The Vultures are Circling… and the Federal Reserve can’t do jack squat about it!
The Vultures are Circling…. And the Federal Reserve can’t do jack squat about it!
(In the black ink is a Bloomberg article of today. – In red ink are comments which put the Federal Reserve to shame!)
Aug. 18 (Bloomberg) – Ben S. Bernanke is still trying to define which financial institutions it’s safe to let fail. The longer it takes him to decide, the tougher the decision becomes. (Why is this a “tough” decision? If Peter’s Popsicles don’t produce a product that people want, his Popsicle store goes out of business – why is it any different for financial corporations?)
In the year since credit markets seized up, the 54-year- old Federal Reserve chairman has repeatedly expanded the central bank’s protective role, turning its balance sheet into a parking lot for Wall Street’s hard-to-finance bonds and offering loans through its discount window to investment banks and mortgage firms Fannie Mae and Freddie Mac. (This is Wall Street speak for, “Our securities are worth nothing and nobody will buy them!”)
The lack of clearly defined limits may put the Fed’s independence at risk as Congress discovers that its $900 billion portfolio can be used for emergency bailouts that might otherwise require politically sensitive appropriations and taxes. (The “Fed’s independence?” ARE YOU KIDDING ME?!?!?! The “FED” depends on American taxpayers to pay the **** bills. The “FED” is a private banking institution and should be abolished immediately.)
“There is some hard thinking that needs to be done,” Philadelphia Federal Reserve Bank President Charles Plosser said in an interview last week. “The Fed has a terrific reputation as a credible institution. We have to be cautious not to undertake things that put that credibility at risk.” (The FED has a terrific reputation as a credible institution?!?! Ha Ha Ha! That’s the WORST comment I’ve ever heard. The FED has the ability to cost the USA over $1.25 BILLION everyday! – Credible institution my ***!)
The expanding role of central banks will be the hottest topic in the room when Bernanke addresses his counterparts from around the world at the Kansas City Fed’s Jackson Hole, Wyoming, symposium Aug. 22. (Why is the FED expanding anywhere? The government hands are in every cookie jar the way it is. Get the fox out of the chicken coop!)
Since taking on $29 billion in Bear Stearns Cos. assets to facilitate the failing firm’s takeover by JPMorgan Chase & Co., Bernanke has made several moves that imply further expansion of the central bank’s mission. (Who paid for the $29 billion dollar Bear Stearns bail out? Ah yes, the American taxpayer. Abolish the FED!)
Student-Loan Collateral
He granted a congressional request to accept bonds backed by student loans as collateral for Fed securities loans. And he didn’t object when Congress inserted a provision into the housing bill signed into law last month that makes it easier for the Fed to lend to failed banks under government control. (Failed banks under government control? How many more IndyMac’s are out there?)
“They want to placate the Congress and the financial markets,” says Fed historian Allan Meltzer; doing so sets a “terrible precedent.” (Asking the Federal Reserve to “placate” the Congress and financial markets is like asking a smack in the back to soothe a 2nd degree sunburn. How did Congress ever allow the FED to get us into this mess in the first place?!?)
Policy makers are aware of the concern. The Federal Open Market Committee has ordered a formal study of the implications of the Fed’s broader role in fostering financial stability, drawing on research from throughout the Fed system. (Welcome to communism through banking.)
Under Bernanke’s predecessor Alan Greenspan, the Fed drew a clear line against using its portfolio to influence specific markets. An internal study published in 2002 warned that “the favoring of specific entities” might “invite pressure from special-interest groups.” (Ha! That’s what the FED is! A special interest group of private bankers controlling, through monetary manipulation, the whole economy!)
Refusing a Request
Just three days after the Fed approved a loan against Bear Stearns securities, Pennsylvania Democratic Representative Paul Kanjorski and 31 other lawmakers sent Bernanke a letter asking him to open the discount window to nonbank education-loan companies. Bernanke refused. (How embarrassing. This shows you that the FED is in complete control. Our congressman have to go to the FED like beggars in the street. Paul Kanjorski and the 31 other lawmakers better pull their heads out and abolish the FED)
The 2002 study said such pressures “could pull the Fed into fiscal debates” and “compromise its objectives” for monetary policy: keeping employment high and inflation low. (The FED keeps employment high and inflation low? HAHAHAHAHAHAHA!!!! Since the inception of the FED in 1933, the value of the American dollar has plummeted to all time lows! Something that would cost you $100 in 1933 would cost you over $1500 today. Abolish the FED.)
“How can you be independent on one score and dependent on another?” asks Vincent Reinhart, former director of the Fed’s Monetary Affairs Division, who advised both Bernanke and Greenspan. Officials “are overburdening the Federal Reserve, and that sets up the potential for multiple conflicts,” he says. “They use up their credibility on nonmonetary issues, they lose their independence and they dilute their expertise.”
Reinhart, now a resident scholar at the American Enterprise Institute in Washington, is one of several Fed alumni who say they are concerned the central bank will next face requests to rescue hedge funds or insurance companies whose failure might damage the financial system. (Oh and those losses are going to come. Bloomberg ran a report 3 weeks ago that stated up to 300 financial institutions are going under!)
Hard to Say No
“It is much harder to say no when you have the precedent,” says J. Alfred Broaddus Jr., former president of the Richmond Fed. “Congress needs to find a way to structure something else to take the Fed out of this.” (Yeah Alfred – it’s called, “ABOLISH THE FED.”)
The Fed chairman’s decisions are a decisive break with Greenspan’s aversion to government interference in markets, a conviction that even permeated the central bank’s day-to-day operations.
On Aug. 10, 2005, when Greenspan was chairman, 94 percent of the Fed’s $24 billion in outstanding repurchase agreements with Wall Street were in U.S. Treasury notes. On Aug. 10, 2008, only 14 percent were in Treasuries, with the rest in mortgage bonds and agency securities, according to Wrightson ICAP LLC in Jersey City, New Jersey. The New York Fed says agency and mortgage-backed securities “became more attractive.” (That means “zero” got closer to “zero”. – US Treasury notes are worthless paper.)
Vultures circling the FED
Abandoning Principles
“They have had to abandon all principles that guided their earlier debates,” says Lou Crandall, chief economist at Wrightson. The objective now is “how you get the most market impact.”
To Bernanke, the decisions of the past 12 months may well have protected the Fed’s independence from far greater erosion that might have occurred if the central bank had stood aloof while financial markets melted down.
The former Princeton University scholar views the Great Depression as a fiasco that compromised the Fed’s credibility, bringing an onslaught of regulation and a congressional review of the Federal Reserve Act. If the Fed had walked away from Bear Stearns, it would have led to higher unemployment, a deeper downturn and a longer recovery, all of which would have brought even greater political pressure on the Fed, the chairman’s defenders argue. (Uh, Earth to economists, when banks work on a “make money out of thin air” creation system, it’s just a matter of time before crap hits the fan.)
“It is not an easy sell,” Bernanke told Senator Evan Bayh, an Indiana Democrat, during an April 3 hearing on the Bear Stearns rescue. “But the truth is that the beneficiaries of our actions were not Bear Stearns and were not even principally Wall Street. It was Main Street.” (How do you figure that Evan? Please, please, fill me in on exactly how Main Street benefits from Bear Stearns going under and the FED bailing them out? How did you ever get elected?!?!?)
Under Stress
Bernanke added that “the financial system has been under a lot of stress and that has affected our ability to grow. It’s affected employment. It’s affected credit availability.”
Bernanke’s actions have been informed by his own research with New York University’s Mark Gertler showing that damaged banks accelerate economic downturns.
That threat has multiplied in a new financial system where mortgage lenders may not even be banks, and mortgages are warehoused in funds off the books of banks.
“We are in a new environment, and the Fed had to do something different,” Gertler says. “Moving forward, the regulatory structure has to adjust.”
Fed officials have been cautious about suggesting what new supervisory powers they would like or how their lender-of-last- resort powers should function in the future.
(The FED knows that the house of cards is going to collapse and they can’t do anything about it. After all, the United States has over $9.5 trillion in national debt and loses over $1.25 BILLION every single day. Now, please tell me Mr. Bernanke, how can you possibly compensate for that? What? Oh. Print more money? Gotcha. No wonder gas is over $4 a gallon. Our dollar is worth less thanks to your banking tactics.)
Expanding Authority
Bernanke said in a July 8 speech that a “strong case can be made” for expanding the Fed’s authority over the U.S. payment system, the complex network of financial plumbing that handles the exchange of money from such transactions as options trades in Chicago and stock sales in New York. The Fed also is pushing for better settlement and trading systems for securities that aren’t bought and sold on exchanges. (See earlier comment – communism through banking)
Beyond that, the Fed chairman has expressed wariness over the U.S. Treasury’s recommendation that the Fed become the “market-stability regulator.”
“Attention should be paid to the risk that market participants might incorrectly view the Fed as a source of unconditional support,” he said in the July 8 speech. (Up to this point, I’d say it’s a correct viewpoint. If we had an honest banking institution, none of this would be happening in the first place.)
Even so, the Fed has already expanded its supervisory reach. It has become a temporary consulting regulator of Fannie Mae and Freddie Mac, working with the Office of Federal Housing Enterprise Oversight. An agreement with the Securities and Exchange Commission allows the Fed to make recommendations on the capital and liquidity positions of investment banks. The Fed is also more actively using its authority to supervise nonbank consumer-finance subsidiaries of bank holding companies, such as the CitiFinancial unit of Citigroup Inc. (Perfect! More idiots making more bad loans! Exactly what the industry needs!)
`A Major Regulator’
To “a large degree,” it appears the Fed “ is going to become a major regulator of financial institutions,” says Ross Levine, a Brown University economist who has written a book on bank regulation.
With that comes the danger that measures the Fed has to take to enhance stability may end up restraining economic growth, Levine says. “That can come at a very big cost to innovation and the welfare of the country,” he says. (Communism through banking – again. For the 3rd time. Get it?)
Plosser, the Philadelphia Fed president, says the central bank is struggling internally with such concerns.
“What has been put on the plate is the broader role of central banks in their effort to promote or ensure financial stability,” he says. “We have to face up to the potential risks to the conduct of sound monetary policy from acquiring these other responsibilities.” (If I hear the term “sound monetary policy” come from a central banker again, I might vomit for the 12th time. I mean, good grief, you’re the inept characters who started the whole cycle in the first place!)
The time is arriving when the Federal Reserve system will implode. Are you prepared?
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I totally agree with this article….Abolish the FED!!!!