Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Guest Blogger
In the past few weeks, I have written about how the FDIC along with the Bank of England had developed a plan to allow the Big banks to grab depositors funds in order to bail out those very same big banks. Since that article was written, I have reviewed just what role the Federal Reserve Bank plays and how can it be improved. You may remember the role the Federal Reserve played in bailing out the Big Banks during the beginning of the Great Recession.
“As a result of the Government Accountability Office (GAO) audit of the Fed, Senate sponsor Bernie Sanders of Vermont said, “We now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world.” Among the investigation’s key findings was that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland. These decisions were all made without the public, media or elected officials’ knowledge, and they would have remained secret without an audit.” Bernie Sanders
For the math impaired, like myself, that is 16 Trillion dollars in basically secret financial “assistance” that the Fed provided the so-called Big Banks. As the GAO Audit of the Fed showed, the “assistance” was given to not only domestic banks and corporations, but to many foreign firms as well. Should the American people allow the Federal Reserve to continue to secretly fund the very same banks and institutions that played a large part in sending this country into a recession? In an Op-Ed for Truthout-org, the case is made that our country needs to consider remaking the Federal Reserve into an institution that actually works to better the economy and not just improve the big financial institutions bottom lines. Truth-Out
Before we continue, it is necessary to briefly review just what the Federal Reserve does and how does it operate. “The Federal Reserve is a privately owned US central bank that acts behind closed doors to create money and set interest rates, and it presently puts the interests of the big banks first. The Federal Reserve was originally created by Congress in 1913 and can be altered, nationalized or even dismantled by Congress.
The Fed is a private entity that is controlled by the banks. The 12 Regional Reserve Banks issue shares of stock to its member banks. The Fed is not operated for profit, and the stock may not be sold, traded or pledged as security for a loan. It does pay dividends that are, by law, 6 percent per year. But more importantly, the stock provides banks with votes to elect six of the nine members of the board of governors of the regional banks.” Truth-Out
The Truthout Op Ed suggests that while a central bank is necessary “to regulate the money supply by setting interest rates and to be a lender of last resort in a financial crisis, ” some experts suggest that regulating process can be done in a more transparent and mechanical way without the Federal Reserve Board of Governors weighing in on the issue. ” The GAO Audit referred to earlier also uncovered conflicts of interest within the Fed’s lending practices.
‘ “For example, the CEO of JPMorgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Sanders urged that “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed.” ‘ Truth-Out
Does it concern you that until the GAO audit was forced on the Federal Reserve by Congress, a member bank of the Fed and indeed, an institution run by a member of the Federal Reserves Board of Directors can obtain secret loans totaling $390 Billion? Anyone who has borrowed money from any bank knows how your economic life is examined and investigated before your loan to buy your home or your car is approved. Maybe we should all get our mortgage loans from the Federal Reserve!
What can be done to make the Federal Reserve better or make our country’s monetary policy actually work for everyday Americans and the American economy? There are many suggested improvements or overhauls that have been recommended. Public banks, modeled after the public Bank of North Dakota is one possible answer. The Bank of North Dakota takes in all of the state’s revenues and turns it into credit that ordinary citizens can use.
“Ellen Brown, the president of the Public Banking Institute, argues that we need a public bank in every state and major city. The United States has one model for public banking: the bank of North Dakota. When North Dakota farmers were losing farms to Wall Street, they organized a populist movement, and in 1919, set up the bank of North Dakota. The publicly owned bank recycles state revenues into credit for the state. Thus, North Dakotans keep their money in their community.
The result has been an ongoing success. Even during the current economic collapse, North Dakota escaped the credit crisis and has maintained a budget surplus since 2008, low unemployment and no public debt. ” Truth-Out
Can you imagine the money saved in the State of North Dakota by utilizing the Bank of North Dakota instead of private banking institutions? Ms. Brown who was quoted above provides us with an example of how much money the State of California could save by setting up its own State bank. ” Brown summarizes: “At the end of 2010, it had general obligation and revenue bond debt of $158 billion. Of this, $70 billion, or 44 percent, was owed for interest. If the state had incurred that debt to its own bank – which then returned the profits to the state – California could be $70 billion richer today. Instead of slashing services, selling off public assets, and laying off employees, it could be adding services and repairing its decaying infrastructure.” Truth-Out
The changes suggested to the Federal Reserve along with States setting up their own State banks are just two of the ways that the economy and everyday Americans can be helped. Americans can move their money into credit unions and smaller community banks and they can take advantage of or establish Time banks and Time dollars to allow for a barter like system to provide an option for Americans to purchase services in exchange for their own services or labor.
I cannot cover all the possible methods and means that can be utilized to improve the economy for ordinary Americans in this one article. I recommend that you read the Truth-Out article in its entirety and check out the links and additional references noted herein. The bottom line, in my opinion, is that the Federal Reserve, in its current set-up, has outlived its usefulness. Americans are still hurting from the recession that the Federal Reserve did not see coming. The recovery is being delayed, in part because of the policies of the Federal Reserve and its penchant to work for the Big Banks instead of all Americans.
We need to take back our economy and work to convince Congress to revamp the Federal Reserve. The individual States can save Billions for their citizens by setting up their own public banks. Wall Street and the Big Banks will claw and scratch to keep the Federal Reserve in their pockets, but this country cannot survive without a sea change in how the Fed works and how Americans have access to credit.
Can the Federal Reserve be reined in and revamped to help ordinary Americans? Do you think that your home State would be able to establish a State bank? Have you moved your money into credit unions or small community banks? What else can be done to improve the economy without utilizing large private financial institutions?
Additional references: Clearing the Fog Radio;
Elaine,
Thanks for the links. Reading about the Fed’s secret bailouts can be disturbing.
kristinaustntx,
Interesting video. Thanks.
The Federal Reserve is a Central Bank which represents the member banks by a Board comprised of Bank members. It is a bank cartel. It is there to control and manipulate the money supply and the interest rate. It is neither Federal nor a Reserve. It is the crux of the Government/Banking relationship. It manipulates the interest rate to enable the government to borrow cheaply and beyond its means, punishing savers, rewarding debtors. Big banks receive new money printed by the Fed first, before it is released into the public realm when it has most its value, inflation coming to later recipients. The system rewards crimes by both the government and the bank members. Read “The Creature from Jekyll Island.” You will get quite an education on this conspiracy of epic proportion perpetrated upon the American people.
“When I critically scrutinize the economic, political, financial, and social landscape at this point in history, I come to the inescapable conclusion that our country and world are headed into the abyss. This is most certainly a minority viewpoint. The majority of people in this country are oblivious to the disaster that will arrive over the next decade. Some would attribute this willful ignorance to the normalcy bias that infects the psyches of millions of ostrich like iGadget distracted, Facebook addicted, government educated, financially illiterate, mass media manipulated zombies. Normalcy bias refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring and its possible effects. This often results in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to inform the populace about the impending disaster. The assumption that is made in the case of the normalcy bias is that since a disaster hasn’t occurred yet, then it will never occur. It also results in the inability of people to cope with the disaster once it occurs. People tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.”
http://www.theburningplatform.com/?p=52862
RobinH,
Do you have a link for this…. Ora book…
The fed rreserve is the reason jfk was killed.. he had the utter gall to return to his christian roots and shut down the fed reserve and reopen our central bank to print the money which had no debt on it… also go read money the 12th and final religion. And american caliphate by R.duane willing
Excellent article – informative and it included a couple solutions. Anyone who desires a better understanding of what happened in 2008, should watch this documentary, produced by the Canadian Broadcast Company and Al Jazeera. It shows what happened and why in the US, UK, Iceland, France, Germany, Spain, Dubai, China, etc.
Title: “Meltdown – Secret History of the Global Financial Collapse”
Duration: Four 45-minute episodes
Black men are fed up with the way Connecticut Justice is treating us. Can you do a story on that?
________________________________
Wall St. Redux: Arcane Names Hiding Big Risk
By NATHANIEL POPPER
Published: April 18, 2013
http://www.nytimes.com/2013/04/19/business/banks-revive-risky-loans-and-mortgages.html?pagewanted=all
Excerpt:
The alchemists of Wall Street are at it again.
The banks that created risky amalgams of mortgages and loans during the boom — the kind that went so wrong during the bust — are busily reviving the same types of investments that many thought were gone for good. Once more, arcane-sounding financial products like collateralized debt obligations are being minted on Wall Street.
The revival partly reflects the same investor optimism that has lifted the stock market to new heights. With the real estate market and the economy improving, another financial crisis seems a distant prospect. What’s more, at a time when the Federal Reserve has pushed interest rates close to zero, the safest of these new investments offer interest rates almost double that paid by ultrasafe United States Treasury securities, according to RBS Securities, which was involved in such instruments in the past.
But the revival also underscores how these investments, known as structured financial products, have largely escaped new regulations that were supposed to prevent a repeat of the last financial crisis.
“All of this seems like a fairly quick round trip,” said Manus Clancy, a managing director at Trepp, a research firm that focuses on commercial real estate. “You are seeing a fair number of sins being forgiven.”
Banks are turning out some types of structured products as fast or faster than they did before the bottom fell out. So far this year, for instance, banks have issued $33.5 billion in bonds backed by commercial mortgages, slightly more than they did in early 2005, when the real estate market was flying high, according to data from Thomson Reuters.
Banks have won over investors by taking steps to make this generation of structured products safer than the last one. But with demand for these products on the rise, credit ratings agencies and regulators are warning that the additional protections are already dwindling, allowing some of the old excesses to creep back into the market.
“The players in the business are generally the same as they were before,” said Tad Philipp, a commercial real estate analyst at Moody’s rating agency. “Because it’s the old players, they know how to push the boundaries.”
Elaine:
We ought to have a flat tax of 15% of a person’s income to cover everything we do on the local, state and federal levels. We would have no exemptions and everyone making over $20,000 per year would pay. All income whether derived through actual work or investment would be taxed at that rate. People and corporations would save billions of dollars a year and accountants could work on making people profitable in a positive way rather than using the tax code. And lobbying would just about disappear once congress quit monkeying around with the tax code.
If government would stop deficit spending, we would have a thriving economy and more money than we knew what to do with. We ought to operate our country as a business and every citizen ought to own shares. If we lease federal land to an oil company for drilling we ought to all get a small royalty check, if we lease pasture land to farmers ditto, timber from federal lands ditto, coal ditto.
rafflaw,
I postponed reading your post because I get so upset when I read stories about the Fed and big banks and Wall Street, and corporations and billionaires who avoid paying taxes–or paying as little as possible.
Here’s a story that got me going this morning:
Restyled as Real Estate Trusts, Varied Businesses Avoid Taxes
By NATHANIEL POPPER
Published: April 21, 2013
http://www.nytimes.com/2013/04/22/business/restyled-as-real-estate-trusts-varied-businesses-avoid-taxes.html?hp&_r=1&
Excerpt:
A small but growing number of American corporations, operating in businesses as diverse as private prisons, billboards and casinos, are making an aggressive move to reduce — or even eliminate — their federal tax bills.
They are declaring that they are not ordinary corporations at all. Instead, they say, they are something else: special trusts that are typically exempt from paying federal taxes.
The trust structure has been around for years but, until recently, it was generally used only by funds holding real estate. Now, the likes of the Corrections Corporation of America, which owns and operates 44 prisons and detention centers across the nation, have quietly received permission from the Internal Revenue Service to put on new corporate clothes and, as a result, save many millions on taxes.
The Corrections Corporation, which is making the switch, expects to save $70 million in 2013. Penn National Gaming, which operates 22 casinos, including the M Resort Spa Casino in Las Vegas, recently won approval to change its tax designation, too.
Changing from a standard corporation to a real estate investment trust, or REIT — a designation signed into law by President Dwight D. Eisenhower — has suddenly become a hot corporate trend. One Wall Street analyst has characterized the label as a “golden ticket” for corporations.
“I’ve been in this business for 30 years, and I’ve never seen the interest in REIT conversions as high as it is today,” said Robert O’Brien, the head of the real estate practice at Deloitte & Touche, the big accounting firm.
At a time when deficits and taxes loom large in Washington, some question whether the new real estate investment trusts deserve their privileged position.
At a time when deficits and taxes loom large in Washington, some question whether the new real estate investment trusts deserve their privileged position.
When they were created in 1960, they were meant to be passive investment vehicles, like mutual funds, that buy up a broad portfolio of real estate — whether shopping malls, warehouses, hospitals or even timberland — and derive almost all of their income from those holdings.
One of the bedrock principles — and the reason for the tax exemption — was that the trusts do not do any business other than owning real estate.
But bit by bit, especially in recent years, that has changed as the I.R.S., in a number of low-profile decisions, has broadened the definition of real estate, and allowed companies to split off parts of their business that are unrelated to real estate.
For example, prison companies like the Corrections Corporation and the Geo Group successfully argued that the money they collect from governments for holding prisoners is essentially rent. Companies that operate cellphone towers have said that the towers themselves are real estate.
The conversions generally do not require the companies to change their underlying business. The chief executive of the Corrections Corporation, Damon T. Hininger, told investors in February that the new structure should help in the company’s aim of “housing more and more population for federal, state and local levels as they grow or deal with overcrowding.”
david blauw:
how about we are all equal before the law and have the right to pursue our happiness as we judge it based on liberty and the right to our life.
raflaw:
as far as mortgages go I know they have some minor influence but they dont set the rate as does the fed.
by the way a good article and timely.
rafflaw:
yes, as were you.
Bron,
Are you talking about the state bank in North Dakota?
Woosty, how about this one.
All people in all quintiles are equal. ….But the top quintile is more equal :o)
Gene H:
“The precise reasons why using it as a basis for currency is too volatile and an invitation for runaway inflation as the supply either dwindles or remains static while demand is ever increasing.”
huh?
If the supply remains static, then that means an ounce of gold increases in value, if the supply dwindles that means an ounce of gold increases in value. Which means that a pair of pants costs less in relation to the amount of gold needed to buy them not more.
That is why when we were on the gold standard our buying power increased by at least a factor of 2. Because the government was not able to rob us blind using fiat currency.
rafflaw:
can that bank influence my mortgage rate or yours or inflate currency?
david:
what do they invest in? probably some stuff that doesnt do much and is tax free but they also invest in companies. Although municipal bonds go for building things and that puts people to work.