Ron Paul, the Fed and Watergate

This New York Times article on Fed chairman Ben Bernanke's appearance before a congressional committee was notable for several reasons.
First, he made headlines, and reassured markets, by saying that interest rates would remain low for some time to come.Second, the chart behind him shows the collapse and slow recovery of wealth over the last 30 months. The Fed's extraordinary extension of its balance sheet is just a fraction of the $17.5 trillion in lost wealth. The fact that only $5 trillion has been regained is one reason why monetary and fiscal policies have not triggered inflation so far, and won't for a while.
But what really struck me was this exchange between Bernanke and Congressman Ron Paul:

After Mr. Paul suggested that money used in the 1972 Watergate break-in came from the Federal Reserve, and that the Fed had loaned $5.5 billion to the regime of Saddam Hussein of Iraq, Mr. Bernanke replied, “The specific allegations you have made are absolutely bizarre. I have no knowledge of anything remotely like what you’ve described.”

A healthy skepticism towards our institutions is an enduring part of our political tradition, but this sounds more than a little nutty to me. Woodward and Bernstein followed the money in breaking the Watergate story, but the money trail never led back to the Fed. Unless you think they were in on the conspiracy too.