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;
Mike S:
she was there for only a few years. The changes she instroduced are gone as are the changes Reagan introduced.
Too bad too. But even Reagan and Thatcher didnt go nearly far enough and had to compromise quite a bit with the Democrats and the Labour party.
My history is fine.
Gary T:
well said, socialist dont know sh*t about economics and have been protecting the Fed for years. The corporate fascists told them it was necessary and they believed them rather than Paul and other free market economists who have been shouting this from the roof-tops for many decades.
It is a joke as you say. Gene H gives the tell above. Sanders and Grayson just want to nationalize it, not end it.
What a choice we have; corporate fascism or state socialism. Oh my god we are doomed. Either way we are fuked.
Maybe it is time to go to Texas, arent they talking about creating a seperate country?
What Mike S. said.
Gene H:
do you think it is going to work any differently if nationalized? Britian tried nationalization of industry and banking in the late 40’s after the war and destroyed its economy.
“Britian tried nationalization of industry and banking in the late 40′s after the war and destroyed its economy.”
Bron,
Again you view history through a distorted lens. The privatization and austerity introduced by Thatcher remade the British economy into a the bank controlled economy they have today.
In the industry that I know of, BP bought my old company ARCO. This happened after Thacher had privatized BP. Before that BP was a very good company. In fact, they and ARCO jointly owned and ran the Prudhoe bay oil field. I was thinking that BP was a great company to work for since the BP employees on the North Slope had an indoor swimming pool for its employees and ARCO did not. After privatization, I imagine that they probably got rid of that perk.
If you read the headlines, you will see that BP actually got worse after privatization, and after acquiring ARCO, the pipeline went from getting environmental awards to destroying it. They refused to run pigs through the line and cut all maintenance. In Texas City when they took over the Amaco refinery, they failed to fix the engineering design flaws that were pointed out by OSHA, which resulted in the deaths of 15 people when an outrageously designed blow down drum was allowed to vent to the air. It blew up and burned those 15 contrators to death. Then of course we all saw how they lied, cheated, and dodged responsibility for the Deepwater Horizon disaster. If anything, this proves that privatization of such things is a threat to the company, and the public. Instead of fines,the US simply should have nationalized BP with NO compensation for its crimes.
Justice Holmes sed:
“Confession: I used to think that people who talked about the shady deals the FED made with corporations both foreign and domestic were simply right wing conspiracy buffs who saw double dealing behind every door. Boy was I WRONG!
I have had it. Thanks, Raff. And thanks to Bernie Sanders.”
Rafflaw sed:
“You are right about Bernie Sanders. But kudos should also go out to Rep. Alan Grayson and others for making the audit the fed bill a possibility.”
—–
OMFG, really?
Thanks to Bernie Sanders and Alan Grayson?
For sure they have some thanks coming, but who has been railing against the Fed for the last 30 years? Who has been ringing the alarm bell about this corrupt cronyed institution, when no one was listening and everyone was laughing about how ridiculous such “chicken littel” criticisms were?
And who, almost single handedly against an uphill battle actually managed to get a partial Audit-the-Fed bill passed???
And Sanders, Grayson get the Kudos, without one mention in this thread so far about the venerable Ron Paul, who was the only with the prescience to see this problem and never let it go until some other representatives finally dimly saw something might be wrong. And when got the glimpse that the Fed hoped we never got, it only pointed to even worse unrevealed machinations.
Basically the Fed Board has managed to bail out almost exclusively their personal pals and colleagues that they worked with, on the backs of taxpayer money and the credit of the US Govt, just so that their friends wouldn’t have to sacrifice any of their own uber-rich lifestyles.
They took their public trust, made up a false catastrophe that they caused, and that would have been a problem only for them, and nationalized it as a public crises.
David Stockman has illuminated this most clearly with his new book, and showed that the only ones who would have suffered without a govt bailout, would have been the bankers and financial corporate board members and stockholders of their failed gambles.
This is all true, and wouldn’t have seen the light of day, had it not been for the “right wing conspirasist” Ron Paul, who was for the longest time, the ONLY one calling for inquiry and public control over the Fed.
Bron,
A central bank does have utility in controlling inflation. However, the other stated rationales for creating the Fed – maximizing employment and moderating interest rates – come into direct conflict with it being privately held and guaranteeing a dividend. A central bank can be a useful tool for government to shape the economy. The Fed, however, does not work for the government ergo it does not work for the public interests. It is a prime example of an institution that begs for nationalization.
AY:
no it isnt. Every man, I dont care how moral you are, brings natural bias to any situation. You may not even understand the bias.
Interest rates should be tied to the market rate, that is what controls the economy. The Fed has been responsible for 100 years of boom and bust and has trashed the economy along with all the other controls enacted to protect us from the Fed.
It is a self-perpetuating economic nightmare, the Fed fuks up and congress legislates to offset the fuk up and then has to legislate some more to offset congressional fukupery and then the Fed raises or lowers its rates to offset the fuk up that offset the fuk up that led to the fuk up.
“Interest rates should be tied to the market rate, that is what controls the economy.”
Bron,
Belief in the “Free Market” is akin to belief in the “Tooth Fairy”. Even Adam Smith understood that markets had to be regulated or they become corrupt.
Den of Thieves. They all should be in prison. Soon even the worm will be turning.
The Federal Reserve is just as good as the men with the ability running it….
RAFFLAW:
Baby, you are late to this party!
End it honey, dont mend it. Let the market set the interest rate. All this central planning is enough to give a capitalist the vaors. Pass the smelling salts and tell Bernie he’s passe.
Capitalism is where its at man, can you dig? Socialism is for aging hippies and people with refined taste, like the Vanderbilts, Harrimans and other members of the New York social register. Get it, social register, socialism?
You boys on the left have been supporting those lame brains for years. Well I guess better late than never in figuring it out.
As I always say, “Rags to riches to rags in 3 generations.” Thats in a capitalist free market. You boys on the left have been doing the bidding of the “man”. for nigh on 100 years now. Keeping that social register safe for their posterity and posteriors.
We have been trying to tell you guys on the left, the decent ones anyway, that you are just supporting rich people with all your talk about the proletariat.
You think ole Engles really wanted to share his wealth? Nah, he wanted the middle class to pay. Marxism was created to protect the wealthy not the poor.
Its about time you start to figure it out.
“Capitalism is where its at man, can you dig?”
Bron,
I don’t know if you vote or not, but if you do, I believe that every vote you’ve cast in a regular election was for someone who if elected would support the Fed and Corporatism. Possibly you’ve voted for some Libertarians, but in the main you wouldn’t have the opportunity to do so. Also too in this issue you miss the point. It is the anti-Capitalist Corporatists who use the Fed, not the other way around.
The development of the global economy has eliminated the significance of borders and national fidelity. The only important distinction now is between have and have-nots, or have-less’. I believe the bubble crisis was deliberately drawn up as a transfer of wealth, and that now all that remains is to loot the social security trust fund.
“The second amendment will be of no use against the government if the banks crash the economy.”
There is a breakdown of both correlation and causation in that statement, raff. Tyranny and economic collapse may come hand in hand, but their relation to the 2nd is independent, not conjoined.
http://www.youtube.com/watch?v=QPKKQnijnsM&feature=share
Infographics on the distribution of wealth in America, highlighting both the inequality and the difference between our perception of inequality and the actual numbers. The reality is often not what we think it is.
Published on Thursday, April 18, 2013 by Common Dreams
Majority in the US: Redistribute Wealth, Enact ‘Robin Hood Tax’
New Gallup poll finds strong support for ending inequality plaguing the nation
– Andrea Germanos, staff writer
http://www.commondreams.org/headline/2013/04/18-9
Very good article. It is too bad that there is no one in Congress to take this issue by the horns and begin the move to replace the Fed with a regulated Central Banking entity. A regulator not a facilitator for theft and deception.
anon,
The second amendment will be of no use against the government if the banks crash the economy.
Now maybe some of you will now understand why the 2nd amendment is essential to protect. Our government is becoming increasingly fascist and stripping rights.
bettykath,
Guess who else thought about pricing oil in denominations other than dollars…
http://archives.cnn.com/2000/WORLD/meast/10/30/iraq.un.euro.reut/
IndigoJones is right about the importance of the use of the US dollar for oil trades but that could be changing.
From 2006:
http://www.projectcensored.org/top-stories/articles/9-irans-new-oil-trade-system-challenges-us-currency/
excerpt:
The U.S. media tells us that Iran may be the next target of U.S. aggression. The anticipated excuse is Iran’s alleged nuclear weapons program. William Clark tells us that economic reasons may have more to do with U.S. concerns over Iran than any weapons of mass destruction.
In mid-2003 Iran broke from tradition and began accepting eurodollars as payment for its oil exports from its E.U. and Asian customers. Saddam Hussein attempted a similar bold step back in 2000 and was met with a devastating reaction from the U.S. Iraq now has no choice about using U.S. dollars for oil sales (Censored 2004 #19). However, Iraq’s plan to open an international oil exchange market for trading oil in the euro currency is a much larger threat to U.S. dollar supremacy than Iraq’s switch to euros.
While the dollar is still the standard currency for trading international oil sales, in 2006 Iran intends to set up an oil exchange (or bourse) that would facilitate global trading of oil between industrialized and developing countries by pricing sales in the euro, or “petroeuro.” To this end, they are creating a euro-denominated Internet-based oil exchange system for global oil sales. This is a direct challenge to U.S. dollar supremacy in the global oil market. It is widely speculated that the U.S. dollar has been inflated for some time now because of the monopoly position of “petrodollars” in oil trades. With the level of national debt, the value of the dollar has been held artificially high compared to other currencies.
From 2012
http://www.examiner.com/article/dollar-no-longer-primary-oil-currency-as-china-begins-to-sell-oil-using-yuan
On Sept. 11, Pastor Lindsey Williams, former minister to the global oil companies during the building of the Alaskan pipeline, announced the most significant event to affect the U.S. dollar since its inception as a currency. For the first time since the 1970’s, when Henry Kissenger forged a trade agreement with the Royal house of Saud to sell oil using only U.S. dollars, China announced its intention to bypass the dollar for global oil customers and began selling the commodity using their own currency.
I believe Hugo Chavez had similar plans for Venzuelan oil sales.
The FED was chartered to accomplish two main tasks: ensure full employment, and manage inflation. It also charges the Treasury to manage our currency. And, since the most recent round of “quantitative easing” the FED is now the single largest holder of US Treasury Bills — they hold more US debt than China.
While a lot of people think that a major problem with the FED is its use of “paper money,” this really isn’t the problem that most people think it is. The Dollar isn’t “backed by nothing” but rather, it is backed by the world’s reliance on the Dollar as a global reserve currency. What keeps other countries buying dollars is the fact that oil is priced exclusively in Dollars.
Moreover, if we leave paper currency behind and switch to a “more tangible” commodity like gold (as if oil weren’t tangible — the problem here is that our stake in oil is contingent), we’d be in for a world of hurt.
If we return to the gold standard, for example: 1) China could ask us to repay our debt to them in gold, in which case all our wealth would flow right out of the country, and couldn’t be replaced; 2) it would be easier for interested parties to manipulate the value of the currency simply by cornering the market for gold (whereas now, things get complicated LIBOR-style when somebody wants to manipulate the currency); 3) if we returned to the gold standard, our economy would tank because right now the whole thing is built around the dollar’s status as a reserve currency, and the creation of wealth through the mechanism of bank lending (which also creates inflation by expanding the monetary supply); 4) returning to the gold standard would make the valuation of our currency less intuitive: all the gold ever mined in the history of the world would fit inside three Olympic size swimming pools, and we would, in essence, be pricing things in terms of gold ATOMS (which are not all that “tangible” in and of themselves).
Lastly, there is some historical precedent for viewing paper money favorably: under the Articles of Confederation, paper money was viewed as an important means by which to regulate wealth. The system was seen as more equalitarian by the majority of Americans.