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;