Thursday, October 27, 2011

End the Fed II

More: You knew it had to happen given the police state in which we live. Just as the anti-war movement was martyred at Kent State, so now the first blood has been drawn in Oakland. The victim of repression happens to be a young, patriotic Marine who lies in hospital with a severe concussion. He is currently listed in fair condition with brain swelling. City officials nationwide are loosing their cool over the 99% Alliance. Police have been ordered to remove protestors from their encampments. That is what the Oakland police were doing Tuesday night [video] when the peaceable Marine was apparently hit in the head with a gas canister at close range. More than 100 people were arrested in the melee. Certainly ranks of vigils and marches planned for this weekend will swell in response to the violent tactics employed against citizens exercising their constitutional rights of peaceable assembly and free speech. Real change never comes cheap.

credit: Alex Schaefer
{26.10.11} Even Nobel prize-winner Joseph Stiglitz, former chief economist at the World Bank, thinks the Federal Reserve is corrupt because it is infected with plutocratic self-dealing. Stiglitz said, "If we [the World Bank] had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance; this is a corrupt governing structure." Well said Mr. Stiglitz. Notice he says that the problem with the Federal Reserve is structural, not incidental. That is so because the Fed's directors come from big corporations and banks like General Electric, JP Morgan Chase, Goldman Sachs and others. The latest example of what commentator Mike Whitney says is "just plain evil" is the Fed's backing of teetering Bank of America's move to thrust the risk of its rotten derivatives portfolio onto a subsidiary depository institution that is FDIC insured. Of course the FDIC objected to the move because it puts taxpayers at risk of picking up the tab for B of A's counterparties. Under the amended bankruptcy rules of 2005 derivative counterparties are first in the line of creditors to take assets of a defaulting bank. So B of A's transfer amounts to another TARP-like extortion of taxpayers to save depositors. What politician is going to vote against depositors of a federally insured institution? Answer: none.

The GAO, Congress' investigative arm, recently completed its second audit of the Federal Reserve. Senator Bernie Sanders (I-VT) was responsible for the amendment to the Dodd-Frank bill allowing the GAO to audit the heretofore secret central bank, and has posted a summary of the GAO report on-line. The GAO found significant conflict of interests. GAO identified 18 former and current members of the Fed's board affiliated with banks and companies that received emergency loans during the financial crisis of 2008. The policy that allows the banking industry to elect and serve on the supposed independent Federal Reserve board creates in the circumspect phraseology of bureaucrats the "appearance of a conflict of interest". The reality is more than an appearance. Many of the directors work directly for supervised or regulated banks or own stock in them. They supervise the Federal Reserve's operations including personnel and salary decisions. They also decide how much interest to charge banks receiving loans from the Fed, and whether to extend credit to a bank at all.

'Old Hickory' slays the Second Bank
Perhaps the most blatant example of this insidious nexus between private bankers and a supposedly independent agency of government is that of Stephen Friedman. During the 2008 Panic the New York Federal Reserve Bank approved an application from Goldman Sachs to become a bank holding company which would allow it to receive near zero interest loans from the Federal Reserve system. This move was made possible by the repeal of the 1933 Glass- Steagall law which prohibited investment banks from entering commercial banking and established the FDIC. Chairman Friedman at the time also sat on the Goldman board, and owned shares in Goldman. Friedman received a waiver of the Fed's conflict of interest rules. After receiving the waiver the opportunistic Friedman continued to purchase Goldman stock. There are others examples of this incestuous self-serving by Federal Reserve members: Jeffry Immelt, CEO of General Electric, received $16 million in financing during the Panic at the time he was a director of the Federal Reserve; Jamie Dimon was on the NY Fed board when his bank, also serving in its traditional role of clearinghouse for Fed lending programs, received $30 billion in financing to acquire failing Bear Sterns. There are more such instances of insider dealing. The bailout of banks "too big to fail" shows the Federal Reserve as it is presently constituted does not serve the national interest. It has degenerated into a private banker's club with the soverign power to create money. Only eleven of the 202 directors in the period 2006-2010 represented labor and consumer interests despite a congressional mandate for a Federal Reserve board consisting of experts in labor, consumer protection, agriculture and industry. Presidents Jefferson's and Jackson's darkest fears that the Democracy would be strangled by the Money Power have come to fruition. It is time to end the Fed.