Tags: Obama | Federal | Eeserve

Federal Reserve Credibility Tarnished

Tuesday, 21 Jul 2009 12:58 PM

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"He who owns the gold makes the rules."

Beyond the empirical reality that the Federal Reserve is neither “federal” nor “reserve” the recent grilling of their Inspector General Elizabeth Coleman, is significant.

Democratic U.S. Rep. Alan Grayson continues to bask in the praise being piled upon him by Glenn Beck and others over his inquisition-style grilling of Federal Reserve Inspector General Elizabeth Coleman (reportedly the most watched congressional YouTube clip ever.) To see the clip, go here now.

Everet Dirkson once famously said, "A billion here, a billion there, and pretty soon you're talking about real money.” We have now reached the point where the Fed’s inspector general seems totally non-plussed over more than $9 trillion in unaccounted for (and apparently uninvestigated) funds.

The once-upon-a-time convenient fiction that the Federal Reserve had credibility has been epically tarnished by the easy credit policies it embraced, and the sloppy regulatory oversight that allowed institutions to crank up their balance sheet leverages to amass a humongous concentration of risky, incredibly complex, supposedly secured products.

The Fed was created in 1913. It was specifically designed to top the growing influence of small, rival banks. Its purpose was to ensure control over the nation's financial resources remain in the hands of a select private club. The goal was to make the money supply more available so as to reverse the trend of private capital formation and to recapture the industrial loan market.

The implemented plan was to pool the small reserves of the nation's banks into one large reserve so that all banks were/are motivated to follow the same loan-to-deposit ratios. However, here’s the biggie “Should this cartelization approach lead ultimately to collapse of the whole banking system, shift the losses from the owners of the banks to the taxpayers.”

President Barack Obama’s voluminous wish list includes his proposal that the Fed become the main overseer of firms whose collapse could further muck up markets, and bring hedge funds and private equity under “real” federal inquiry. The dream quest would create an agency (another agency) to monitor consumer financial products. Treasury Secretary Timothy Geithner urged quick action by Congress . . . quick before anyone notices what is and isn’t happening.

Meanwhile, the liquidation of the American Federal Reserve continues at a rate of knots. Instead of receiving more power and authority after this latest business cycle mess, the Fed and the usual Ponzi suspect co-conspirators around it have been rattled a good bit. Despite the Obama administration’s intent to direct more power their way, it is starting to appear less likely that the president will see success.

Notwithstanding the complicity of the mainstream media nabobs, the Fed and central banks in general, are fighting a major reality check caused in no small measure by the ubiquitous Internet and the annoying axiom that sunlight is indeed the best disinfectant.

One observer clearly stated what is becoming increasingly obvious. “It is not a complex matter, after all. The Fed inflates, the economy has a boom and then bust, the financial industry is blamed and regulators — including the Fed — get more power. Repeat as many times as it takes to fully centralize the economy and create a complex regulatory democracy into which responsibility for many — and wealth — flows into the hands of a few.” THAT was the routine paradigm . . . but gosh-oh-gee-golly . . . it has shifted.

Largely because of the Internet (and YouTube), the cycle has not worked out this time. And it is driving the usual suspects and would-be controllers bonkers. The Federal Reserve has routinely soiled the sheets. All of a sudden the Obama plan to make the Federal Reserve into a white knight on a prancing stallion seems kinda/sorta . . . nuts.

The Fed is finally under attack . . . and it’s about time that “Creature from Jekyll Island” got pimp slapped.

However, the Fed's troubles are only just starting:

  • Bloomberg News (go figure) is actually suing the Fed for additional internal information.

  • The inspector general’s disastrous performance in front of Congress.

  • There are the bills in the House and Senate to more fully audit the Fed. Way overdue.

  • Ben Bernanke may be a lame duck.

  • And now the Fed may well be deprived of additional responsibility to monitor the nation's financial risk taking.

    Despite lame efforts to defend the indefensible, setting interest rates is a form of price fixing by a group of private (not “federal”) agents.

    Way smarter folks than me conclude it is possible that eventually the bigger than big financial system will implode back into some variation of gold or silver standard, despite the wants, needs, and desires of the financial elite. Unless or until that happens, we the people will continue to pay for the excesses, and malfeasance of the Fed elite will continue to “shift the losses from the owners of the banks to the taxpayers.”

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