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The Fed: Massive Role, No AccountabilityPublished 11/24/08 Craig Harrington - Print ArticleE-mail - editor@economyincisis.org The Federal Reserve System has had a huge role in the economic crisis. However, its role has been largely confidential and permanently hidden from public – or even governmental – review. Many people have expressed concern over the apportionment of $250 billion and counting from the Treasury Department’s bailout packages. The information and details of these various deals are largely public record. The Fed’s simultaneous crisis programs have lent out much more, $893 billion and counting, but the details of all dealings are closely guarded secrets. The Fed has lent over $500 billion to banks, over $260 billion to commercial paper markets, $70 billion for mutual funds and $50 billion to investment houses. All of this lending comes on top of what was already lent to these institutions by the Treasury Department. When combined, the brand new programs have already spent over $1 trillion. For a nation and a government dealing with horrendous fiscal debt crises, the idea of spending perhaps trillions of dollars on propping up crumbling institutions should be alarming. The idea that the majority of this spending is kept completely secret from both the government and the public should be a major and primary concern for everyone in this nation. Fed Chairman Ben Bernanke has argued that the Fed’s refusal to name names (as has always been its precedent) is to encourage stability in the marketplace. He and other Fed governors wish to avoid causing public hysteria by revealing that this bank or that institution came to them for aid. But does the public not deserve the right to know that their bank is borrowing from the Fed? A routine overnight loan would hardly be cause for concern, but if a bank is rushing to the Fed for cash in order to stave off collapse it would seem prudent that depositors and shareholders be told. To make matters worse, the Federal Reserve lends money that it quite literally creates. The Treasury has the power to print Treasury bonds, but they only have value when purchased by someone. The Federal Reserve controls all of the currency in the United States, and its lending programs have greatly increased the amount of currency in the system. Every dollar created borrows its value from those already in existence and devalues the whole (this is called “inflation”). In essence, the Fed’s lending programs were enacted in theory to help the economy recover but they are undermining the economy in practice. The Federal Reserve is not, as many believe, a part of the United States government. However, the Fed board of Governors is appointed by the President and confirmed by the Senate. It is bad enough that the Federal Reserve System is a privately owned corporation. Now, just when access to information is of paramount importance, the Fed stands in the way of the American people in their search for an understanding of which company could be the next to fail. The FDIC keeps the banks listed on its “troubled list” a secret for good reason, and it does so as it actively tries to right whatever problems that bank is suffering from. The Fed argues that it is not releasing bank names for the same reason, but it has no enforcement division to correct the problems. Instead, it secretly lends money to secret borrowers to be used for whatever they wish. Source Washington Post:
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Greedy Speculators, who manipulate the Market both ways going up (pumping and dumping) and “Naked Shorts” while going down have been like gasoline thrown on the fire of this credit crisis.
Never mind the fact that many of these investment banks over extended their leverage way beyond the proven 10 to 1 ratio of “Fractional Reserve Banking”.
Phil Gramm, McCain's top economic adviser, sponsored a bill that made the Glass-Steagall act much less than it was, by making it possible for large brokerage firms to act like banks, without the Glass-Steagall regulations, leading to the chaos we have today. Both sides of the House are responsible for this mess and President Bill Clinton approved this bill.
One of the reasons the Glass-Steagall Act was important for the financial security of the United States was because of bank speculation, much like what is happening in the current subprime mortgage crisis in the U.S. Back in the 1930s, many American banks were said to be dangerously speculative. Many banks, in the hopes of reaping financial rewards, took large leveraged risks, endangering the financial market. The Glass-Steagall Act was created to prevent such speculation by the investment banks.
Until Glass-Steagall Act regulations and protections are reinstated, we will continue to have financial problems. The huge pile of accumulated debt and bad paper need to be accounted for over a period of time (five years?) and written-off in whole, or in part, as necessary. However this is accomplished- either through bankruptcy or otherwise, the systemic problems can't just be "called away" or papered-over with good intents and more Federal bailouts. So, moving the bad debt under an eggshell all around the table is not a desirable approach to problem solving.
The banking system and deregulation are the main culprits for this crisis. However, Fiat money is not the problem as was proved by Ben Franklin. He is considered the father of paper money. Pennsylvania and other colonies had paper money and no gold or silver to back it with. The colonies thrived very well until King George forced all of the colonies back on the gold standard of the crown. This caused a major shrinkage of the money supply in the colonies and thus causing an economic depression in the years leading up to the American Revolution. It wasn’t just a tax on tea that caused the revolution. The International Banking Cartels started their earliest manipulations of currencies values when gold was the standard so going back to it will only make our debts worse.
Joe Schmoe just doesn’t get it, that he and everyone in this country who have a mortgage are nothing more than wage slaves to the banking system. Abe Lincoln freed all the slaves including the wage slaves when he issued the “Greenback” dollar to pay for the Civil War. There would be no Federal Debt today if we still had the “Greenback” and no Federal Reserve (private bank) Bank.
Thomas Jefferson said "The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered"
Only Andrew Jackson ever defeated the Greedy Bankers and he was the only President to ever pay off the Nation’s debt. All other Presidents who attempted to challenge them were assassinated.
If Obama wanted to be more like Lincoln and Jackson, he would bring back the “Greenback” and do away with the Fed by nationalizing the whole Federal Banking System. This would allow him to pay off the National Debt with “Greenbacks” and do away with the Federal Income Tax. Change we could believe in would be the return of a Congress that took on its constitutional duty of printing once again its own money - the “Greenback”.
If you want to read the truth about our corrupt Fed and banking system read the “The Web of Debt” by Ellen Hodgson Brown, J.D. Also,”American Lion”
by Jon Meacham will give insight into the cabals of America’s first lobbyists the elite rich bankers.