Café Hayek’s Professor Robert Russell is right: The US Federal Reserve is Corrupt
From Bloomberg, (bold emphasis mine)
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger…
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
This serves as more proof of a political economic system gamed by special interests groups along with the political class. That's because vested interest groups represented by the banking class serves as the principal intermediaries for the welfare-warfare state and whom have been protected or bankrolled by the US Federal Reserve as shown above.
I might add that since the FED is an integral part of the complicit political arrangement then this implies that the incumbent political system is corrupt.
Ron Paul is right. End the FED. Abolish the welfare state. Reinstate sound money.
Ron Paul explains the bubble cycle (Austrian Business cycle) better than I do [bold emphasis mine]
Because of continued rising inflation and the Federal Reserve's suppression of interest rates, investing in traditional safe havens such as savings accounts, mutual funds, and Treasury bonds has become unprofitable. Lots of money is moving through the system seeking a return on investments or at least some measure of safety, as increasingly desperate investors move their funds around in search of long-term profits and stability. Until the Fed stops its monetary intervention and allows interest rates to be set by the free market, investors will move their money in a volatile manner. They will invest in commodities and stocks while prices swing upwards, but will flee to bonds and cash at the first sign of a downturn.
The uncertainty caused by the Fed does help some people – professional traders on Wall Street for example. Increased volatility and huge price swings mean more opportunities for profit, as sophisticated electronic trading programs can buy and sell huge positions within a fraction of a second of a major market movement. But small businessmen are misled by the artificially low interest rates into making unwise investments, and those whose jobs vanish when the Federal Reserve's latest bubble pops suffer. Without the knowledge or ability to move with the markets or diversify overseas, average Americans see their savings stagnate or depreciate-- along with their hopes and dreams for a better tomorrow.
The only way to return to a sound economy is for the Federal Reserve to cease and desist its monetary manipulation and allow interest rates to be determined by markets, just as the price of goods, services, and labor should be determined by markets. Everything the Fed is doing by pumping money into the economy benefits only the insolvent, too-big-to-fail banks. Low interest rates encourage consumers to take on more debt, meaning more profits for the banks issuing those loans. Purchasing mortgage-backed securities, as the Fed has done, keeps housing prices inflated, helping the banks who have non-performing mortgages on their books. However, it hurts consumers who continue to be priced out of the housing market. In order to maintain a decent standard of living for the American people and to restore the vibrancy of the U.S. economy, it is time to end the Fed.
It’s time to liberate money from politics and return to sound money.
The great Murray N. Rothbard have presciently warned on this long time ago,
It is little known, however, that there is a federal agency that tops the others in secrecy by a country mile. The Federal Reserve System is accountable to no one; it has no budget; it is subject to no audit; and no Congressional committee knows of, or can truly supervise, its operations. The Federal Reserve, virtually in total control of the nation's vital monetary system, is accountable to nobody — and this strange situation, if acknowledged at all, is invariably trumpeted as a virtue.
Now, Professor Rothbard’s vindication as seen from the Daily Bail’s enumeration of Ben Bernanke’s failures
As you will hear in the collection of videos and stories linked below:
We can sum it up to: POLITICS—being accountable to no one, arbitrarily choosing winners and losers by using and exposing taxpayer money to unnecessary risks and the presumption of superior knowledge (fatal conceit) from which enables experimentation of untested policies that imposes unmeasured externality risks to the global economy.
The sham of independence.
I further include Bernanke’s policies of expanding the Fed’s balance sheets: (both charts from St. Louis Federal Reserve chart which ironically is under Bernanke’s umbrella)
has led to this:
which has done little to the economy.
chart from Money and Markets
But to bolster commodity prices…
and elevate inflation risks…
chart from tradingeconomics.com
…and of course, fueling worldwide excess speculation in financial markets which should bring about the imminence of another crisis.
Again to close with Mr. Rothbard,
It was not enough, however, for the new statist alliance of Big Business and Big Intellectuals to be formed; they had to agree, propound, and push for a common ideological line, a line that would persuade the majority of the public to adopt the new program and even greet it with enthusiasm. The new line was brilliantly successful if deceptive: that the new Progressive measures and regulations were necessary to save the public interest from sinister and exploitative Big Business monopoly, which business was achieving on the free market. Government policy, led by intellectuals, academics and disinterested experts in behalf of the public weal, was to "save" capitalism, and correct the faults and failures of the free market by establishing government control and planning in the public interest.
And thus the (big) banking industry, the US Federal Reserve and the government cartelized system.
The Federal Reserve won’t exist in 25 years and the reappointment of Ben Bernanke as head of the central bank was a “management failure,” said Nassim Taleb, author of ‘The Black Swan.’
Allowing Bernanke to stay at the helm of the Fed is equivalent to “letting an unqualified pilot fly a plane,” Taleb, a principal at Universa Investments LP, told a conference in Moscow, Russia today.
From Moneynews.com
Unknown to most, the politics of redistribution will always benefit certain vested interest groups.
The US Federal Reserve’s actions during the 2008 Lehman crisis should serve as worthy examples.
From the Bloomberg,
Credit Suisse Group AG, Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.
The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.
Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.
“This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”
Until brought to light by the public, politicians tend to look the other way.
Again from the same Bloomberg article, (bold highlights mine)
Congress overlooked ST OMO when lawmakers required the central bank to publish its emergency lending data last year under the Dodd-Frank law.
“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.
Conflict of interest is an innate constituency of political distribution.
For instance, Rep Barney Frank admitted that he got his ex-lover a job at the Fannie Mae. So denials like the above should be viewed distrustfully.
Part of the Fed’s recent bailouts included wives of Wall Street bigwigs and Libya’s Gaddafi.
Part of the US Federal Reserve’s post Lehman market stabilizing scheme included loans to Libya’s state owned bank, the Bloomberg reports, (bold emphasis mine)
Arab Banking Corp., the lender part- owned by the Central Bank of Libya, used a New York branch to get 73 loans from the U.S. Federal Reserve in the 18 months after Lehman Brothers Holdings Inc. collapsed.
The bank, then 29 percent-owned by the Libyan state, had aggregate borrowings in that period of $35 billion -- while the largest single loan amount outstanding was $1.2 billion in July 2009, according to Fed data released yesterday. In October 2008, when lending to financial institutions by the central bank’s so- called discount window peaked at $111 billion, Arab Banking took repeated loans totaling more than $2 billion.
Fed officials say all the discount window loans made during the worst financial crisis since the 1930s have been repaid with interest.
The U.S. government has frozen assets linked to the regime of Libyan ruler Muammar Qaddafi and engaged in air strikes against his military forces, which are battling a rebel uprising in the North African country. Arab Banking got an exemption that allows the firm to continue operating while barring it from engaging in any transactions with the Libyan government, according to the U.S. Treasury Department.
Some comments:
This represents as the continued the love-hate relationship between the US and Libya’s Qaddafi
The Federal Reserve has been bailing out the world, which included despots, and not just US banks.
No wonder the US Federal Reserve has been getting brickbats not only from Americans but also from some other authorities elsewhere in the world.
Here is a short video on the history of Central Banking from Cato’s Dan Mitchell...
Here is the list of US and world financial crisis from Misis.org wiki (click on the link to redirect you to the page)
Here is a graph of the number of banking crisis worldwide post the Nixon Shock or the End of the Bretton Woods standard (from the World Bank)
The reason I had to include these is to illustrate how central banks have fundamentally failed to contain panics-the rationalized role for their existence.
It’s a pleasant surprise to see one of mainstream media join in the bashing of the US Federal Reserve.
The CNN Writes,
Since it was created in 1913, the Federal Reserve hasn't exactly had the best track record of predicting booms and busts.
Not to mention, its leaders have had some embarrassing sound bites along the way, whether they're referencing punch bowls or helicopters.
Here are some of the Fed's biggest bloopers over the years.
Go to the slideshow here
This just goes to show how Fed critics, led by Ron Paul and the Austrian School, have been gradually moving from the fringes and into the mainstream.
Ben Bernanke and the US Federal Reserve just lost a popular mainstream media supporter.
Telegraph’s Ambrose Evans Pritchard does a turnabout…
I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.
My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.
We now learn from last week’s minutes that the Fed is willing “to provide additional accommodation if needed to … return inflation, over time, to levels consistent with its mandate.”
NO, NO, NO, this cannot possibly be true.
Ben Bernanke has not only refused to abandon his idee fixe of an “inflation target”, a key cause of the global central banking catastrophe of the last twenty years (because it can and did allow asset booms to run amok, and let credit levels reach dangerous extremes).
Worse still, he seems determined to print trillions of emergency stimulus without commensurate emergency justification to test his Princeton theories, which by the way are as old as the hills. Keynes ridiculed the “tyranny of the general price level” in the early 1930s, and quite rightly so. Bernanke is reviving a doctrine that was already shown to be bunk eighty years ago.
Read the rest here
Nothing is fixed, people’s minds can and has always changed. Parlayed into politics, this only means politics always evolve.
Could Mr. Pritchard’s volte-face presage on the emergence of mainstream’s clamor to end the fiat money central banking regime or a return to sound money?
