Rep. Ron Paul (R-Texas) made "absolutely bizarre" allegations about the Federal Reserve's involvement in Iraqi weapons deals and the Watergate scandal, chairman Ben Bernanke said Wednesday.

Bernanke appeared before the House Financial Services Committee earlier in the day to deliver testimony.

Paul, a libertarian Republican who opposes the Fed, said that the Fed issued a $5.5 billion loan to Saddam Hussein's regime to buy U.S. weapons during the Iran-Iraq War. 

"It has been reported in the past that in the 1980s, the Fed facilitated a $5.5 billion to Saddam Hussein and he then bought weapons from our military industrial complex," he said.

He also said that cash used in the Watergate scandal "came through" the Fed.

Paul made his remarks in support of his effort to audit the Fed's monetary activity. 

"Well, congressman, these specific allegations you've made, I think are absolutely bizarre and I have absolutely no knowledge of anything like what you've just described," Bernanke replied.

Bernanke also explained that Congress is already permitted the Fed's loans and internal memos five years after they take place. 


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