martedì 4 maggio 2010

Bank Robber Start Own 'Open Market Operation'

Police seek bank robber who handed out $100 bills

The Associated Press
Published: Monday, May 3, 2010 at 7:27 p.m.
Last Modified: Monday, May 3, 2010 at 7:27 p.m.

Police in Columbus are looking for a man they say robbed a bank near downtown, then handed two $100 bills to passers-by as he ran away. FBI Special Agent Harry Trombitas said the man robbed a Huntington Bank branch early Monday afternoon after showing a teller a gun in his waistband. Trombitas said the man was running up the street when he encountered a mother and daughter window-shopping.

The robber stopped and gave them each a $100 bill, assured them it was real, then kept running.

Trombitas said the mother and daughter from the Cleveland area were in town for a visit to Ohio State.

They took the money to the nearest bank which turned out to be the Huntington branch that was just robbed, and there told police what happened.

Will Banks Be Held Accountable to Communities?

RaceWire at 10:46 am
May 3, 2010

Will Banks Be Held Accountable to Communities? [VIDEO]

Cross-posted from RaceWire

By Kai Wright

Last week, Senate Democrats managed to get their financial reform bill past the Republican blockade. Floor debate on the bill, which would create a consumer protection bureau inside the Federal Reserve, will move forward this week and the Senate’s more progressive Dems are expected to push amendments to make it tougher. They’re emboldened by the renewed outrage that the SEC’s charges against Goldman Sachs has stirred and Delaware Sen. Ted Kaufman says he’ll press to have the six largest banks broken up, which is a step the Obama administration opposes.

But there’s little public talk about toughening the bill’s consumer protections. On Thursday, housing and labor advocates organized thousands to march on Wall Street as a reminder of why that’s important — because banks’ shoddy, often predatory lending in working communities, particularly Black and Latino ones, was the fuel for the fire that eventually engulfed our economy. ColorLines took a camera down to the march to hear what protestors had to say to the banks about that fact (watch the video above—and pass it on!).

Advocates have broadly pushed a consumer protection agency. But the devil will be in the details.

The Senate bill creates a bureau inside the Fed that has it’s own budget, a presidentially appointed director and broad rule-writing and enforcing authority. Nonetheless, the bill gives veto power to an oversight board stacked with the same bank regulators who have already proven unwilling to protect consumers. Meanwhile, the House version creates a fully independent agency, but it carves out significant areas of lending from the agency’s oversight. Car dealers, who originate a massive volume of loans in Black communities, are exempt in the House bill and lobbyists are working hard to carve them out of the Senate bill as well.

The coming debate will focus largely on the “too big to fail” questions — if mega-banks need to be broken up and how public funds should be used to prevent their collapse. But the question of how consumers are protected within the financial system is equally crucial. We’ll see if that discussion gets back on the table as well.

Design Tools for Creating Community Currencies

On The Money
Design Tools for Creating Community Currencies
A Vision Quest to the Heart of Local Money

with John Rogers & Jonathan Dawson
featuring eminent guest speakers Richard Douthwaite,
Margrit Kennedy & Bernard Lietaer by teleconference
plus other local money practioners

14th to 18th August, 2010, The Park, Findhorn, Moray, Scotland

Our money system is in crisis. We can try to reform a broken system or we can design new ones to support the transition to a sustainable and resilient society. Local money gives us a proven tool to deal with the effects of financial crises, community breakdown, climate change and peak oil. It supports communities to use their own assets to solve local problems, meet local needs and achieve local goals: everything from community gardens to renewable energy and local economic regeneration.

This course is about how to design more resilient community currency systems that will stand the test of time. Together we’ll discover the wealth that lies at the heart of our communities and learn how to mobilise that wealth for the benefit of all.

Come and learn the essential design skills to create local money systems that last, in the company of eminent international designers who have done it.

See video clip

Money  and Soul . Learning Englsih


£450/£525/£650 low/medium/high income (residential)
£360 (non-residential)

Apply online here


John  Rogers John Rogers has worked with community currencies since 1993, bothas volunteer organiser and professional development specialist. He cofounded the Wales Institute for Community Currencies at the University of Newport and now directs the consulting and training practice Value for People, supporting emergent community currency systems. He runs the internet course 'Let's Make Money' for local currency designers
JKonathan Dawson

Jonathan Dawson is a sustainability educator based at the Findhorn Foundation. He is involved in the management of Findhorn’s own community currency, the Eko and has published widely on issues of local economic sustainability. He is co-author of the Gaia Education sustainability curriculum that has been welcomed by UNESCO as a valuable contribution to the UN Decade of Education for Sustainable Development.

By video link

John  Rogers Richard Douthwaite is helping to develop the Liquidity Network, a debt-free electronic currency system, in Ireland. He is the author of the Schumacher Briefing The Ecology of Money (Green Books).
Margrit  Kennedy Margrit Kennedy is the author of Interest and Inflation Free Money and has been instrumental in the creation of more than 70 regional and sectoral complementary currency initiatives in Europe.
Bernard  Lietaer

Bernard Lietaer is author of the widely acclaimed The Future of Money. He is Chairman of the ACCESS Foundation, an educational non-profit organization relalang to monetary innovations aiming at re-aligning sustainability and global financial interests (

Contact Information:
Findhorn College, The Park, Findhorn, Forres, IV36 3TZ
Tel: + 44 (0) 1309 690806

Rahm Working With Fed To Beat Back Audit

Alfred Woody Wang, May 5, 2010

Rahm Working With Fed To Beat Back Audit

The White House, Federal Reserve and Wall Street lobbyists are kicking up their opposition to an amendment to audit the Fed as a Senate vote approaches, Sen. Bernie Sanders (I-Vt.), the lead sponsor of the measure, said on Monday.

Banking Committee Chairman Chris Dodd (D-Conn.), who is shepherding the bill through the Senate, told Sanders Monday afternoon that "there's a shot we'll be up tomorrow," Sanders told HuffPost.

In the spring of 2009, Sanders brought a similar amendment to the Senate floor and won 59 votes. Eight senators who voted against it then are now cosponsors of his current measure.

"I think momentum is with us. But I've gotta tell you, that on this amendment, you're taking on all of Wall Street, you're taking on the Fed, obviously, and unfortunately you seem to be taking on the White House, as well. And that's a tough group to beat," said Sanders.

He's been trading calls, he said, with Rahm Emanuel, the White House chief of staff.

Earlier on Monday, HuffPost reported that former Fed Chairman Alan Greenspan wanted dissent kept secret so that people outside the Fed wouldn't involve themselves in their debates.

"We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand," Greenspan said, according to the transcripts of a March 2004 meeting. "I'm a little concerned about other people getting into the debate when they know far less than we do."
Story continues below

Sanders said that Greenspan's comments are all the more reason for an audit. "I think it just adds a lot of weight to what we are trying to do," Sanders said. "It just points to the fact that if there was more transparency then it in fact would have allowed the debate to take place about the subprime mortgage [sic] unfolding crisis at that point. It may have prevented the horrendous recession that we're in now and the near collapse of the financial institutions."

Democratic leadership has yet to decide if an amendment will need 51 or 60 votes for passage, but Sanders said he thought the decision would be made to go with 60.

On April 2, 2009, 59 senators voted for the Sanders-Webb-Bunning-Feingold Amendment that would open the Fed to an audit. Then-Sen. Ted Kennedy (D-Mass.) did not vote and there are indications that his replacement, Sen. Scott Brown (R-Mass.), is supportive.

Meanwhile, eight of the 39 no votes have since signed on to a Sanders bill to audit the Fed or the amendment that will come up: Sens. John Barrasso (R-Wy.), Bob Bennett (R-Utah), Saxby Chambliss (R-Ga.), Thad Cochran (R-Miss.), Orrin Hatch (R-Utah), Johnny Isakson (R-Ga.), Lisa Murkowski (R-Alaska), and Roger Wicker (R-Miss.).

Sen. Mel Martinez (R-Fla.) voted no, but has since been replaced by Republican Sen. George LeMieux.

With Brown, the Sanders amendment would have 69 votes. It has already passed the House of Representatives.

The Yes votes in Arpil 2009 (59)

Akaka (D-HI)
Begich (D-AK)
Boxer (D-CA)
Brown (D-OH)
Brownback (R-KS)
Bunning (R-KY)
Burr (R-NC)
Burris (D-IL)
Byrd (D-WV)
Cantwell (D-WA)
Cardin (D-MD)
Casey (D-PA)
Coburn (R-OK)
Collins (R-ME)
Conrad (D-ND)
Cornyn (R-TX)
Crapo (R-ID)
DeMint (R-SC)
Dorgan (D-ND)
Durbin (D-IL)
Ensign (R-NV)
Feingold (D-WI)
Feinstein (D-CA)
Graham (R-SC)
Grassley (R-IA)
Hagan (D-NC)
Harkin (D-IA)
Hutchison (R-TX)
Inhofe (R-OK)
Inouye (D-HI)
Kerry (D-MA)
Klobuchar (D-MN)
Landrieu (D-LA)
Leahy (D-VT)
Levin (D-MI)
Lincoln (D-AR)
McCain (R-AZ)
McCaskill (D-MO)
Merkley (D-OR)
Mikulski (D-MD)
Murray (D-WA)
Nelson (D-FL)
Pryor (D-AR)
Reid (D-NV)
Risch (R-ID)
Roberts (R-KS)
Rockefeller (D-WV)
Sanders (I-VT)
Sessions (R-AL)
Snowe (R-ME)
Specter (R-PA)
Stabenow (D-MI)
Tester (D-MT)
Thune (R-SD)
Udall (D-NM)
Vitter (R-LA)
Webb (D-VA)
Whitehouse (D-RI)
Wyden (D-OR)

The no voters who have since signed on to an audit (8)

Barrasso (R-WY)
Bennett (R-UT)
Chambliss (R-GA)
Cochran (R-MS)
Hatch (R-UT)
Isakson (R-GA)
Murkowski (R-AK)
Wicker (R-MS)

The no voters who have not signed on to an audit and are still in the Senate (30)

Alexander (R-TN)
Baucus (D-MT)
Bayh (D-IN)
Bennet (D-CO)
Bingaman (D-NM)
Bond (R-MO)
Carper (D-DE)
Corker (R-TN)
Dodd (D-CT)
Enzi (R-WY)
Gillibrand (D-NY)
Gregg (R-NH)
Johanns (R-NE)
Johnson (D-SD)
Kaufman (D-DE)
Kohl (D-WI)
Kyl (R-AZ)
Lautenberg (D-NJ)
Lieberman (ID-CT)
Lugar (R-IN)
Martinez (R-FL)
McConnell (R-KY)
Menendez (D-NJ)
Nelson (D-NE)
Reed (D-RI)
Schumer (D-NY)
Shaheen (D-NH)
Shelby (R-AL)
Udall (D-CO)
Voinovich (R-OH)
Warner (D-VA)

Trust in Free Markets is Dead

Jim Rickards - Trust in Free Markets is Dead:

Eric King: As Rickards correctly points out Washington had no idea of the depth of the financial crisis. The wealth transfer and looting of this country continues unabated while the chasm between the rich and the poor widens. The destruction of the middle class is irrelevant to the modern day pirates, they must have their treasure at any cost. As Jim notes, “The winners like Goldman Sachs made sure to collect.” The last two sentences of Jim’s piece summarize the situation nicely and are in line with top professionals who ask today, “What is real anymore?”

April 26, 2010
KWN Blog

Welcome to Pluto

By Jim Rickards,_Trust_in_Free_Markets_is_Dead__files/shapeimage_22.png

Plutocracy, rule by the rich, is not named for Pluto, god of death, but his spoiled son, Plutus, the personification of wealth. The juxtaposition of a dead economy and bank billionaires makes this lineage apt.

The failure of Washington and Wall Street to foresee the financial crisis is well known. Less well known is their failure to grasp the depth of the crisis once it began. The crisis did not emerge suddenly in September 2008 with Lehman and AIG; it was in full swing by August 2007 with the Fed’s emergency discount rate cut. Why were our leaders blind not once, at the outset, but twice, after the crisis had begun?

Things got worse than regulators first imagined because of the hidden role of derivatives. A simple example makes the point. In 2007, there were about $1 trillion in subprime and similar risky mortgages outstanding. Historic default rates on mortgages were around 3 percent. It became clear that subprime defaults would be much higher. So assuming some sky-high estimate like a 25 percent default rate meant $250 billion of potential losses on $1 trillion of risky mortgages. A $250 billion loss is a big number but manageable in a $14 trillion economy. In real terms, it was not worse than the S&L crisis of the late 1980’s. Experts thought this was a problem to be managed but not one that threatened the financial system as a whole. This view prevailed through the spring and summer of 2008 as the Bear Stearns, Fannie and Freddie bailouts continued. There was a persistent sense that somehow the crisis was not going away, yet the basic subprime math made it hard to understand why.

Unknown to the public, politicians and bank regulators, a grotesque edifice of credit default swaps had emerged in the shadows of Wall Street. Credit defaults swaps, CDS, are just side bets on whether some normal debt instrument will perform or fail. The size of the CDS market grew from $2.2 trillion in 2002 to $54 trillion in 2006. Not all of these CDS related to subprime mortgages but a large percentage did. If we generously assume half were subprime related, that’s a $27 trillion bet. Now, when we apply the 25 percent default rate we get losses of over $6 trillion; much closer to the actual losses in the collapse of 2007-2008 and over 20 times greater than the $250 billion estimate from subprime mortgages alone.

The subprime market was a scandalous fraud by itself. But the lying borrowers, crooked mortgage brokers, greedy investment bankers, corrupt rating agencies, crony-filled government agencies and ignorant investors combined could only lose $250 billion on their own. It took the quants at Goldman and elsewhere to find a way to lose over 20 times that amount through the magic of derivatives. Who said American technology is dead? It takes genius to turn a quarter-trillion-dollar scam into a $6 trillion catastrophe.

Surely some social good came out of this financial alchemy? After all, isn’t reward half of the risk-reward spectrum? When a city borrows money an airport can be built. When a corporation borrows a new factory rises. When individuals borrow they buy a house or car. Along with debt comes some investment, purchase or savings that helps advance the economy however fitfully. How many airports, roads, factories, farms, houses, cars or other goods fell out of the $27 trillion CDS piñata? I won’t keep you in suspense—the answer is none.

Unlike real banking which raises capital for worthy enterprises, the CDS market is a betting parlor with no social utility. But don’t the bets just change hands between winners and losers with no harm to the rest of us? Not exactly. The winners like Goldman made sure to collect. But the losers, after receiving their personal bonuses on up-front fees and buying houses in Nantucket, walked away and handed society the bill. If you’re wondering who the real losers are and you happen to be a taxpayer just look in a mirror.

Society is so in thrall to Goldman and the other banks that we can’t even hold them accountable. Their critics are accused of using hindsight as if the game wasn’t rigged from the start. Opponents are accused of being anti-free market as if putting horsemeat in hamburgers is a legitimate market activity. As a society, we’ve lost our nerve when it comes to bankers and their lobbyists. The Age of the Plutocrat has well and truly arrived.

Democrats are going through the motions of reform now while Republicans are going through the motions of reform later. There is no reform. The Dodd and Frank bills are shot through with easy loopholes a second-year law student could find. Blanche Lincoln’s bill has teeth, but no hope of passage. The new bank bailout fund is just another wealth transfer from citizens to the banks. The new systemic risk regulator does not understand risk, viewing it as stocks and flows to be dialed up or down rather than the complex nonlinear system poised on the edge of catastrophe, which it really is. Campaign contributions are flowing, lobbyists are high-fiving, journalists don’t get it and the public is confused and disgusted. We are blinded by a so-called free-market ideology subscribed to by politicians and pundits who can’t see the difference between a free-market and a rigged game. Free markets depend on trust and that died a long time ago.

James G. Rickards is a director of Omnis, Inc. and former general counsel of Long-Term Capital Management. Follow him at

Forum Nazionale Antiusura Bancaria


_____comunicato stampa

Giovedì 29 Aprile si è svolto a Roma, nella sala della Mercede dietro Palazzo Marini, il 6^ incontro dei Rappresentanti del “FORUM Nazionale Vittime dell’usura”, presieduto dall’On. Domenico Scilipoti.

Nell’incontro, alla presenza del Notaio Antonio Mosca, sono state registrate le firme dei promotori del Forum Nazionale, concretizzando così ufficialmente la costituzione della


Ultimata questa importante e necessaria formalità, i lavori sono stati aperti dall’On. Scilipoti, il quale ha ripercorso gli obiettivi prioritari del FORUM, identificabili essenzialmente nei seguenti punti:

E’ stata quindi evidenziata l’esigenza di formalizzare al più presto la individuazione di Responsabili Regionali e Provinciali, per avviare iniziative parallele a quella promossa dall’Avv. Giovanni Giuffrida, che in Sicilia sta organizzando un tour con il Camper “Stranabanca”, in tutte le provincie siciliane per illustrare ai cittadini le azioni di lotta che verranno intraprese contro l’usura e le vessazioni bancarie .

L’Esecutivo del FORUM, come già individuato dall’Assemblea, si dovrà riunire a Roma ogni 20/30 giorni, ove verrà eletto un Direttivo, composto dai soggetti maggiormente attivi e di provata rettitudine. I membri dell’Esecutivo e del Direttivo sono tenuti a depositare presso la segreteria del Forum, ove è preposta la Sig,ra Angelica Bianco, il proprio certificato dei carichi pendenti.

Ogni aderente al Forum è autorizzato a redigere ed inviare alla segreteria dell’On. Scilipoti le segnalazioni per violazioni di legge e/o ingiustizie significative e di interesse generale, onde promuovere attività di sindacato ispettivo e/o interrogazioni parlamentari. Naturalmente gli argomenti segnalati saranno sottoposti ad un Comitato di Controllo, nominato dall’Esecutivo, del quale si darà puntuale informativa.

Ovviamente, oltre alle interrogazioni, tutti i partecipanti al Forum saranno sollecitati a predisporre eventuali proposte di legge.

In una prospettiva di sviluppo del Forum, verranno individuati uno o più gruppi di lavoro di tipo tecnico/contabile, legale e politico i quali, a titolo di volontariato (inteso come rimborso delle spese ed un sotto/minimo tariffario) si porranno a disposizione della struttura per la definizione degli obiettivi da raggiungere e/o dei singoli aderenti, per l’esame e l’esplicazione dei singolari problemi.

L’Assemblea dei presenti ha aderito alla proposta di inserire subito i Professionisti delle varie categorie aderenti al FORUM nel sito A tale proposito, da parte dell’Ing. Di Stefano Luigi, responsabile del sito internet, sono stati invitati tutti gli Aderenti al FORUM ad iscriversi al sito.

Il Presidente del FORUM, On. Domenico Scilipoti, ha quindi richiamato i tutti i presenti sulla necessità di divulgare con ogni mezzo ed il più possibile la manifestazione fissata per Venerdì 25 GIUGNO 2010, dalle ore 10,00 alle ore 17,00, presso la Sala delle Conferenze di Palazzo Marini, in Via del Pozzetto 158 - Roma (a lato di Piazza San Claudio).

Chiunque lo desideri, potrà prenotare un proprio breve intervento (max. 4/6 minuti) per il giorno della manifestazione, presso la segreteria dell’On. Scilipoti. Gli argomenti saranno incentrati su usura e vessazioni bancarie, nonché sulle disfunzioni delle Istituzioni che dovrebbero proteggere le vittime; ognuno potrà riferire brevemente la propria storia ed il calvario vissuto nell’impari confronto.

E’ stato poi ricordato che mercoledì 05 maggio p.v. si svolgerà un incontro tra l’On. Scilipoti e due delegati del Forum, con il Commissario Straordinario del Governo.

Successivamente ha preso la parola il Responsabile dell’immagine del Forum, Dr. Remo Candotti, il quale ha illustrato quanto sinora realizzato e che verrà comunicato con una mail informativa ai partecipanti.

Sono state indicate le seguenti manifestazioni di cui verranno comunicati i dettagli:

  • VENERDI' 7 MAGGIO a Padova dalle 8,30 alle 13 in Piazza Insurrezione, promosso da Alfredo Belluco ci sarà un sit-in di protesta contro i soprusi delle banche, in occasione della Giornata dell'Economia organizzata dalla C.C.I.A.A., con l’intervento di numerosi imprenditori angariati dal sistema bancario da tutte le province del Veneto (escluse Rovigo e Belluno)
  • SABATO 8 MAGGIO in Sicilia, con un tour itinerante, a cui parteciperà l’Avv. Giovanni Giuffrida con l’On. Domenico Scilipoti;
  • SABATO 22 MAGGIO a Brescia, il cui programma sarà indicato dalla Lorena Sacchi;
  • VENERDI’ 28 MAGGIO a Civitanova Marche, il cui programma verrà puntualizzato dall’Avv. Adolfo Pesaresi e dal Tesoriere Cav. Giuseppe Tosoni;
  • Altre manifestazioni saranno programmate in Piemonte, Toscana, Abruzzo e nel Lazio, secondo le indicazioni e suggerimenti della Sig.ra Katia Gavioli, Silvestro Dell’Aerte, entrambi imprenditori, dell’Avv. Daniele Cozza e del Prof. Francesco Petrino.

Per ogni ulteriore chiarimento è possibile contattare la Sig.ra Angelica Bianco

(presso la Segreteria dell’ On. Domenico Scilipoti) ai Nn. 06/ 67608028 - 090/ 693070

Suicide by Regressivism

Suicide by Regressivism

By David Michael Green

May 02, 2010
"Information Clearing House" -- Sometimes bad things happen to countries, and people suffer.

Other times, people suffer because countries are stupid and bring bad things upon themselves.

No country in the history of the world has ever been as rich and powerful as the United States. Regrettably, few have demonstrated the level of stupidity we have and brought so much grief upon our own heads (not to mention treating so many other people in the world to an even worse fate).

To watch the Wall Street hearings in Congress this week is to witness this folly in full flower. To ask, “What two greater sets of organized criminals are there in America than Wall Street bankers and the United States Congress?” is actually to make the fundamental mistake of being too charitable. The question assumes that they are indeed distinguishable entities, when in fact this is arguably nonsense.

That distinction is actually quite critical, for our public sector has in many ways more or less ceased to exist in this country. And that in turn is critical for what it signifies, in addition to the very tangible effects felt every day.

What’s at stake in the significance of a robust public sector, with supreme political authority, is nothing less than democracy at its most profound level. We tend to think of democracy primarily in terms of elections. Those of us who scratch the surface a little deeper might invoke associations to the concept of responsible government, and the notion of clearly assignable credit for policy successes and failures, along with the idea of legitimate voter choice which follows from that.

But foundational to both those important concepts is the assigned role for the government being chosen through this electoral process. It doesn’t much matter if you have free and fair elections, with lots of distinct party choices to pick from, if the government you are electing is substantially limited in its capacities. You might as well get all excited about the Queen of England. You can do that if you want, but the reality is that she doesn’t have any real political power anymore, so why bother?

Likewise, the stature of American government has much deteriorated in many key respects from where it stood a generation ago. Regressives have been so good at winning the ideological warfare of the last thirty years, whether on fronts overt or subtle, and this is just another example of the latter. By weakening the government, by undermining its status in the public mind, and by making it subservient to other actors on the political stage, incalculable damage has been done to American society. Just exactly as was intended.

One of the great regressive triumphs of our time has been to turn people against their own government. It’s an astonishing victory – especially in a democracy where those same people have chosen that very government – and it comes against the long odds cast by the shadow of rationality.

But it has been a necessary ingredient for a plutocracy which has sought to achieve – and has achieved – the fundamental goal of radically redistributing wealth in America. The major impediments to such predation include government’s presumptive power to tax, to regulate, to provide services, and to set the fundamental rules for the structural mechanics of economic life in a society. All of these had to be challenged to insure that a wealthy overclass could become fantastically more wealthy, and the easiest way to do that was to corrode the status and power of government itself. To choose a metaphor which is not entirely metaphorical, it’s a lot harder to steal from you if you think you deserve to own what you have. If, on the other hand, you can be sold a diet of some lovely self-loathing, you’re likely to be a lot more inclined to acquiesce in your own fleecing.

Teaching people to hate their own government is one way to divest them of it, and it has been crucial. At least as important, however, has been the process of wresting the beast right out of the hands of any remaining semblance of public control. So, first the Republican Party was completely coopted, then – courtesy of Bill Clinton and Barack Obama especially – the Democrats as well. Now both parties take enormous sums from Wall Street and any other corporate actor who realizes what a great return on investment is provided on the minimal pay-to-play entry fee of buying off a few members of Congress, through the medium of former members of Congress now cashing in as lobbyists. If this goes on much longer it will make the robber baron era of the late nineteenth and early twentieth century look as garish as Gandhi by comparison.

While taxes on the wealthy have been dramatically cut in the United States these last decades (with, of course, debt rising in equally fantastic proportion) the very notion of the legitimacy of taxation has been called into question to a ludicrous extent. It’s as easy as it is immature to bitch about taxes, in the same way that a certain five year-old might decide that he should have all the cookies on the communal plate, and his playmates none. Some folks on the right may have some legitimate policy disputes about being forced through taxation to pay for programs they don’t like (though I suspect nearly all of them are just looking to have more cookies). But, hey, guess what? Most everyone can readily find lots of stuff in the federal budget they’d rather not fund. As for me, I am appalled that something like one-half of the federal dollars skimmed off of my paycheck go to fund a massively bloated military-industrial-complex, for a country with no real enemy, in a process that represents little more than corporate welfare at its absolute worst. But I don’t complain about the concept of taxes. It is, as Oliver Wendell Holmes pointed out, the price we pay for civilization. Sadly, in America, we pay comparatively little in taxes. If you do the math on that, per Holmes’ formulation, you quickly realize that we have purchased for ourselves a Walmart civilization, and not just figuratively, either.

Deregulatory fervor is another concept which fairly boggles the mind. Does it seem to you that Wall Street has been prevented by the government from being the best it can be lately? Were those poor hard-working bankers unable to earn an honest day’s salary, even after we dismantled the regulatory framework we built after the 1930s, the last time this same nightmare went down? Do you think that American industry should be freer to pollute our waters, strip-mine our mountains, or build even bigger shit pools surrounding industrial-scale meat factories? Aren’t zoning restrictions just an outrage, too? Why shouldn’t that sulfur-processing plant be located right in your neighborhood? Why should the next generations get to enjoy the same temperate planet we all have grown up with, when that would mean profits for an already wealthy tiny minority might be slightly diminished? What’s so bad about the Sahara, anyhow?

Then there’s spending. Of all the developed countries in the world, the United States has always been the most absolutely miserly in taking care of its populace. Americans would be entirely amazed to learn what goes on in places like Germany or Sweden, how socially and personally beneficial such welfare state programs are, and how much security and, yes, freedom, comes from such initiatives. They might even realize what a raw deal they’ve given themselves, in exchange for the right to buy a bigger TV on their high-interest credit cards. But, of course, the only times in half a century that we’ve moved in the direction of enlarging the American welfare state – Bush’s prescription drug bill and Obama’s health care debacle – it’s really been a lot more about enlarging corporate profits. Coupled with the Clinton/Gingrich meat cleaver approach to already minimal welfare assistance, it’s a very sad record indeed. But, then, it’s only lives that are at stake here.

While taxes and regulation and spending are the obvious manifestations of this public-versus-private dynamic, there is another more profound one as well, which has to do with the very structuring of society. We seem to have forgotten, all too often, that the former is meant to sanction the latter, and not the other way around. Corporations are, at least in theory, chartered by the state, for purposes of serving some sort of public good, and not otherwise. In practice, however, corporations have come to view the state as their sometime nemesis and oft-time resource collector. Regressives, however, in their supposed zeal for ‘freedom’, never stop reminding us of the need to leave the private sector unfettered to do what it wants. Funny, they don’t seem so obsessed with freedom from state power when it comes to murder or robbery, or even abortion or gay marriage. What could be the rationale for letting corporate actors murder – and in some cases there is no other word for it – as a result of actions taken in a society free from government control? And, worst of all, for the lowest of reasons imaginable?: To generate big profits for little people.

At the root of all this is a society that has lost touch with the very meaning of the public sector. At the end of the day, and despite all the deviations of real-world practice, government is the forum in which the aspirations and interests of the people, as a people, are expressed. And that is why, despite the need to protect some substantial quantities of individual and even corporate freedoms, government must ultimately trump the power of private actors. We don’t allow individuals the right to take the lives of others whenever they feel like it on the basis of their claims to freedom. Why do we contemplate extending these and analogous rights to corporate actors? Yes, of course, everyone should have maximal possible freedoms, but only after the needs of society and other individuals have been placed first.

At its core, the regressive project these last thirty years has sought to undermine that principle, rhetorically, legislatively and conceptually. Ronald Reagan was the embodiment of this initiative, and nothing spelled it out more clearly than his line that “Government is not the solution, government is the problem”. What he was really saying was, “Greedy wealthy folks are not getting enough yet, so the rest of you need to have less and live shorter, shittier lives to rectify that unacceptable imbalance”.

And so, precisely, it has been. The Great Recession of our time is only the most obvious manifestation of a thirty year process of wealth transfer from bottom to top. Even as the global economy crumbles and America groans under the burden of record-high unemployment rates, all remains quite lovely, thank you very much, for the nice folks in America’s economic stratosphere. Record high bonuses on Wall Street and a rising Dow. Meanwhile, the distribution of wealth in this country is now as it was in Herbert Hoover’s day, a scenario of which any banana republic could be proud.

And the notion of what to do about it is more farcical than ever. The only serious political energy in the country belongs to the tea party morons, and their media cheerleaders on Fox and, well, seemingly everywhere. And they are calling – wait for it now – for less government as a solution to the country’s problems. It boggles the mind. Could an ideology ever have been more obviously shown to be catastrophic in its effects? And yet here we are arguing in public about doubling down on those policy ideas, while the two major political parties both pretend to be limiting the worst practices of the most predatory actors, as they simultaneously accept bags of money from the very same folks at the very same time.

I’m sorry, but this is embarrassing. I know enough about history that I don’t entirely mind if my country has a bad century or two, or falls from the lofty heights of its great power status. Falling is what you’re supposed to do when you’re a great power and you’ve already done the whole rise thing. It’s called gravity, and it’s pretty inevitable.

But do we have to do it to ourselves?

And does it have to be the product of such rampant stupidity?

David Michael Green is a professor of political science at Hofstra University in New York. He is delighted to receive readers' reactions to his articles ( ), but regrets that time constraints do not always allow him to respond. More of his work can be found at his website, .

Was There A Plan to Blow Up The Economy?

The Subprime Conspiracy:

Was There A Plan to Blow Up The Economy?

By Mike Whitney

May 03, 2010 "Information Clearing House" --Many people now believe that the financial crisis was not an accident. They think that the Bush administration and the Fed knew what Wall Street was up to and provided their support. This isn't as far fetched as it sounds. As we will show, it's clear that Bush, Greenspan and many other high-ranking officials understood the problem with subprime mortgages and knew that a huge asset bubble was emerging that threatened the economy. But while the housing bubble was more than just an innocent mistake, it doesn't rise to the level of "conspiracy" which Webster defines as "a secret agreement between two or more people to perform an unlawful act." It's actually worse than that, because bubblemaking is the dominant policy, and it's used to overcome the structural problems in capitalism itself, mainly stagnation.

The whole idea of a conspiracy diverts attention from what really happened. It conjures up a comical vision of top-hat business tycoons gathered in a smoke-filled room stealthily mapping out the country's future. It ignores the fact, that the main stakeholders don't need to convene a meeting to know what they want.They already know what they want; they want a process that helps them to maintain profitability even while the "real" economy remains stuck in the mud. Historian Robert Brenner has written extensively on this topic and dispels the mistaken view that the economy is "fundamentally strong". (in the words of former Treasury secretary Henry Paulson) Here's Brenner :

"The current crisis is more serious than the worst previous recession of the postwar period, between 1979 and 1982, and could conceivably come to rival the Great Depression, though there is no way of really knowing. Economic forecasters have underestimated how bad it is because they have over-estimated the strength of the real economy and failed to take into account the extent of its dependence upon a buildup of debt that relied on asset price bubbles. In the U.S., during the recent business cycle of the years 2001-2007, GDP growth was by far the slowest of the postwar epoch. There was no increase in private sector employment. The increase in plants and equipment was about a third of the previous, a postwar low. Real wages were basically flat. There was no increase in median family income for the first time since World War II. Economic growth was driven entirely by personal consumption and residential investment, made possible by easy credit and rising house prices. Economic performance was weak, even despite the enormous stimulus from the housing bubble and the Bush administration's huge federal deficits. Housing by itself accounted for almost one-third of the growth of GDP and close to half of the increase in employment in the years 2001-2005. It was, therefore, to be expected that when the housing bubble burst, consumption and residential investment would fall, and the economy would plunge. " ("Overproduction not Financial Collapse is the Heart of the Crisis", Robert P. Brenner speaks with Jeong Seong-jin, Asia Pacific Journal)

What Brenner describes is an economy that's flat on its back; an economy that--despite unfunded tax cuts, massive military spending and gigantic asset bubbles--can barely produce positive growth. The pervasive lethargy of mature capitalist economies, poses huge challenges for industry bosses who are judged solely on their ability to boost quarterly profits. Goldman's Lloyd Blankfein and JPM's Jamie Dimon could care less about economic theory, what they're interested in is making money; how to deploy their capital in a way that maximizes return on investment. "Profits", that's it. And that's much more difficult in a world that's saturated with overcapacity and flagging demand. The world doesn't need more widgets or widget-makers. The only way to ensure profitability is to invent an alternate system altogether, a new universe of financial exotica (CDOs, MBSs, CDSs) that operates independent of the sluggish real economy. Financialization provides that opportunity. It allows the main players to pump-up the leverage, minimize capital-outlay, inflate asset prices, and skim off record profits even while the real economy endures severe stagnation.

Financialization provides a path to wealth creation, which is why the sector's portion of total corporate profits is now nearly 40 percent. It's a way to bypass the pervasive inertia of the production-oriented economy. The Fed's role in this new paradigm is to create a hospitable environment (low interest rates) for bubble-making so the upward transfer of wealth can continue without interruption. Bubblemaking is policy.

As we've pointed out in earlier articles, scores of people knew what was going on during the subprime fiasco. But it's worth a quick review, because Robert Rubin, Alan Greenspan, Timothy Geithner, and others have been defending themselves saying, "Who could have known?".

The FBI knew ("In September 2004, the FBI began publicly warning that there was an "epidemic" of mortgage fraud, and it predicted that it would produce an economic crisis, if it were not dealt with.") The FDIC knew. ( In testimony before the Financial Crisis Inquiry Commission, FDIC chairman Sheila Bair confirmed that she not only warned the Fed of what was going on in 2001, but cited particular regulations (HOEPA) under which the Fed could stop the "unfair, abusive and deceptive practices" by the banks.) Also Fitch ratings knew, and even Alan Greenspan's good friend and former Fed governor Ed Gramlich knew. (Gramlich personally warned Greenspan of the surge in predatory lending that was apparent as early as 2000. Here's a bit of what Gramlich said in the Wall Street Journal:

"I would have liked the Fed to be a leader" in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.

"He was opposed to it, so I didn't really pursue it," says Mr. Gramlich. (Wall Street Journal)

So, Greenspan knew, too. And, according to Elizabeth MacDonald in an article titled "Housing Red flags Ignored":

"One of the nation’s biggest mortgage industry players repeatedly warned the Federal Reserve, the Federal Deposit Insurance Corp. and other bank regulators during the housing bubble that the U.S. faced an imminent housing crash....But bank regulators not only ignored the group's warnings, top Fed officials also went on the airwaves to say the economy was "building on a sturdy foundation" and a housing crash was "unlikely."

So, the Mortgage Insurance Companies of America [MICA] also knew. And, here's a clip from the Washington Post by former New York governor Eliot Spitzer who accused Bush of being a ‘partner in crime’ in the subprime fiasco. Spitzer says that the OCC launched “an unprecedented assault on state legislatures, as well as on state attorneys general just to make sure the looting would continue without interruption. Here's an except from Spitzer's article:

"In 2003, during the height of the predatory lending crisis....the OCC promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules. (Washington Post)

So, the Fed knew, the Treasury knew, the FBI knew, the OCC knew, the FDIC knew, Bush knew, the Mortgage Insurance Companies of America knew, Fitch ratings knew, all the states Attorneys General knew, and thousands, of traders, lenders, ratings agency executives, bankers, hedge fund managers, private equity bosses, regulators knew. Everyone knew, except the unlucky people who were victimized in the biggest looting operation of all time.

Once again, looking for conspiracy, just diverts attention from the nature of the crime itself. Here's a statement from former regulator and white collar criminologist William K. Black which helps to clarify the point:

"Fraudulent lenders produce exceptional short-term “profits” through a four-part strategy: extreme growth (Ponzi), lending to uncreditworthy borrowers, extreme leverage, and minimal loss reserves. These exceptional “profits” defeat regulatory restrictions and turn private market discipline perverse. The profits also allow the CEO to convert firm assets for personal benefit through seemingly normal compensation mechanisms. The short-term profits cause stock options to appreciate. Fraudulent CEOs following this strategy are guaranteed extraordinary income while minimizing risks of detection and prosecution." (William K. Black, "Epidemics of 'Control Fraud' Lead to Recurrent, Intensifying Bubbles and Crises", University of Missouri at Kansas City - School of Law)

Black's definition of "control fraud" comes very close to describing what really took place during the subprime mortgage frenzy. The investment banks and other financial institutions bulked up on garbage loans and complex securities backed by dodgy mortgages so they could increase leverage and rake off large bonuses for themselves. Clearly, they knew the underlying collateral was junk, just as they knew that eventually the market would crash and millions of people would suffer.

But, while its true that Greenspan and the Wall Street mandarins knew how the bubble-game was played; they had no intention of blowing up the whole system. They simply wanted to inflate the bubble, make their profits, and get out before the inevitable crash. But, then something went wrong. When Lehman collapsed, the entire financial system suffered a major heart attack. All of the so-called "experts" models turned out to be wrong.

Here's what happened: Before to the meltdown, the depository "regulated" banks got their funding through the repo market by exchanging collateral (mainly mortgage-backed securities) for short-term loans with the so-called "shadow banks" (investment banks, hedge funds, insurers) But after Lehman defaulted, the funding stream was severely impaired because the prices on mortgage-backed securities kept falling. When the bank-funding system went on the fritz, stocks went into a nosedive sending panicky investors fleeing for the exits. As unbelievable as it sounds, no one saw this coming.

The reason that no one anticipated a run on the shadow banking system, is because the basic architecture of the financial markets has changed dramatically in the last decade due to deregulation. The fundamental structure is different and the traditional stopgaps have been removed. That's why no one knew what to do during the panic. The general assumption was that there would be a one-to-one relationship between defaulting subprime mortgages and defaulting mortgage-backed securities (MBS). That turned out to be a grave miscalculation. The subprimes were only failing at roughly 8 percent rate when the whole secondary market collapsed. Former Treasury Secretary Paul O'Neill explained it best using a clever analogy. He said, "It's like you have 8 bottles of water and just one of them has arsenic in it. It becomes impossible to sell any of the other bottles because no one knows which one contains the poison."

And that's exactly what happened. The market for structured debt crashed, stocks began to plummet, and the Fed had to step in to save the system. Unfortunately, that same deeply-flawed system is being rebuilt brick-by-brick without any substantive changes.. The Fed and Treasury support this effort, because--as agents of the banks--they are willing to sacrifice their own credibility to defend the primary profit-generating instruments of the industry leaders. (Goldman, JPM, etc) That means that Bernanke and Geithner will go to the mat to oppose any additional regulation on derivatives, securitization and off-balance sheet operations, the same lethal devices that triggered the financial crisis.

So, there was no conspiracy to blow up the financial system, but there is an implicit understanding that the Fed will serve the interests of Wall Street by facilitating asset bubbles through "accommodative" monetary policy and by opposing regulation. It's just "business as usual", but it's far more damaging than any conspiracy, because it ensures that the economy will continue to stagnate, that inequality will continue to grow, and that the gigantic upward transfer of wealth will continue without pause.

Credit as a Public Utility: The Solution

SIX-PART VIDEO NOW AVAILABLE: “Credit as a Public Utility: The Solution to the Economic Crisis”

by Richard Cook

This is a six-part professional-quality video that is over two hours in length. Each part consists of a lecture by Richard C. Cook on the economic crisis and its solution. The video was made on March 16, 2009, in the Maryland Room of the Prince George’s County Library, Hyattsville, MD. This is the most in-depth and complete critique of our debt-based monetary system ever made. The video concludes with a complete program of reform based on the draft American Monetary Act, implementation of a Greenback-type currency, and a citizens’ dividend/basic income guarantee. The material is deeply rooted in the history of American public finance and the author’s experience of 21 years as a U.S Treasury Department analyst. His recommendations would replace the existing financial system, which mainly serves the interests of the financial oligarchy, with a new monetary system that would serve the needs of “We the People” and our producing economy. It would also replace Federal Reserve Notes with a new system of United States currency.

Link to Video on Dandelion Salad Website

Six-Part Video Available as a Two Hour Two-DVD Set

Click “Donate” button to place order. The price for the two-DVD set is $19.95 plus $4 S&H for U.S. delivery. If your mailing address is not included in your order please send separately using the “Contact” page on the website. Also send inquiries about non-U.S. S&H cost.

Video Script Available as a Down-loadable PDF

Click “Donate” button to place order. The price for the 39-page script is $5.95.

Review of Video on “People’s Economics”

Click Here

“This is a six-part professional-quality video that is over two hours in length. Each part consists of a lecture by Richard C. Cook on the economic crisis and its solution. This is the most in-depth and complete critique of our debt-based monetary system ever made. The video concludes with a complete program of reform based on the draft American Monetary Act, implementation of a Greenback-type currency, and a citizens’ dividend/basic income guarantee. The material is deeply rooted in the history of American public finance and the author’s experience of 21 years as a U.S Treasury Department analyst. His recommendations would replace the existing financial system, which mainly serves the interests of the financial oligarchy, with a new monetary system that would serve the needs of “We the People” and our producing economy. It would also replace Federal Reserve Notes with a new system of United States currency.”

“Credit as a Public Utility:

The Solution to the Economic Crisis”

A Video in Six Parts

Written and Produced by Richard C. Cook

©2009 by Richard C. Cook. All Rights Reserved.

Part One of Six Parts: Credit As A Public Utility: The Solution to the Economic Crisis

“Our Early Political Leaders Warned Us Against the Banking Interests”

Early U.S. statesmen, such as Benjamin Franklin, Thomas Jefferson, James Madison, and Andrew Jackson worked to free the nation from control by the bankers who had been behind the establishment of the First and Second Banks of the United States. During the Civil War, President Abraham Lincoln implemented a true democratic currency by spending Greenbacks directly into circulation without borrowing from the banks. These measures allowed the U.S. to develop for much of the 19th century largely free from bankers’ control. By the end of the century, this had changed, and the bankers were taking over. Click Here

Part Two of Six Parts: Credit As A Public Utility: The Solution to the Economic Crisis

“The Federal Reserve System: The Bankers Take Over”

President Lincoln’s Greenback system worked but was undermined and replaced by the financiers who got Congress to pass the National Banking Acts of 1863 and 1864, then the Federal Reserve Act of 1913. The United States now became a nation dominated by the financial elite, the banks, and a debt-based monetary system. Consequently, the 20th Century was one of constant cycles of inflation and deflation resulting in the economic chaos we see today.

Part Three of Six Parts: Credit As A Public Utility: The Solution to the Economic Crisis

“The Collapse of the Financial System”

The collapse we are seeing today began in the financial system, not the producing economy. The crisis started with the housing bubble which the Federal Reserve created by cutting interest rates and then brought own by raising them. The trigger of the 2008 bank meltdown was refusal by European banks to purchase any more “toxic” U.S. debt based on mortgages and sold as securities. Now, with the decline in equity values, the burden of debt in our economy has grown even larger. Thus a renewal of bank lending will not solve the problem, while the economic stimulus program of the Obama administration is likewise insufficient to restore economic health.

Part Four of Six Parts: Credit As A Public Utility: The Solution to the Economic Crisis

“What is Credit and Who Should Control It?”

Fractional reserve banking is the process by which banks create credit out of thin air. But despite abuses of the system, credit is still a crucial part of modern economics. An enlightened concept of governance would view credit as a public utility. This means that government must take back the control of credit from the private financiers.

Part Five of Six Parts: Credit As A Public Utility: The Solution to the Economic Crisis

“The Gap Between Prices and Income”

One of the most important and least understood concepts in modern economics is the existence of a gap between prices and purchasing power. This gap results when a portion of prices must be set aside as business and private savings. The money is then used by the financial system for lending and speculation. Keynesian economics takes control of some of the savings through government deficit spending but is still a compromise with control of the economy by the financiers. In fact Keynesian economics has helped cause the collapsing debt pyramid. A better system would be to provide consumers with a National Dividend as a way to monetize the continuous appreciation of the producing economy.


Part Six of Six Parts: Credit As A Public Utility: The Solution to the Economic Crisis

“The Greenback and National Dividend Solutions”

The U.S. should convert to a system where the money supply is created by the federal government by being spent into circulation without government borrowing or taxation as was done with the Greenbacks. The Federal Reserve should no longer be a bank of issue. Additionally, a National Dividend should be paid directly to the people. The “Cook Plan” calls for the initial distribution of vouchers in the amount of $1,000 a month plus a new system of community savings banks. Greenbacks combined with a National Dividend will create a non-inflationary democratic currency and transform the economy of the United States.

On Auditing the Fed: The Doddering Senate

On Auditing the Fed: The Doddering Senate

By: Gary North

-- Posted Monday, 3 May 2010 | Digg This ArticleDigg It! | Share this article | Source:

Retiring Senator Chris Dodd's financial reform bill is now open for debate in the U.S. Senate. For the next few weeks, the public will be treated to media sound-bite snippets of Senatorial debate on various aspects of the Senate version of the reform bill. The bill is supposedly designed to prevent a replay of the 2008 crisis, in which 75 years of Federal financial reform laws proved utterly useless in preventing the crisis.

Rule: Whenever Federal regulation fails to prevent the negative outcome that has just come out, Congress adds more regulation.

Rule: Whenever a Federal regulatory agency or Government-licensed monopoly (read: Federal Reserve System) fails to prevent a disaster, Congress then transfers more power to that agency. This usually is accompanied by an increase in its budget. Of course, Congressional authorization of an increased budget is unnecessary for the Federal Reserve System, which keeps whatever money it wants in order to fund its operations, and then decides, based on an audit by a firm hired by the FED and answering only to the FED, regarding how much money it will repay to the Treasury each year.

Result: Another unforeseen crisis, probably worse than the crisis that triggered the reform legislation.

We have seen it all before. We will see it all again. Congress never learns. Voters re-elect Congress. The bureaucrats understand this. The system rolls on . . . toward the cliff.


In February, 2009, Congressman Ron Paul introduced a bill to audit the Federal Reserve System. He has been introducing bills ever since the summer of 1976, his first six months in office (he was elected in a special late-term election). No bill of his had ever previously received a majority of votes.

In introducing his bill, he made this announcement:

I rise to introduce the Federal Reserve Transparency Act. Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation.

That was a frontal assault on the FED. It was clear that he had more in mind than just an audit.

Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed's susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.

He has been attacking the FED from his first months in office. He has long been known as the heir of populist Democrats, such as Wright Patman, whose name he invoked in his brief speech. But the populists are promoters of full Congressional control over money. They oppose both the gold standard and the FED. They want fiat money. Paul opposes the FED, opposes fiat money, and favors a gold standard.

He raised the question of the FED's secret international agreements.

The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight? Particularly when hundreds of billions of dollars of currency swaps have been announced and implemented, the Fed's negotiations with the European Central Bank, the Bank of International Settlements, and other institutions should face increased scrutiny, most especially because of their significant effect on foreign policy. If the State Department were able to do this, it would be characterized as a rogue agency and brought to heel, and if a private individual did this he might face prosecution under the Logan Act, yet the Fed avoids both fates.

What applies to its international agreements also applies to its bailout of specific American banks. This secrecy must end.

More importantly, the Fed's funding facilities and its agreements with the Treasury should be reviewed. The Treasury's supplementary financing accounts that fund Fed facilities allow the Treasury to funnel money to Wall Street without GAO or Congressional oversight. Additional funding facilities, such as the Primary Dealer Credit Facility and the Term Securities Lending Facility, allow the Fed to keep financial asset prices artificially inflated and subsidize poorly performing financial firms.

He called for an official audit by the one government agency that possesses legal authority over all government agencies, with the exception of the CIA and the National Security Agency: the GAO or Government Accountability Office.

By opening all Fed operations to a GAO audit and calling for such an audit to be completed by the end of 2010, the Federal Reserve Transparency Act would achieve much-needed transparency of the Federal Reserve. I urge my colleagues to support this bill.

Incredibly, his colleagues did exactly that. He was able to gain 319 co-sponsors for H.R. 1207. This stunned the leadership in the House. It has stunned the Board of Governors of the Federal Reserve. Nothing like this had happened since 1914, when the FED began operations.

Barney Frank bottled up the bill in committee. Then an alternative bill was proposed, one which gutted Paul's bill. It was defeated in committee, to the amazement of the Democrats' leadership – and also the Republicans' leadership.

The bill was not allowed to be discussed on the floor of the House. Instead, it was incorporated into the House's version of the financial reform law. There was a strategy behind this. The Senate version of the banking reform bill has no FED-audit provision. If the bill passes the Senate, Paul's audit section of the House bill will be removed during the bill-reconciliation process.

The FED will remain in charge.


On July 10, 2009, I wrote an article on the Senate's vote to kill a similar bill, introduced by Jim DeMint. It was a rider on a spending bill. It was defeated on July 6, 2009. To understand why Dodd's bill has avoided the FED-audit issue, it may help you to read what I wrote in 2009.

The Federal Reserve runs finance, and, through finance, the economy. Congress and the President go through the motions of being in charge, but it's an illusion – one that the FED prefers. But when push comes to shove – extremely rare – the FED insists on its integrity as independent of the government. It runs the economy based on a government-established legal monopoly over the money supply, yet it is supposedly independent of government.

It's a sweet deal.

Congress dutifully goes along.

And then, briefly, it didn't. Well, half of Congress didn't.

When the House of Representatives got enough co-sponsors to pass Ron Paul's bill to audit the FED (bottled up by Barney Frank in committee), I knew the Senate would not. If, somehow, it got through the Senate, Obama would veto it.

Why? Because the right to audit is part of the right to set policy. This, the FED will not tolerate, except hypothetically.

The rider was rejected by the Senate because it implied the right to set policy. Technically, this was not legal, according to Senate rules. Policy riders may not be tacked onto spending bills.

The 12 regional Federal Reserve Banks – privately owned by member banks – are audited annually.

The Board of Governors of FED – a government agency – is audited annually.

The FED hires these auditing firms. This sends the correct signal: The FED is in charge. It's done on a rotating basis. Rotation makes it easier for the FED to conceal things. There is no single firm with a team that understands all of the digital nooks and crannies.

The FED can say what gets revealed and what doesn't, such as how much money or Treasury debt was lent/swapped to specific banks.

The FED has established its own standards of accounting. No one cares. Do you think the average House member understands the following language? Of course not.

The Board of Governors has developed specialized accounting principles and practices that it considers to be appropriate for the nature and function of a central bank, which differ from those of the private sector. These accounting principles and practices are documented in the Financial Accounting Manual, which is issued by the Board of Governors. The primary difference between the accounting principles and practices in the Financial Accounting Manual and GAAP is the presentation of all System Open Market Account (SOMA) securities holdings at amortized cost, rather than using the fair value presentation required by GAAP. U.S. government securities and investments denominated in foreign currencies comprising the System Open Market Account are recorded at cost, on a settlement-date basis, and adjusted for amortization of premiums or accretion of discounts on a straight-line basis. Amortized cost more appropriately reflects the Reserve Banks' securities holdings given the System's unique responsibility to conduct monetary policy.

This is how all central banks run their balance sheets: book value, not market value. This is why the FED could legally swap at face value marketable Treasury debt for bad loans held by toppling big banks in late 2008.

The House's co-sponsors want to find out which banks got what. There is no chance that the FED would allow this.

The proposed bill symbolically says that Congress is in control. Legally, this is true. In fact, it has never been true.

Symbols are important. Who is in charge here? The Senate avoided having to pretend to be in charge. The bill was tacked onto a spending bill. It got removed when one member protested.

The FED is in charge whether Congress audits it or not. But the FED wants to preserve the mark of being in charge: hiring its own auditors, not having auditors forced on it by Congress.

The audited numbers are irrelevant. The FED reports the raw numbers accurately. But you must know what to look for, such as the reporting of commercial bank sweeps. The FED does not clarify these issues, the better to deceive the public and Congress. A mere audit will not help much. There must be an audit with explanations. There won't be.

It's the fractional reserve banking cartel that is rotten, not the audits. That, Congress neither cares about nor understands.

It's always nice to gain a symbolic victory, but it's irrelevant for the economy. The FED is in charge.

The other issue is auditing the gold reserves that the FED says it holds on behalf of the United States government. Is it there? Does it still belong to the FED? The FED will avoid this audit at all costs.

So, where does Congressman Paul think we are in the battle over auditing the FED? He said this in an interview with Lew Rockwell on March 31, 2010:

I don't expect the Fed to give up easily. I can see them destroying records before a true audit would occur. But like you point out, the real benefit is exposure of the Fed to the general public, and this is very, very healthy because I work on the assumption that we should do everything possible to slow this mess up, do what we can to make positive changes but also work on the assumption that they are probably going to get ahead and drive us into bankruptcy with the destruction of the dollar or a lot more financial chaos then the more people that are informed, the more likely it is that we will resort to sound money and get people to understand why paper money doesn't work. So, that's where we are making the progress and as you know, the college campuses have come alive with this issue and I know a lot more people are interested in studying Austrian economics, so I'm very pleased with what's happening outside of Washington and as far as I am concerned, that's the only thing that really counts ultimately.


For the first time since 1914, there are millions of voters who are aware of the destructive power of the Federal Reserve System. They want it audited. Paul's book, End the Fed, is a bestseller. This would have been inconceivable in mid-2008.

This has the FED on the defensive. The Senate will not adopt any FED-audit provision. If the bank reform bill passes, it will go back to the House for reconciliation. There may be a battle over the audit issue, but I doubt it. The House leadership of both parties will agree to remove the section.

The FED is still in control.

If the bill gets to Obama with the audit provision intact, he can simply do what Bush did: write a provision that he will not enforce it. This practice is unconstitutional, but so far no case has gone to the Supreme Court to challenge it.

If any future President attempts to enforce an audit, the New York FED, a private agency that does all of the transactions on behalf of the Board of Governors, will take the case to court. When a Federal judge last summer ordered the Board of Governors to reveal to Bloomberg, LLP which banks got the TARP how much bailout, the Board of Governors appealed the decision. The case is now somewhere in the system.

The FED is in charge. The Federal government does not exercise the control it lawfully possesses. The charade of Congress' being in charge goes on, as it has since 1914.

The auditing issue will not go away. It will continue to enrage a growing minority of voters.

What is really at stake? The legitimacy of the Federal government. The more legitimacy erodes, the better for the cause of liberty.

May 3, 2010

Gary North [send him mail] is the author of Mises on Money. Visit He is also the author of a free 20-volume series, An Economic Commentary on the Bible.