The Fed on Steroids
By Geoff Metcalf (03/31/08)
"Giving money and power to government is like giving whiskey and car keys to teenage boys." -- P.J. O’Rourke
So the Treasury Department wants Congress to gift the Federal Reserve with broad new authority and power to ride rough shod over financial market stability (or lack thereof). The New York Times described it as “allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.”
Giving the Fed more power is like giving crack cocaine to jihadists…it’s NOT a good idea.
This latest bureaucratic brain flatulence is part of a far reaching master plan to overhaul the nation’s mishmash of financial regulatory agencies. This ‘slamming the door after the horse is out of the barn’ is a result of what braniacs say is needed to mitigate the failure to recognize wild excesses in mortgage lending until after they sparked what is now allegedly the worst financial calamity in decades.
Before passing the buck (BIG bucks) to the Fed to solve problems Congress should be, and is required, to address, a few basics need to be reiterated.
I have interviewed Eustace Mullins several times, and he has been screaming for decades the empirical reality that,
· The Federal Reserve System is not Federal; it has no reserves
· From November, 1910 the maneuverings of the Federal Reserve bankers have been shrouded in secrecy.
· That secrecy has cost the American people trillions of dollars in debt, with annual interest payments to these bankers amounting to over three hundred billion dollars per year.
· When I filed this column the outstanding public debt was $9,416,953,744,070.69.
· National Debt increases an overage of $1.66 BILLION per day.
o You can see the current debt at http://www.brillig.com/debt_clock/
· Donald J. Winn, Assistant to the Board of Governors in response to an inquiry by Congressman, Norman D. Shumway, on March 10, 1983.
o Mr. Winn states that "The Federal Reserve System was established by an act of Congress in 1913 and is not a ‘private corporation’."
o On the next page, Mr. Winn continues, "The stock of the Federal Reserve Banks is held entirely by commercial banks that are members of the Federal Reserve System."
o He offers no explanation as to why the government has never owned a single share of stock in any Federal Reserve Bank, or why the Federal Reserve System is not a "private corporation" when all of its stock is owned by "private corporations".
Read More http://www.apfn.org/apfn/reserve.htm.
Thomas Jefferson expressed his opinion about the concept of an entity like the Fed when he wrote, “I consider the foundation of the Constitution as laid on this ground--that all powers not delegated to the United States, by the Constitution, nor prohibited by it to the states, are reserved to the states, or to the people (12th amend.). To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition.”
“The incorporation of a bank...have not, in my opinion, been delegated to the United States by the Constitution.” Of course that was before the evisceration of the Constitution in 1913.
Meanwhile, Democrat lawmakers (the same malfeasant cowards who shirk their responsibility to declare war, and now want to create another scapegoat to take their heat) are all but certain to say the steroid shot for the Fed does not go far enough in restricting the kinds of practices that caused the financial crisis.
So what is behind the headline about this ‘new’/old plan?
· The plan would consolidate a gaggle of banking and securities regulators into “a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms.”
· It artfully avoids a call for tighter regulation.
· The plan would not rein in practices that have been linked to the housing and mortgage crisis.
· The plan gives the Fed ‘some’ authority over Wall Street firms, but only when an investment bank’s practices threatened the entire financial system.
· The plan does not recommend tighter rules over the huge and mostly unregulated markets for risk sharing and hedging.
· The plan could reduce the power of the Securities and Exchange Commission.
One red flag should be that Paulson’s pitch for the Fed mirrors the ideas of Representative Barney Frank, who is chairman of the House Financial Services Committee.
The Bear Stearns flap is instructive. For the first time since the 1930s, the Fed agreed to allow investment banks to borrow hundreds of billions of dollars.
This plan would ‘consolidate’ a large number of regulators into roughly three big new agencies.
In Lewis v. United States, the United States Court of Appeals for the Ninth Circuit stated that "the Reserve Banks are not federal instrumentalities…but are independent, privately owned and locally controlled corporations." THAT is the fox Congress wants to guard our financial hen house...
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