When the severe financial panic struck the United States in 2008, it was absolutely essential that the nation's central bank, the Federal Reserve, preserve the nation's payment system. The payment system includes bank accounts, especially those guaranteed by the government such as commercial bank accounts and money market accounts that have federal insurance, a liability of the taxpayers. The payment system includes the operation and security of digital transfers of funds.
That should not mean that the Federal Reserve is authorized make loans to any individuals, partnerships and corporations with the approval of as few as two unelected bureaucrats. It should not mean that these few unelected officials face no required checks or balances. It should not mean that Federal Reserve officials need no detailed source records, nor, if they do exist, should they destroy them, a policy they began in 1995. There should be full individual accountability for each of the Fed's unelected officials who have immense power over the economy.
Only two unelected bureaucrats at the Federal Reserve can decide who can receive trillions of dollars of loans without even consulting Congress. The Board of Governors of the Federal Reserve (not the Fed's other policy committee, the Federal Open Market Committee) has the immense power to bypass the congressional appropriation process to make loans to individuals, partnerships and corporations that are "unable to secure adequate credit accommodations from other banking institutions" provided there are "unusual and exigent circumstances."
Before 2002, at least five of the seven Fed governors had to authorize the action. (Section 13-3 of the Federal Reserve Act). In 2001 the law was amended after the 9/11 terrorist attacks so that if there are less than five governors in office these loan powers could be authorized by a "unanimous vote of all available members then in office -- if at least 2 members are available." [11/26/01 (115 Stat. 333)]
Consider a few of the many past events at the Federal Reserve that I have described in Deception and Abuse at the Fed (U.T. Press, 2008 )and on The Huffington Post leading up to the $3.3 trillion insider trading exposed last week. They can be described as corrupt practices that do not belong in the government of our great democratic nation.
For 17 years the Federal Reserve lied that it had no transcripts of one of its two policy making committees. The 17-year lie ended in 1994 during a congressional investigation by House Banking Committee Chairman Henry B., Gonzalez. Fed personnel were forced to end the lie and show me the 17 years of neatly typed transcripts around the corner from Fed Chairman Alan Greenspan's office.
The Fed again began issuing the transcripts with a ridiculously long lag of five years. Then in 1995 the Greenspan Fed voted (without any record of how each unelected bureaucrat voted) to destroy the source transcripts and send only the edited records to the National Archives and Records Administration where they are stored for 30 years. Donald Kohn, who became the Vice Chairman of the Fed's Board of Governors, answered a letter I had sent to Fed Chairman Greenspan. Kohn said that the destruction of the the source records was considered legal.
Almost immediately after Alan Greenspan became chairman of the Fed in August 1987 he was confronted with a stock market crash. Stock market prices reached their peak in August and then fell with a 22.6 percent drop occurring in one day, October 19, 1987. Seven years later the Greenspan Fed, under pressure from a Gonzalez investigation and a series of hearings, sent Congress the long list of FOMC phone conference call transcripts from 1976 to 1993.
The Greenspan Fed may have correctly handled the liquidity problems associated with the stock market crash. The cautionary word "may" is appropriate because the Fed reported to the Congress that transcripts of eight consecutive "FOMC Telephone Conference Calls" following the crash are listed as "no transcript" (October 21, 22, 23, 26, 27, 28, 29, and 30). What did the individual FOMC members advise during this period? Did their individual views reflect skill in conducting the Fed's operations? What could we have learned for dealing with future crashes that were never sent to the Congress?
A Russian default crisis caused a large hedge fund in the United States, Long-Term Capital Management, to collapse in 1998. When LTCM failed -- it lost $4.6 billion in four months -- the Greenspan Fed thought that this was potentially so harmful to financial markets that it required Fed intervention. Working from the offices of the New York Fed Bank, the Fed orchestrated a bailout by private sector banks. Greenspan could not or would not tell Congress the details of the bailout apparently because the nation's central bank produced no detailed public records of its actions. Hundreds of lawyers and many large financial firms were evidently involved in this operation. The London edition of the Financial Times reported:
For more than three hours, members of the House Banking Committee lined up to condemn last week's bailout of Long-Term Capital Management. From both sides of the political debate, members attacked the operation as -- at best -- an indictment of the central bank's poor scrutiny of the US financial system, and -- at worst -- a piece of crony capitalism in which Mr. Greenspan and his senior colleagues were protecting the well fed princes of American banking. (10/03/98)
$4.6 billion is less than a rounding error compared to the $3.3 trillion of Federal Reserve loans it has been forced to expose. Senator Bernie Sanders and Congressman Ron Paul led the efforts to pass an audit bill of the Fed activities during the recent economic and financial crisis. Senator Sanders' amendment to the Dodd-Frank Reform bill for an audit of the Fed's transactions during the present recession passed on a vote of 96 to 0 in the Senate on May 11, 2010.
This was strong bipartisan support for complete records from the Federal Reserve. The Fed had fought the audit and along with many people waved its banner of independence from politics which means protect us from individual accountability. (See Chapter 10 in my book, Deception and Abuse at the Fed: The Myth of Political Virginity.)
Valuable exploitable inside information was hidden by the most powerful peacetime bureaucracy in the United States that secretly transacted $3.3 trillion loans during the current economic turmoil. Initial records indicate a vast array of private firms and some individuals who may have benefited from these loans. I previously described exploitable inside information problems in the Fed's foreign currency operations. Greenspan informed Gonzalez it would be ignored.
There must be checks and balances for the Fed's activities. The complete source records and transcripts of the Fed meetings that led to the $3.3 billion in loans should be made available in a timely manner. During a crisis they should inform members of the banking committees in the House and Senate that have security clearance. If the CIA can inform Congress, why should the Fed be exempt?
Some details of the $3.3 trillion dollars in 21,000 Fed loans had been exposed in the media when Chairman Ben Bernanke was interviewed on 60 Minutes on Dec. 5. Surely he knew his statement denying the expansion of the money supply would be misleading in a time when clarity is needed about the Fed's immense worldwide loan activity: "One myth that's out there is that what we're doing is printing money," he said. "We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way."
True, the money supply (M2: primarily currency, coin, checking accounts and consumer time, savings, and money market accounts) grew by 3.3 percent in the 12 months prior to November 2010. However, the monetary base (currency, coin and bank reserves) rose from $800 billion in August 2008 to $1.9 trillion in November 1, 2010 (2.3 times larger).
Chairman Bernanke, your Fed is "printing money." The banks are holding nearly fifty percent of the nearly $2 trillion of the exploding monetary base your bureaucracy has put into circulation instead of lending it to commercial businesses and buying other income earning assets? The bureaucracy you lead is paying the banks interest on the money it holds as reserves, an incentive to immobilize their excess reserves. See: "Malpractice at the Bernanke Federal Reserve."
The Fed receives interest from the U.S. Treasury on the large amount of securities the Fed already has purchased, and that is the taxpayers' money. It sends the interest it does not use back to Treasury to reduce the "recorded" deficit. The interest sent to the banks is being paid by the taxpayers.
The members of the Board of Governors have 14-year terms (unless they are filling an unexpired term) and can only be removed by impeachment, which has never happened. That is a longer term than is needed to insure some short-term independence for their vote on monetary policy. This is not true for the presidents of the 12 district Fed banks, five of whom vote on monetary policy. The presidents of the 12 Fed banks should have their credentials and views aired in public during Senate confirmation hearings. They should not be serving if they have massive conflicts of interest. The present method of selecting these presidents internally by boards of directors, two thirds of whom are elected by the banks they will regulate, places them in massive conflicts of interest, as I have described.
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"Valuable exploitable inside information was hidden by the most powerful peacetime bureaucracy in the United States that secretly transacted $3.3 trillion loans...The complete source records and transcripts of the Fed meetings that led to the $3.3 billion in loans...grew by 3.3 percent in the 12 months...." NOW WHAT ARE THE ODDS OF 3-33's IN ONE ARTICLE ABOUT THE FEDERAL RESERVE - WORSE THAN THAT OF A CAMEL GOING THROUGH THE EYE OF A NEEDLE. WE WILL LET YOU KNOW WHEN THE NEXT COINCIDENCE OCCURS.
The private banks don't (or at least shouldn't) control the FED. It's a government entity, so we, the people (who pay taxes and fund it) are the owners and need to know what's being done in that agency.
The Tea Party was fleeced and used. Corporate entities, with lobbyists, attorneys, fat check books, currently control our government, and are using their wealth-power to destroy this nation. While we speak about a strong national defense, sovereignty, security and safety, they should consider that corporate malfeasance (collapse of financial institutions, market melt-down, economic havoc, mining explosions, oil spills, abuses by health insurers etc.) during the past decade have caused more devastation, death, injury, poverty, destruction of property, lost livelihoods, lost homes, theft of life-savings of millions of Americans, and far more than Hamas, al-Qaeda and Hezbollah combined could plan or pray for. Unfortunately, they gave even more power to the same culprits who are now swindling and profitting off of fraudulent foreclosures, etc. That's what they get for listening to Palin and Faux news, rather than studying-reading-investigating issues on their own merit.
Apparently it's harder for Americans to give a few hundred dollars to an American who lost his livelihood when he lost his job than it is for them to give a few billion to a bank who paid its executives bonuses while they lost some other American's money.
Tea Party, pay attention: you are angry at *exactly the wrong people*.
Fed employee lends its company billion of dollars at super favorable conditions
"Fed Director's Bank Lavished With Billions From The Fed
The Federal Reserve Bank of Atlanta made six major loans to SunTrust Banks at the height of the financial crisis totaling at least $7.5 billion. James M. Wells, the Chairman and CEO of SunTrust, sits on the Board of Directors at the same Atlanta Fed that lent his company the money.
SunTrust also received $4.85 billion in bailout funds from TARP, a separate program run by the Treasury, on November 14th and December 31st of 2008.
According to data released Wednesday by the Federal Reserve, SunTrust's first billion dollars came on November 6, lent through the Fed's Term Auction Facility, a week before it received TARP money, A week after it took the TARP money, it took another billion dollars from the Atlanta Fed. On December 4, it took another $1.5 billion from the Atlanta Fed. The bank received two more billion dollar loans in January from the Atlanta Fed, followed by a May loan of $2.5 billion from the same bank. -- Ryan Grim"
http://www.huffingtonpost.com/2010/12/01/fed-directors-bank-reciev_n_790631.html
So good on Bernie Sanders for beginning to open up Pandora's Box.
I think what they're thinking is that it's just above the common man to understand, and so he will misunderstand and make problems for the Fed. Okay, maybe so. Then let's have very selective oversight, and full disclosure when the Fed steps into the nefarious cesspools of questionable motives.
The only other line of thinking would dictate that $100 billion really isn't that much. Hmmmm.
Like a child that has learned yelling is an abstract, the whole of our financial system will continue to be corrupted until we emplace and enforce laws that punish corruption.
Corruption isn't always a criminal act, but often borderline abuses that bend and pervert the intent of the law.
The independence of these committees is meant to protect our monetary system from politicization; but of course greedy--meaning corrupt--individuals see that independence as an endorsement of their ideology.
That's why it's a perversion, because individuals choose to see things from a certain perspective, a perspective that excuses, allows and/or justifies their otherwise wrongful actions.
If you believe America is all about making a buck, you're part of the problem. Period. The reason this is a problem is because money for money sakes is just another way of saying the ends justify the means. So crooked flourishes, the economy suffers, and blue-collar crime rises as a result of white-collar corruption.
If you believe our capitalistic system is the best system for allowing independence and self-reliance, you’re about 2/3 right. But don't worry, no economic system is 100% simply because profitability always increases prices, and as long as labor is also consumer, there will never be 100% employment, or 100% livable wages.
And as the world's population continues to rise humanity's problems will continue to grow.
For some that's even more “reason” to be dishonest.
Well....if not the Bankers; who then? Joe The Plumber?
The fact is that, since the Feds creation, Currency Speculating and Insider Trading have taken over for the destructive financial practices that led to it's creation; Gold and Silver Speculating!
The fact is that we've never elected a Government that could be trusted to anage th Economy; only people with a whole lot to lose when the Economy Tanks, like JP Morgan, could be trusted to do it right - and thus, on a little cruise of the cape.......they saved us from the 'Southern Gents' who'd been using the Gold (which was supposed to have been 'backing' the Confederate Dollar) that they'd stollen from the Bank of the Confederacy (sending every institution who held ANY Securities based on Conferderate Dolars into a NOSEDIVE) to Crash and Burn the 'Yankee Ecomony' for the previous 50 years; through the Old Evil Gold Speculation.
For the most part, I think ye doth protest too much; though you have a valid point vis-a-vis the failure to more widely distribute those accumulated 'newly printed' funds.
CNN Money reports $ 9.9 Trillion:
http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm
Federal Reserve made $9 trillion in emergency loans - Dec. 1, 2010
Otherwise:
1. The properties on which the mortgages were based still exist.
2. The mortgages still exist
What would have been so bad about that?
As the international banking system froze the U.S. would not have been able to meet certain treaty obligations. (I assume other countries would have similar problems.)
Arguments for continuing the loans since then are much weaker. Companies needed a few weeks to make other arrangements. After that, only the companies with weak cash positions were vulnerable. A strong argument can be made that we would be better off without those companies.
A business can go into receivership, be run by a court appointed administrator, and be gently put to sleep.