Treasury Department Seeking New Powers For Fed

New York Times:

The Treasury Department will propose on Monday that Congress give the Federal Reserve broad authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.

The proposal is part of a sweeping blueprint to overhaul the country's hodge-podge of regulatory agencies, which many specialists say failed to recognize rampant excesses in mortgage lending until after they triggered what is now the worst financial calamity in decades.

Read the whole story: New York Times

Comments

[Dewy1414]

Welcome to the 4th branch of the government­...and soon the most powerful..­..if it already isn't.

goodbye to the House, then the Courts, then the president.­....

hello to a new form of fascists dictatorship.

[WIpatriot]

...enabled by the NYT.

[eugenegerard]

This proposal by the Treasury is BACKWARDS. The US government should be taking over and regulating the FED. The FED is a CARTEL of international bankers who tell the government what to do. The FED is NOT an agency of the US government. WAKE UP. Your government has been handed over to fasists corporatists.

[mmckinl]

Lincoln and the "Banks"

Undoubtedly Lincolns' greatest trangression stemmed from his reaction to the need for money to pay for the war in 186l. When he approached the Secretary of the Treasury, Solomon P. Chase, he was offered loans at 24 to 36 per cent interest, which Lincoln refused. He called on his friend, Colonel Dick Taylor, to help him figure out how to finance the war. Dick replied: "Get Congress to pass a Bill authorising the printing of full legal tender Treasury Notes. Pay your soldiers with them and go ahead and win your war."

In 1862 and 1863 he printed 400,000,000 dollars in interest free "Greenbacks". An editorial in the London Times revealed the bankers' attitude:

"If this mischievous financial policy which had its origin in North America shall become a fixture that government would furnish its own money without cost. It would pay off debts and be without debt, it would have all the money necessary to carry on its commerce. It would become prosperous without precedent in the history of the world. That country must be destroyed or it will destroy."
Shortly before he was assassinated, Lincoln made the following statement :

"The Money Power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucrac­y."

Hello Disaster Capitalism !

The very actors that caused this crisis want to privatize our regulatory system !

[WIpatriot]

I guess the proofers didn't like my civil war comment, eh?

[Troubledwawa]

Is it January 2009, yet?

Of course the frb want's everything the same with more power to act faster. Look at the deal jp morgan chase just got from bs - one of the frb owners.

[opie]

I am still waiting for the day Americans wake-up to the full scope and extent of Bush bullshit.

I listened with interest today to "This American Life" today on the local public radio station wherein Ira Glass presented a few stories about the extent to which NeoCon/Unitary Executive proponents have decided to meddle in the smallest details of our lives by drawing at every opportunity a bright red line between what you can do and the what the President can control about what you can do.

I haven't always believed the Federal Reserve was a bad thing, but I have come around to believing it. That is a startling thing to realize after more than 4 decades on the planet thinking our nation's interests were best served by it. But that is plainly the wrong conclusion.

I believe concentrating more power and discretion into the hands of this organization is a devastating failure of judgement. I appeal to all citizens who have an ounce of sense to fight this in every possible way.

[loki]

Read the text and you will see this is a feel good measure, not anything real. Its to make us, the non elite , feel like they are policing the bad guys. They are not.

"While the plan could expose Wall Street investment banks and hedge funds to greater scrutiny, it carefully avoids a call for tighter regulation.

The plan would not rein in practices that have been linked to the housing and mortgage crisis, like packaging risky subprime mortgages into securities carrying the highest ratings.
And the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves and gave many institutions a false sense of security."

[speakingtruth2power]

Our leaders are selected by the MSM and SCOTUS and

our Congress is now the weak willed whore of the MSM.

Our government is being torn asunder from within as

BushCo creates a financial crisis so the corporatists

can remake America in their own fascist image.

[Rog49Thomas]

Often when the Fed is mentioned in an article on HuffPo, the following comments are sometimes made:

First, the Fed is privately owned and operated and thus not accountable to the government.

Second, the Fed is highly secret and doesn't publish financials.

Third, the Fed earns interest from the US Govt on the currency it issues and thus the taxpayer is being ripped off so private banks can get rich.

I'll deal with each of these topics in a series of further postings.

Two important notes:

(1) Don't infer from these postings that I believe the FRB is the “best” form of central bank or that I think the FRB has done a sterling job at all times. I am trying to correct what I perceive to be misconceptions about the Fed.

(2) If you believe I'm mistaken, I'm willing to listen if you have facts to support your argument.

If you are from the Bill O'Bluster school, save your breath.

[Rog49Thomas]

Who controls the Fed? Part 1

The US Govt through the seven member Board of Governor (BOG) appointed by the US President with Senate confirmation.

Each FRB has 9 directors.

The BOG appoints three directors (Class C Directors) at each of the 12 regional FRBs (the Chairman, Deputy Chairman and one other director). Note the first two positions are lead positions on boards.

FRB bember bank elect the remaining six directors.­: Class A who represents the member banks. Class B who represent other local interests - business, labor, etc.

Class B Directors may not be directors, officers or employees of banks. Class C Directors may not own stock in any bank.

Each member bank has two votes – one for a Class A Director and one for a Class B Director. Thus, at the NY FRB, JPMorgan has the same vote as the Bank of Podunk. There are three Class A directors: one for small, medium, and large banks. Therefore, Citibank abd JPMorgan, cannot be Class A Directors at the same time.

The FOMC sets the monetary policy of the USA. It has 12 members. 7 of them are the BOG. Of the remaining five, the NY Fed is always represented. The remaining four are selected from the 11 remaining districts so that there is always a rep from a district on the FOMC. The FOMC instructs the reserve banks on monetary policy. The 12 FRBs also offer a variety of fee-based banking services to commercial banks.

[Rog49Thomas]

Who controls the Fed? Part 2

Well, I'm sure some are saying nice theory but how does it work in practice?
Fair question.

Right now there are 5 serving BOG members.

President Pan nominated two: Elizabeth Duke and Larry Klane last year (I think May) but the Senate has been sitting on the nominations. Of the five members of the BOG, only one has banking experience Kevin Warsh who rose to the exalted rank of VP/Executive Director at Morgan Stanley where he worked 1995-2000. Since then he's been in the government. The rest are academics or career government servants.

One might expect to see more bankers on the BOG if the Fed is really controlled by “big money”. I'm also surprised that big money wasn't able to get these two directors confirmed.

I suppose an answer could be that the conspiracy is extremely insidious – all these people are on the payroll and play elaborate charades to misdirect the public.

[Rog49Thomas]

Who controls the Fed? Part 3

Well, what about the regional Feds? Here the private ownership is undisputed.

In District 2, the NY Fed. Here are the governors.

Class A: Jamie Dimon JPMorgan, Charles Wait Adirondack Trust ($717mm in assets, $77mm in equity) and Richard Carrion, Banco Popular ($36bn in assets, $3 billion in equity)

Class B: Jeff Immelt, GE: Indra Nooyi Pepsi: Richard Fuld, Lehman Brothers.

Class C: Steve Friedman Stone Point Capital (Chairman), Dennis Hughes NY State AFL-CIO (Vice Chairman) and Lee Bollinger, President Columbia University.

In District 7, Chicago Fed:

Class A: Dennis J. Kuester (Marshal and Ilsley), Michael L. Kubacki (Lakeland Financial, Warsaw Indiana Financial $2 billion assets $147mm equity), Mark C. Hewitt (Clear Lake Bank and Trust, Clear Lake Iowa, $210mm in total assets, equity not disclosed (owned by Hewitt family)).

Class B: Anthony K. Anderson (Partner Ernst and Young), Mark T. Gaffney (Michigan AFL-CIO), Ann D. Murtlow (Indianapolis Power and Light).

Class C: John A. Canning, Jr. (Madison Dearborn – a private equity firm) (Chairman), William C. Foote (USG Corp) (Vice Chairman) and Thomas J. Wilson (Allstate Insurance).

The Deputy Chairman of the Philly Fed is Charles Pizzi CEO of The Tasty Baking Company.

If you're interested the names and affiliations of all Board members are at www.federalreserve.gov/generalinfo/listdirectors/

[Sneaky]

Oh this should be good.

[WIpatriot]

It proves absolutley nothing.

[Rog49Thomas]

Why don't the FRBs and BOG issue financial statements?

They do and these are available on internet.

Google “Financial Statements and Federal Reserve Banks” Or go to my profile and trawl through the postings there: I've posted links to the BOG financials and those of the NY, Chicago and SanFran FRB.

Three things to note.

First the auditors reports are addressed to the BOG and to the Board of the individual banks. This means that the BOG has oversight over the individual FRBs. Take a look at financials of say Bank of America, the auditors report is not addressed to any government entity.

Second, The auditors of the FRBs are major accounting firms like KPMG, PwC, etc.

Third, the financials are prepared in accordance with accounting policies laid down by the BOG not US GAPP. The primary difference between normal bank GAAP and these principles is the use of historic cost (BOG) for all securities instead of mark-to-market for all or some securities (“normal” bank GAAP). All other USA private banks' financials are under normal USA GAAP.

[Rog49Thomas]

Do the individual FRBs get interest on currency they issue?

Not really.

If you'll look at the financials I referred to above, you'll see that the FRBs are required to pay the Treasury “interest on Federal Reserve Notes”. This amount is calculated by taking all revenues and deducting all operating expenses and then deducting dividends (the 6% required to be paid) and amounts put in reserves. Whatever's left goes to the UST.

Some examples.

Chicago FRB 2006 Fiscal Year: $2.985 billion in net operating income less $2.910 billion “interest” to US Treasury, less transfers to reserves of $0.023 billion and dividends of $0.053 billion. That represents a 3% dividend on equity. Why not 6%? The dividend is on nominal paid in capital. But equity includes accumulated earnings over the years.

SanFran FRB 2006 Fiscal Year: $3.520 billion in net operating income less $3.521 billion in “interest” to the US Treasury less transfers from reserves of $0.081 billion and dividends of $0.080 billion. Effective 3.2% dividend rate. Paid more in interest than on NOI.

NY FRB 2007 Fiscal Year: $14.353 billion in net operating incomes less $13.208 billion in “interest” to the UST less transfers to reserves of $0.892 billion and dividends of $0.253 billion. Effective 2.7% dividend rate.

In essence then the interest paid to the UST is the balancing factor. But as you can see it is a very high percentage of net operating income.

[Rog49Thomas]

So do the banks get rich out of being FRB members?

Well, the dividend is not that generous – a 3% return on equity.

But consider some other factors.

First, national banks are compelled to join the FRB. Each member bank must maintain shareholding equal to 6% of its capital and reserves. Thus, if a bank grows, it must continue to buy more shares.
Normally, in a free market economy, the decision to purchase shares is voluntary. And once you’ve bought you’re not forced to buy more. And note that JPMorgan which holds a lot more shares than the Bank of Podunk still has the same voting rights as the BoP. Normally, if you own more shares, you have more votes.

Second, member banks may not sell, transfer or pledge their FRB shares as collateral. It's like buying a stock and never being able to sell it. Hardly a free market condition.

What do these two things mean? Essentially the bank's shareholding in the Fed is locked in. As long as it is a national bank or member of the FRB, it can’t dispose of its property..

Third, the dividend rate is fixed by statute. Congress has to amend the FRA to change the dividend rate.

Would you buy an investment like this to make a measly 3% yield? And with limited ownership and voting rights. I wouldn't.

[Herrington]

It appears that elected government is now obsolete. All hail the Fed!

Not smart to put the foxes in charge of the chicken coop you say. Well then we will put the biggest baddest foxes of all in charge. This is truly the crowning accomplishment of the Bush administration, the dissolution of government by and for the people.

[julianne]

If the Democrats fall for this and allow the oligarchs to continue to set their own self-serving interests while we print their money and they charge us interest, then to hell with participating in any federal election process other than going to vote Democrat (there are only two parties). That the Fed wants more powers, particularly economic surveillance, after their unending rip-offs shows a staggering hubris. Outside of the local and state level, Americans need to back-off national politics. Washington is gone, a total corruption filled with traitors. Smarter Americans, certainly a minority, need to continue taking care of each other, grown much of their own feed or eat better, and continue to move out into the countryside. Maybe over time the masses will turn, but we can no longer afford to constantly worry about them, at least not on the level we used to. Most Americans have lost their spirit and intellect and are just along for the ride. They can no longer be trusted. If the Democrats win both House and Senate along with the Presidency, they should seize the Fed but they won't. They allowed the Rockefeller-Morgan syndicate to steal us blind with the Bear Stearnes buyout. Our representatives are cowards and traitors on a very serious level. The American people need to turn their backs on Washington and prepare their children to fend more for themselves outside of the filthy, murderous corruption that is Washington.

[Herrington]

I briefly considered printing a cooperative local currency this morning. I did so at a software company I worked for once. How would you like to be paid in herringtonbucks?

Seriously, dropping out is just what they want the best and brightest to do. This fight transcends our personal lives, and remember that it has been won before. This nation is a testament to that fact.

[The Hedonistic Pleasureseeker]

Maybe we should ask why this information hasn't been updated since 2005 . . .

Federal reserve board of governors and official staff: November 1, 2005.

http://federalreserve.gov/boarddocs/rptcongress/annual05/sec4/c5.htm

http://www.ssrn.com/link/board-governors-federal-reserve.html Oh lookie! You can find them here and read about what they're thinking.

http://papers.ssrn.com/sol3/JELJOUR_Results.cfm?form_name=journalbrowse&journal_id=671301

[jepysdad]

After 9-11 America got the Patiot Act which provided greater individual scrutiny to prevent future occurences. Now after the mortgage meltdown, the Bush administration offers the Financial UnPatriot Act. Corporations, other than commercial banks, remain free to paint investment pigs as high priced hookers.

http://peureport.blogspot.com/2008/03/bush-team-proposes-financial-unpatriot.html

That Arthur Levitt mentioned at the end of the NYT piece works for The Carlyle Group, the politically connected private equity underwriter (PEU). Funny, that fact was omitted. Carlyle remains free to package and sell investments without restraint.

[The Hedonistic Pleasureseeker]

From the Creature (Mr. Hyde?) from Jekell Island:

"The federal government does not own any stock in the System. In that sense, the Fed is privately owned. That, however, is misleading in that it implies a typical private-ownership relationship in which the stockholders own and control. Nothing could be further from the truth. In this case, the stock carries no proprietary interest, cannot be sold or pledged as collateral, and does not carry ordinary voting rights. Each bank is entitled to but one vote regardless of the amount of stock it holds. In reality, the stock is not evidence of “ownership” but simply certificates showing how much operating capital each bank has put into the System. It is not a government agency and it is not a private corporation in the normal sense of the word. It is subject to political control yet, because of its tremendous power over politicians and the elective process; it has managed to remain independent of political oversight. Simply stated, it is a cartel, and its organization structure is uniquely structured to serve that end."

[schoolmaster]

ok

[Steambomb]

After all this administration has done to destroy our government why on earth should we consider any changes they propose? I say wait until 1-20-09 and let the chips fall where they may.

[leftLibertarian]

FU FED - FU!

[The Hedonistic Pleasureseeker]

Folks, it's time to switch to barter and trade, and throw their fake funnymoney back into their faces.

Who the h*ll are they to dictate to us what we must value? F*ck-em.

IT IS TIME for that boycott and strike. Running around in the streets waving pitchforks will only encourage them and their plans for martial law, so hit em where it actually hurts. It's time to grow our own (non GMO, non Monsanto, thank you) foods and distill our water. It's time to snap our (empty anyway) wallets SHUT. It's time to pool our nonmonetary resources and say "f*ckem."

Be nice to your neighbors; you'll need each other soon.