarre, and I have absolutely no knowledge of anything remotely like what you just described." That incident and incidents like it make the Paul skeptics cringe about what he'll do next.
"I don't think he's often the best messenger for the things he believes in," said Mark Calabria, director of financial regulation studies at the Cato Institute and a six-year veteran of the Senate Banking Committee. "I give the guy credit for bringing the Fed under the spotlight, but the real credit probably goes to the Fed for making enough mistakes to make us interested in them. Does Paul approach this in a way that helps his own cause? That's not a guarantee, necessarily. He needs to avoid going down the path to conspiracy theories and keep the focus on economics."
Paul's cheering section has gotten used to that, and they're past it now. In 2007 and 2008, the world of libertarian economists and pundits were pretty evenly divided over whether his presidential campaign and its obsession with the Federal Reserve were doing good for the movement. Paul's supporters mocked his opponents as the "Kochtopus," the small-minded and well-funded elitists looking down on the movement's best spokesman from perches at Cato, the Mercatus Center, and Reason magazine. (I'm a contributing editor of Reason.) But the criticism is more muted now. There's more excitement about what Paul will pull off now that he finally has a gavel.
"Paul's commentary on, and cross-examination of, the Federal Reserve has only seemed less crazy with the passage of time," said Matt Welch, editor-in-chief of Reason. "It sounded crazy when he kept pestering Bernanke or whoever about whether the Fed was involved in various overseas bailouts. But then the Fed was involved in various overseas bailouts! By trying quixotically to End the Fed, he will succeed in doing more to audit the Fed, because there is a growing interest/concern in the post-TARP world about the unprecedented and not-very-well-controlled power that the institution has to do whatever it wants."
There are some libertarians, like McArdle, who worry about Paul's ability to shake the markets by creating uncertainty about the Fed. But Paul, who laid low in order to make sure he wouldn't miss a chance at this job, has given every indication that he'll use the committee as an educational tool and as a place for oversight. He is likely to move Paul Martin-Foss, an economist working for him now, over to the committee. His model for success is not his grilling of Bernanke. It's the "Audit the Fed" legislation that he championed in the House and that Bernie Sanders championed in the Senate—legislation that led to a report on the Fed's activity during the recession that surely has had something to do with the uptick in anti-Fed sentiment.
"My ideas are powerful, but I am not," said Paul in his Bloomberg interview. "There is a committee chairman, speaker of the House. I am realistic and I know what that means. But I also know the strength of ideas, and that is what will prevail. It wasn't my political power that prevailed last year to get 320 co-sponsors of auditing the Fed. It was the power of the ideas. That is what they ought to worry about."