07/01/2010 01:33 pm ET Updated May 25, 2011

2012: Voters Nix Incumbents, Demand Financial Reform and Fed Fraud Audit

The only part that needs to wait is the voting. Bloomberg News reported the "Fed made taxpayers unwitting junk bond buyers" (July 1, 2010):

Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in "assets" the government agreed to purchase in the rescue of Bear Stearns Cos. were "investment-grade." They didn't share everything the Fed knew about the money.

By using its balance sheet to protect an investment bank against failure, the Fed took on the most credit risk in its 96- year history and increased the chance that Americans would be on the hook for billions of dollars as the central bank began insuring Wall Street firms against collapse. The Fed's secrecy spurred legislation that will require government audits of the Fed bailouts and force the central bank to reveal recipients of emergency credit.

Congress's proposed financial reform bill would not have prevented the last disaster, fails to address current problems, and will not prevent the next disaster (more on this in a future post). Among other things, lawmakers are leaning to a provision to allow an audit of the Federal Reserve Bank, but this should be a thorough fraud audit, and there should be ongoing audits.

As for malfeasance at investment banks sheltered by the Federal Reserve Bank's secrecy, in honor of Canada Day here's my video interview from Canada CTV's Lang and O'Leary Report (April 29, 2010) explaining there should be felony indictments for accounting fraud and securities fraud: