Audit The Fed Effort Wins Support From An Unusual Coalition

An unusual coalition of progressive economists, labor leaders, and bloggers has decided to fight back against a congressional amendment that would allow the Federal Reserve to continue operating in secrecy.

In a Thursday letter to the House Financial Services Committee, economists like Dean Baker and Rob Johnson, author Naomi Klein, and such labor luminaries as the AFL-CIO's Richard Trumka and the SEIU's Andy Stern, urged committee members to shoot down an amendment by Rep. Mel Watt (D-N.C.) that would essentially allow the Fed to keep the lights off while it throws money around.

Watt's amendment, which could see a House vote today, is a direct attack against a separate measure by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.). That measure, known as the "Audit the Fed" bill, has been gaining momentum in Congress for months.

"A vote for the Watt amendment is a vote for more secret bailouts," the letter says.

The letter notes that during the financial crisis of the past two years, the Fed's role has shifted from simply setting monetary policy via interest rates to rapidly acquiring "a wide variety of private assets and extend[ing] massive secret bailouts to major financial institutions."

Among those bailouts, critics argue, was the Fed's funneling of cash to AIG counterparties. Earlier this week, a government watchdog issued a blistering report that blamed the Federal Reserve for withholding details of its massive rescue of AIG last fall. In particular, the report blamed the Federal Reserve for paying for botching its private negotiations regarding the price AIG's rapidly souring derivatives investments, a secret move that cost taxpayers at least $13 billion.

Watt's office on Wednesday circulated a letter from what it called a "political cross section of prominent economists" who supported the amendment. All but one of those economists are currently or have previously been on the Fed payroll.

The committee will take up the Watt amendment on Thursday.

Here's the letter:

November 18, 2009

House Financial Services Committee
2129 Rayburn House Office Building
Washington, D.C. 20515

Dear Chairman Frank, Ranking Member Bachus, and Members of the Committee,

During the past two years, the Federal Reserve dramatically changed its operating procedures. Instead of simply setting interest rates to influence macroeconomic conditions, it rapidly acquired a wide variety of private assets and extended massive secret bailouts to major financial institutions.

There are still many questions about the Fed's behavior in these new activities, including potential cronyism and favoritism in its distribution of many trillions of dollars. As the Special Inspector General for the Troubled Assets Relief Program recently wrote about their bailout of AIG, the Fed's "strategy to pursue concessions from counterparties offered little opportunity for success, even in light of the willingness of one counterparty to agree to concessions."

The Federal Reserve balance sheet expanded to more than $2 trillion, along with implied and explicit backstops to Wall Street firms that could cost even more. Who received the money? Against what collateral? On what terms and conditions? The only way to find out is through a complete audit of the Federal Reserve. That's why we support the Paul-Grayson amendment requiring a complete audit.

The Watt amendment does not repeal the existing provisions that prohibit a GAO audit of the Federal Reserve. In fact, it adds entirely new additional categories of restrictions. Instead of opening up the Fed's secretive activities to public inspection, the Watt amendment cloaks it in further secrecy.

A vote for the Watt amendment is a vote for more secret bailouts. We urge you to support Paul-Grayson instead.

Sincerely,

Dean Baker, Economist, Center for Economic Policy Research
William Black, Professor of Economics and Law
Tyler Durden, Blogger, Zero Hedge
Thomas Ferguson, Professor of Political Science, University of Massachusetts, Boston
James K. Galbraith, Economist, University of Texas
Leo Gerard, President, United Steelworkers Union
Jane Hamsher, Blogger, Firedoglake.com
Rob Johnson, Economist
Naomi Klein, Author, No Logo and The Shock Doctrine
Yves Smith, Blogger, Naked Capitalism
Andrew Stern, President, SEIU
Richard Trumka, President, AFL-CIO
L. Randall Wray, Professor of Economics, Center for Full Employment and Price Stability

Comments

[tuberider]

11:34 AM on 11/23/2009

Crazy Uncle Larry told us kids that all the other people are on vacation in Tahiti and the only thing in that big safe he keeps in his bedroom is linens and things. I know he must have some cookies in there. I'm starving. Mom said he's a good Democrat but he's been acting funny lately. I miss Mom.

[tuberider]

10:47 AM on 11/23/2009

Though I don't feel terribly "unusual" you can consider me "on-board".

[PuffDragon]

10:07 PM on 11/22/2009

The curtain around The Fed needs to be torn down completely - forever.

See this movie that provides a detailed and fascinating history of The Fed and centralized banking as an entity:

"History of the Federal Reserve"

http://www.apfn.org/apfn/reserve.htm

Another link to the same movie:
http://video.google.com/videoplay?docid=7757684583209015812&hl=en#

Skip to the last 10 minutes to see their prediction (accurately formulated in 1995) for what's been happening over the past 8 years. Their closing recommendations seem to be "right on the money" as well, no pun intended.

The movie is long . . . but is available on DVD from the first link.

[spmcintyre]

09:55 PM on 11/22/2009

If we had stayed on the gold standard, none of this would have happened, in 1976 when my parents bought their first house, it was less than $15000. Cars were available new for a few thousand, and you could live comfortably on $20000 a year.

Things were even cheaper 10 years before that. Inflation had not quite yet kicked in. Now, people are struggling to live on 30, 40 and sometimes $50k a year in some cases, depending on where they live. The average home cost $150000 and most cars start at 10k. Remember when a pack of gum cost 25c? I do, barely, but I remember.

Audit the Fed, stop trying to pull the band-aid off slowly, its gonna hurt more, for longer if you keep this up.

[willisbones]

08:22 PM on 11/22/2009

My ancestor was Amos Kendall, fourth auditor of the U.S. Treasury.

He found waste, fraud and abuse and he helped the country during Andrew Jackson's presidency.

He was against the "too big to fail" banking system in 1830, and he is turning in his grave in 2009 because his hard work didn't teach us a goddamn thing!

[myshadow]

08:13 PM on 11/22/2009

My guess is, when the legislation gets to the President's desk, there will be a veto or at least a signing statement. The President is behind Bernanke and Geithner all the way. He does want them there. The root canal of insolvency must be so deep that all they can do is try to hide it as long as they can.
I have said it umpteen times in the past, if there aren't some serious perp walks and successful prosections for fraud, this country is going to turn to the demagogue that Frank Rich warned of today. Even people who don't have an advanced degree or economic knowledge viscerally know something of this magnitude had to come about through some amount of lawlessness. Blankfein all but admitted as much this week. The craven disregard for the middle class and sense of entitlement these banksters have as they get bonuses for marketing derivitives at leveraged compounding values, using the treasury as their well of liquidity, is at the doorstep of the White House.

[chaserblue]

07:30 PM on 11/22/2009

I say to h-ll with auditing the fed and let's just seize the fed. Instant relief from so many of the ills plaguing this country and the economy. With no more federal reserve we actually have a chance of getting this country back on it's feet again. I just don't trust Obama and Biden when they say that if we hadn't bailed out the banks we would have been in a depression rather than this fustercluck we're in right now...

[JL-Sosa]

08:46 PM on 11/22/2009

Seize the fed? And what, pray tell, would you do with it Chaserblue Chavez?

Don't shake the hornet's nest unless you've got what it takes to fight back. Clearly, from what you've said, you do not. I would much rather leave monetary matters out of the hands of populist screamers. You say without the fed we have a chance of getting back on our feet again? How? You didn't give a single well-thought, intelligent way to get out of this "fustercluck" as you so brilliantly put it. If people who "don't trust Obama and Biden" (who have *nothing* to do with policy OR the fed BTW) but also can't tell me a single compelling reason why they don't take over things, we are truly lost.

Populism is another word for Stupidity... Don't believe me? Just look at the things we consider 'popular' in our society.

[chaserblue]

01:08 AM on 11/23/2009

If the fed is dismantled, trillions of dollars of interest that we are putting into the coffers OF A PRIVATE CORPORATION suddenly isn't going to come out of taxpayers pockets any more. They've already proven time and time again that they can't be trusted. Bernanke, Geithner &Co are part of the problem, the foxes guarding the hen house. Expanding their powers (as they are trying to do) would not only be stupid, it would be dangerous. William Greider said that there are six very good reasons for curtailing (if not dismantling) the temple. If we expand the problem:
1. It would reward failure
2. Cumulatively, Fed policy was a central force in destabilizing the US economy.
3. The Fed cannot possibly examine "systemic risk" because it helped to create the structural flaws.
4. The Fed can't be trusted to defend the public in its private deal-making with bank executives.
5. Instead of disowning the notorious policy of "too big to fail," the Fed will be bound to embrace the doctrine more explicitly as "systemic risk" regulator.
6. This road leads to the corporate state--a fusion of private and public power, a privileged club that dominates everything else from the top down. WHICH THEY ALREADY DO.
You can read the entire article here:
http://www.thenation.com/doc/20090803/greider
So yes, I do believe that we should dismantle the fed.
Now why don't you take your little toys and run along, let the grownups slug this out.

[PuffDragon]

10:11 PM on 11/22/2009

I think you have something there - shut down the Fed altogether and restore the Government's Constitutional role of printing interest-free currency. Instead of paying private banks to print our government currency while they charge massive interest on every dollar.

[Washington Kos]

06:59 PM on 11/22/2009

Thus that wealth is becoming increasingly concentrated and the middle and lower classes are becoming increasingly unable to maintain standards of living. Jobs are going away, wages are declining. There is a risk of collapse of the entire system.

rec. reading: http://financeopinionss.blogspot.com

the worst part is with globalism the elite dont' even need the working poor or Amerika to buy their crud anymore. Instead china, India, Europe, and South America fill that role.

[sixchair]

07:30 PM on 11/22/2009

Let's start making our own crud and buying it.

[Caru]

07:38 PM on 11/22/2009

But will it be quality crud.

[pontesisto]

06:06 PM on 11/22/2009

If you would like to help pressure Congress to audit the fed please join our voting bloc:
http://www.votingbloc.org/Audit_Fed_Bloc.php

[hellinahandcart]

08:32 PM on 11/22/2009

Thanks for the link-- I joined and promptly copied and sent the standard letter for Dr. Paul's bill to my Rep., urging him to sign.

[zitlight73]

05:25 PM on 11/22/2009

In June of 1963 the President of the United States took back control of our currency and backed the dollar with silver. 46 years ago today he was killed in Dallas. The very next day the mint quit printing silver certificates by December the Fed was back controlling our currency. Coincidence? Yeah, right that has to be it, just a coincidence.

[newbridge]

06:51 PM on 11/22/2009

Of course, it was preplanned. The international bankers have been behind every bubble and bust, every war and every problem since they were created 300 years ago.

[Caru]

07:38 PM on 11/22/2009

Yeah... Nothing else, just them - right.

[ezeflyer]

05:05 PM on 11/22/2009

"Secrets of the Federal Reserve"
"How could the Kuhn, Loeb-Morgan alliance,... believe that it would be capable, first, of devising a plan which would bring the entire money and credit of the people of the United States into their hands, and second, of getting such a plan enacted into law?
... the "National Reserve Plan"... was easily within the powers of the Kuhn, Loeb-Morgan alliance, according to the following from McClure's Magazine, August 1911, "The Seven Men" by John Moody:
Seven men in Wall Street now control a great share of the fundamental industry and resources of the United States. Three of the seven men, J.P. Morgan, James J. Hill, and George E Baker, head of the First National Bank of New York belong to the so-called Morgan group; four of them, John D. and William Rockefeller, James Stiliman, head of the National City Bank, and Jacob H. Schiff of the private banking firm of Kuhn, Loeb Company, to the so-called Standard Oil City Bank group... the central machine of capital extends its control over the United States... the process is not only economically logical; it is now practically automatic.
Thus we see that the 1910 plot to seize control of the money and credit of the people of the United States was planned by... the most powerful men in the United States (who) were themselves answerable to another power, a foreign power, the House of Roth$child.
http://www.thirdworldtraveler.com/Banks/House_Rothschild_TSOTFR.html

[desertman]

05:27 PM on 11/22/2009

If there's anything worse than a secret Federal Reserve, it's Congress controlling it.

[ezeflyer]

05:32 PM on 11/22/2009

Faux pas

[nicole5]

06:10 PM on 11/22/2009

At least we get to vote to decide who our Congressional representatives are - not so with the Fed. They answer to no one.

[newbridge]

06:54 PM on 11/22/2009

You have hit it on the head. A preplanned takeover of America's monetary systems.

[textynn]

05:05 PM on 11/22/2009

It's great to know that during the worst economic crisis since the Great Depression, the wealth of the 400 richest Americans, according to Forbes, actually increased by $30 billion.

What Recession? 400 Richest Americans Lined Their Pockets with $30 Billion
http://www.organicconsumers.org/articles/article_19308.cfm

[sarahtonin]

05:01 PM on 11/22/2009

"Unusual coalition"? Oh no! Now the 92% of our country who wait for "R's" or "D's" or Beck or Maddow to tell them what to do are going to read and think for themselves.

[Coinyer101]

04:40 PM on 11/22/2009

Nothing will 'change' until liberals and libertarians join forces to rest control from centrist dems and repubs..........,

[bzb]

04:36 PM on 11/22/2009

You mean after all these years NOW they want to audit the Fed's. The S&L scandal, cost American tax payers over $1.4 TRILLION dollars back in the 80's.

Ron Paul has his own secret agenda which I don't trust for one minute. They need to audit: GS, BofA, Wells, JP Morgan, AIG et al.

[textynn]

04:52 PM on 11/22/2009

Check t his out. JPMorgan owns the call intake company IN INDIA that is processing food stamps for Americans in financial dire straights. . When someone applies for food stamps they have to reveal their entire financial situation with extensive information and data. They have unreasonable access to our sensitive info while this same government demands practically no oversight over them. It is messed up.

http://consumerist.com/5232809/were-outsourcing-food-stamp-jobs-to-india

[b1986]

05:27 PM on 11/22/2009

YOU HAVE GOT TO BE FREAKING KIDDING ME!!! AUDIT THE FED NOW! That information is awful. They are running this country into the ground.

[zitlight73]

05:40 PM on 11/22/2009

Have been for several years now, they've even made poverty profitable. Instead of hiring food stamp recepiants here to help out USA's unemployed they offshore.

[fortysixandtwo]

04:52 PM on 11/22/2009

Lol, and what would this nefarious "secret agenda" be?

The good doctor is a straight shooter.