Didn't read the article, did you? It's. Been. Audited. Already.
By the way, calling the Fed "communist" is utterly absurd. If it has a "secret," "unaudited" goal, it is to protect the banking system as it exists, and by extension the bankers themselves. Seriously, you really think that can be called "communist"?
By the way, calling the Fed "communist" is utterly absurd. If it has a "secret," "unaudited" goal, it is to protect the banking system as it exists, and by extension the bankers themselves. Seriously, you really think that can be called "communist"?
1
Casey K., conspiracy theory much?
The only real purpose of a central bank in the modern era is to insure the stability of the monetary system. If your paycheck cashes and you can get merchants to sell you the goods you need at mutually acceptable prices then the banking system is working as it should.
The Fed has no military forces and no powers of arrest. It just has the ability to control the size and velocity of the money supply.
Take a breath, there is no conspiracy here.
The only real purpose of a central bank in the modern era is to insure the stability of the monetary system. If your paycheck cashes and you can get merchants to sell you the goods you need at mutually acceptable prices then the banking system is working as it should.
The Fed has no military forces and no powers of arrest. It just has the ability to control the size and velocity of the money supply.
Take a breath, there is no conspiracy here.
2
"Libertarians" such as Rand Paul reveal the full depth of their economic ignorance when they are on the subject of economic subjects and institutions.
3
For those paying attention outside the left & right boxes of the usual partisan tribalism -- greater scrutiny of the Federal Reserve is warranted.
The Libor scandal revealed that yes, collusion and conspiracy does occur. Markets can be rigged -- also cf: Enron's "Death Star" scheme that drove up electricity prices in CA.
Leaving aside partisanship, it should be a widely supported non-partisan no-brainer to try and root out collusion and conflicts of interest. Why this is getting cover from Democrats and the "Left" is a mystery.
For those with (?) amnesia -- there was a real estate asset bubble --fueled by too much credit, and it crashed the economy in 2007-2008.
The same thing is happening now. There is asset inflation. The Fed's policies are sold as a stimulus to help all Americans -- at least that's the way it's sold by some. But in reality, it is an highly imperfect instrument that has been tuned to fuel a wider economic divide, and it is mainly helping Wall Street, real estate owners in key regions, and the professional investor class -- while increasing costs for everyone else. Ex. there's a drought, and people are thirsty -- yes more water is needed, but the fire hose is aimed at the elite, while water trickles to everyone else. This should be obvious as concluding -- based on the evidence & logic -- that the case for WMD in Iraq was a sham. But oddly, the same wall of conformist silence is there from the media and our politicians on this issue.
The Libor scandal revealed that yes, collusion and conspiracy does occur. Markets can be rigged -- also cf: Enron's "Death Star" scheme that drove up electricity prices in CA.
Leaving aside partisanship, it should be a widely supported non-partisan no-brainer to try and root out collusion and conflicts of interest. Why this is getting cover from Democrats and the "Left" is a mystery.
For those with (?) amnesia -- there was a real estate asset bubble --fueled by too much credit, and it crashed the economy in 2007-2008.
The same thing is happening now. There is asset inflation. The Fed's policies are sold as a stimulus to help all Americans -- at least that's the way it's sold by some. But in reality, it is an highly imperfect instrument that has been tuned to fuel a wider economic divide, and it is mainly helping Wall Street, real estate owners in key regions, and the professional investor class -- while increasing costs for everyone else. Ex. there's a drought, and people are thirsty -- yes more water is needed, but the fire hose is aimed at the elite, while water trickles to everyone else. This should be obvious as concluding -- based on the evidence & logic -- that the case for WMD in Iraq was a sham. But oddly, the same wall of conformist silence is there from the media and our politicians on this issue.
1
Apt handle: you've left unsaid what policies you advocate.
If you advocate increased federal borrowing to support infrastructure and education spending at all levels of government (which would have prevented the massive public-employee layoffs of 2008 that decimated the ranks of working Americans), then we're in complete agreement. But the Republicans in Congress have been blocking anything like that for 6 years now, and they won't let up any time soon. Leaving extraordinary Fed action to stimulate the economy as the only weapon available. As bad as it is, it does create some trickle-down to indebted consumers, unlike GOP tax cuts for the rich.
But the Fed has nothing to do with Enron or even the Libor scandal and other banksterism.
If you advocate increased federal borrowing to support infrastructure and education spending at all levels of government (which would have prevented the massive public-employee layoffs of 2008 that decimated the ranks of working Americans), then we're in complete agreement. But the Republicans in Congress have been blocking anything like that for 6 years now, and they won't let up any time soon. Leaving extraordinary Fed action to stimulate the economy as the only weapon available. As bad as it is, it does create some trickle-down to indebted consumers, unlike GOP tax cuts for the rich.
But the Fed has nothing to do with Enron or even the Libor scandal and other banksterism.
2
Given Sen. Paul's dismissal of evidence based analysis as witnessed by his views on vaccination, I shudder to think of what he might do to Fed policy. He like many politicians have little understanding of finance or economics and should be kept as far away from direct influence on monetary policy as our democracy allows.
5
Your assessment is so patently ignorant that I almost didn't want to reply. If you're under the mistaken perception that central bank policies since the end of the gold standard have been beneficial to average wage earning Americans then I have a bridge to sell you. The last three financial collapse have been the direct results of monetary policy. Their solution for all self-inflicted central bank failures is to double and triple down on the very same policy.
1
This is a great column, which is much needed in the discussion. As it suggests, it is really an impossible discussion. How can anyone have a discussion when most people do not have even the basic economic tools to understand what is going on. Just because some things that the FED does and is involved with seem incomprehensible and mysterious, its really a case of comprehension.
Surely Rand Paul, who has performed opthalmologic surgeries, could discuss the finer points of his work, and most Americans simply wouldn't understand what he is saying. So, that doesn't mean that he shouldn't perform such surgeries: just that we would have to consider his credentials, look at his successes and trust him to have been doing the right thing.
The same is true for the FED. In fact, most people don't realize that only a part of 'The FED:" exists within the public domain, and the other part of it is privately-owned. Also, as the column states, the FED is a model of transparency'
http://thetruthoncommonsense.com
Surely Rand Paul, who has performed opthalmologic surgeries, could discuss the finer points of his work, and most Americans simply wouldn't understand what he is saying. So, that doesn't mean that he shouldn't perform such surgeries: just that we would have to consider his credentials, look at his successes and trust him to have been doing the right thing.
The same is true for the FED. In fact, most people don't realize that only a part of 'The FED:" exists within the public domain, and the other part of it is privately-owned. Also, as the column states, the FED is a model of transparency'
http://thetruthoncommonsense.com
I agree with the writer. Current debate of economic, monetary and fiscal policy shows remarkable difference of two group, Keynesians and monetarists, not only in the macro/international economics but also political field in the global scale. The contrasting argument is close to the level between Galileo and the Vatican during the Renaissance age. However, our current dispute is more serious because the policy, whichever side taken, influence not only Americans but also the lives of living world. Unfortunately, the argument is so sophisticated academically, it is hard for the most of the people to understand. I am not sure if politicians do understand these economic theories either. Policy mistakes are everywhere in the world. Japan failed twice in combating secular stagnation/deflation by the rate increase of consumption tax in 1997 and 2014. EU is still failing by the fiscal policy even after the corrected monetary policy by ECB. In our country, Republican politicians still do not understand that their deficit decreasing fiscal policy has harmed our economic growth after the 2008 financial crisis.
We now know that Galileo was right, but most of us still do not know if Ben Bernanke was right.
We now know that Galileo was right, but most of us still do not know if Ben Bernanke was right.
2
"Audit the Fed" means "stop facilitating economic growth so the Republicans have a better chance in 2016!"
3
Good article. I myself am a fairly libertarian on economic issues, but I have some hardcore libertarian buddies who go nuts over this. Most of them never bother getting into the accounting/economic details, you know that would require reading a lot of dry stuff. Easier to listen to a hack like Peter Schiff.
5
Forgive me, Mr. Irwin, but your article pretends to be journalism while functioning as Central Bank propaganda, with admittedly hollow claims of transparency and deceptive defenses of secrecy. It could have been written by the P.R. department of the Fed. It appears we need to perform an audit of the sources you use for your arguments.
Nowhere in this piece do you mention the mortgage backed securities the Fed has gorged itself on since quantitative easing began. Why is that? From whom did they buy those securities and what were the reasons for buying the particular securities they bought? Would that not also possibly be revealed in an audit and do not the American people deserve to know who the Fed is bailing out?
Nowhere in this piece do you mention the mortgage backed securities the Fed has gorged itself on since quantitative easing began. Why is that? From whom did they buy those securities and what were the reasons for buying the particular securities they bought? Would that not also possibly be revealed in an audit and do not the American people deserve to know who the Fed is bailing out?
3
Likely no it wouldn't, if they purchased the Mortgage Back Securities on the open market, you wouldn't know who they bought them from, any more then i know who I buy shares from in my investment accounts.
3
Thanks for bringing some sanity to this discussion. Even otherwise well-informed members of the business community complain about the mysterious Fed, but have no idea all the information that the Fed puts online. You can even get the forecasts for economic growth and employment for each of the members of the FOMC, and their expectations about when policy will change. It's hard to imagine how they could be more transparent without compromising their independence and effectiveness. People want to know what will happen in the future, because they can make money on that information. But even the Fed doesn't know until they see the data.
2
Before any audit of the Fed, I want an audit of every member of congress. Investigate their bank accounts, foreign and domestic, including those of wives and children; patronage jobs given to friends and family; money from lobbyists; business connections. Auditing congress would be much more valuable than auditing the Fed.
18
"The decisions to keep interest rates near zero for the last seven years and buy trillions of securities have certainly been controversial, and it is PERFECTLY FAIR GAME TO ARGUE that these policies have fueled new financial bubbles, risked inflation or contributed to inequality." [Emphasis added]
Perfectly fair game? Perhaps.
Uninformed and refuted by overwhelming evidence? Absolutely.
Tom Benghauser
Denver Home for the Chronically Bewildered
Perfectly fair game? Perhaps.
Uninformed and refuted by overwhelming evidence? Absolutely.
Tom Benghauser
Denver Home for the Chronically Bewildered
9
Audit the Pauls.
5
Let's audit the Department of Defense, first.
12
That was to be my comment, too. As I understand it, an audit has not been done in over two decades and I'm told that it is too complicated and in such disarray, it can't be accomplished. Nonsense.
4
Yes, the Fed is already audited, with caveats. Here are the caveats:
“An audit made under paragraph (1) (A) shall not include—
"(A) transactions conducted on behalf of or with foreign cen-
tral banks, foreign governments, and nonprivate international
financing organizations;
"(B) deliberations, decisions, and actions on monetary policy
matters, including discount window operations, reserves of mem-
ber banks, securities credit, interest on deposits, and open market
operations;
"(C) transactions made under the direction of the Federal
Open Market Committee including transactions of the Federal
Reserve System Open Market Account; and
"(D) those portions of oral, written, telegraphic, or telephonic
discussions and communications among or between Members of
the Board of Governors, and officers and employees of the Federal
Reserve System which deal with topics listed in subparagraphs
(A), (B), and (C) of this paragraph.”
http://www.campaignforliberty.org/audit-federal-reserve-dont-already
“An audit made under paragraph (1) (A) shall not include—
"(A) transactions conducted on behalf of or with foreign cen-
tral banks, foreign governments, and nonprivate international
financing organizations;
"(B) deliberations, decisions, and actions on monetary policy
matters, including discount window operations, reserves of mem-
ber banks, securities credit, interest on deposits, and open market
operations;
"(C) transactions made under the direction of the Federal
Open Market Committee including transactions of the Federal
Reserve System Open Market Account; and
"(D) those portions of oral, written, telegraphic, or telephonic
discussions and communications among or between Members of
the Board of Governors, and officers and employees of the Federal
Reserve System which deal with topics listed in subparagraphs
(A), (B), and (C) of this paragraph.”
http://www.campaignforliberty.org/audit-federal-reserve-dont-already
10
You r right...but i have read in varied, reliable pubs that the Fed is an independent entity subject to oversight from Congress. It makes independent decisions; Congress only periodically reviews its activities (though govt agency, the Board of Governors). Current chair is Ben Bernanke. Is not the Fed privately owned by private banks, collectively known as the World Bank, a group of large private banks owned by the richest of the rich, like the Morgans, Rothschilds, etc.? Use of "Federal" to indicate the role the Board plays, members appointed by the President? Twelve regional Federal Reserve Banks who operate under Board supervision, acting as operating arm of central bank, doing most of Fed's work...truth is it's considered an independent entity because it is not part of Exec or Legislative branches of our govt. This makes it an impressive, imperfect money clearinghouse...a public, private entity. Regardless of how one defines it, the Federal Reserve always has ultimate say.
I know it is way more complicated, yet preceding's basic nults and bolts for others like myself who may want nothing more than the essence to make a little sense of it all. Regardless, your input added aspects I had never delved into before, and I thank you.
I know it is way more complicated, yet preceding's basic nults and bolts for others like myself who may want nothing more than the essence to make a little sense of it all. Regardless, your input added aspects I had never delved into before, and I thank you.
Audit the Department of Defense!
26
When asked to name their greatest concerns, I wonder how many of the general public would place auditing the Fed as a high priority?
6
It is disingenuous to claim that the FED is adequately audited given exclusions and exceptions they enjoy.
To those who state that the Fed already being audited (partially true is not true), here are some specific exclusions for the Fed:
(1) transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization;
(2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;
(3) transactions made under the direction of the Federal Open Market Committee; and
(4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses.
In 2010, as part of the Dodd-Frank bill, Congress authorized a one-time audit of the Federal Reserve’s activities during the financial crisis of 2008. The audit revealed that between 2007 and 2008 the Federal Reserve loaned over $16 trillion — more than four times the annual budget of the United States — to foreign central banks and politically-influential private companies. How would we have known about this other than by 'full' audit?
The American public supports legislation to fully audit the Federal Reserve. The Federal Reserve, investment banks and U.S. Treasury oppose it.
Audit the Fed.
This is a democracy, not a financial oligarchy.
To those who state that the Fed already being audited (partially true is not true), here are some specific exclusions for the Fed:
(1) transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization;
(2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;
(3) transactions made under the direction of the Federal Open Market Committee; and
(4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses.
In 2010, as part of the Dodd-Frank bill, Congress authorized a one-time audit of the Federal Reserve’s activities during the financial crisis of 2008. The audit revealed that between 2007 and 2008 the Federal Reserve loaned over $16 trillion — more than four times the annual budget of the United States — to foreign central banks and politically-influential private companies. How would we have known about this other than by 'full' audit?
The American public supports legislation to fully audit the Federal Reserve. The Federal Reserve, investment banks and U.S. Treasury oppose it.
Audit the Fed.
This is a democracy, not a financial oligarchy.
14
I agree Mark.
Transparency, accountability, and responsibility are fundamental characteristics that government agencies and departments are obligated to possess in order to effectively serve the American people.
Now that the Fed's mandate is goosing the stock market in a straight 30 degree growth line over 6 years despite poor economic fundamentals, it’s time we lift the veil from this mammoth organization and understand, why they must fight it. What are they hiding?
To achieve real transparency, we need a full audit of the Fed – no exceptions. Just as, to achieve real accountability, we need a full audit of the Department of Defense – no exceptions.
From my years of experience as an auditor, it is a qualified opinion that the Fed is a 'going concern and criminal enterprise' chartered by another one, Congress.
(I am former Arthur Andersen and KPMG, with a MBA in Finance (Honors) and I fully endorse this message).
Transparency, accountability, and responsibility are fundamental characteristics that government agencies and departments are obligated to possess in order to effectively serve the American people.
Now that the Fed's mandate is goosing the stock market in a straight 30 degree growth line over 6 years despite poor economic fundamentals, it’s time we lift the veil from this mammoth organization and understand, why they must fight it. What are they hiding?
To achieve real transparency, we need a full audit of the Fed – no exceptions. Just as, to achieve real accountability, we need a full audit of the Department of Defense – no exceptions.
From my years of experience as an auditor, it is a qualified opinion that the Fed is a 'going concern and criminal enterprise' chartered by another one, Congress.
(I am former Arthur Andersen and KPMG, with a MBA in Finance (Honors) and I fully endorse this message).
7
The financial industry is represented here today. Anyone who questions the Federal Reserve must be a conspiracy theorist. Anyone who has any concern at all over the monetary system must wear a tinfoil hat.
This is exactly the smug kind of attitude that makes the entire financial industry look bad. If there is nothing to hide then let the audit happen. If nothing is wrong with the monetary system then humor us and let the audit happen.
This is exactly the smug kind of attitude that makes the entire financial industry look bad. If there is nothing to hide then let the audit happen. If nothing is wrong with the monetary system then humor us and let the audit happen.
3
There is something to hide. Deliberations of the Federal Open Market Committee move markets. There's a reason these parts are kept secret, because if some people got the information before others millions or even billions could be made.
1
I doubt that one in 10,000 (or even more) of my fellow citizens have any correct idea whatsoever about the nature of the Fed and the regional banks, what they do, who owns them, etc. etc. Nor does anyone understand our entire monetary system. For example, I hear cries about "fiat money;" either that we now live with it, or that if the Fed isn't reined in we will be living with it -- when, as far as I know, every currency in the world is, and has been, fiat money for quite some time now -- at least four decades since Nixon broke the gold price peg.
History shows very well that a country such as the US needs a central bank, and has benefitted from ours since it was founded. (see another comment about frequency of panics.) Marx predicted that capitalism would fail because of its instability; the Fed system is perhaps our main provider of stability.
Nevertheless, it must also be acknowledged that the Fed, and our entire banking system, just as in every capitalist country that ever existed, tend to favor creditors over debtors. Every central bank, and also the IMF which is a kind of weak version of a world central bank, has a responsibility to provide financing when needed to avert a crash. And this sometimes costs money, and taxpayers provide most or all of it.
Financial stability is a good beyond price. Like freedom, it isn't free.
History shows very well that a country such as the US needs a central bank, and has benefitted from ours since it was founded. (see another comment about frequency of panics.) Marx predicted that capitalism would fail because of its instability; the Fed system is perhaps our main provider of stability.
Nevertheless, it must also be acknowledged that the Fed, and our entire banking system, just as in every capitalist country that ever existed, tend to favor creditors over debtors. Every central bank, and also the IMF which is a kind of weak version of a world central bank, has a responsibility to provide financing when needed to avert a crash. And this sometimes costs money, and taxpayers provide most or all of it.
Financial stability is a good beyond price. Like freedom, it isn't free.
7
Canada did very well until I believe the 60s without a Central Bank. They had the Bank of Canada that issued money interest free. The government and citizens both had low levels of debt until they replaced it with a privately owned Central Bank. Private and public debt have both skyrocketed since then.
2
Wow are you wrong! Canada's central bank has existed since 1934. It was privately owned for the first four years, but since 1938 has been a public institution.
Having said that, a smaller economy that is very strongly linked to a large one has somewhat (NB somewhat) less need for a central bank because its freedom to implement monetary policies is constrained by what its large neighbor does. So Canada would lose less by not having a central bank than would the US.
Having said that, a smaller economy that is very strongly linked to a large one has somewhat (NB somewhat) less need for a central bank because its freedom to implement monetary policies is constrained by what its large neighbor does. So Canada would lose less by not having a central bank than would the US.
2
Many people seem to believe that during the crisis in 2008, former Goldman Sachs employees then working for the Fed took steps that guaranteed Goldman would be made whole, such as bailing out AIG while letter Lehman go under.
There is, of course, no way to prove this in any kind of audit, and if anyone did it they are certainly not going to confess.
There is, of course, no way to prove this in any kind of audit, and if anyone did it they are certainly not going to confess.
So what. If the Fed has nothing to hide then conduct the audit. Let a public official see and test the gold bars that belongs to the American public and be done with it.
4
The gold stored at the NY Fed belongs to foreign governments. The gold of the United States is at Fort Knox.
Congress has the sole constitutional right to tax not the Fed. Inflation is a tax period. Nothing about an audit changes the independence of the Fed. Its a canard to say otherwise. Why must a bunch of unelected officials in charge of the money supply and in essence the value of all things not be accountable to the people?
What all this fear about an adult? If the Fed has been acting in the best interest of the people then why shouldn't there actions not be transparent and explainable? If everything the Fed does is readily available on there web site then why push back against an audit? What kind of squirmy worms are underneath the Fed's that they don't want want the people to see?
If the Fed's endless bailouts of Wall St. and its cabal of banks it really works for is such a boon to the people then what's the fear? If the inflation tax levied on the people and transferred to the pockets of the financial oligarchs is such a prosperity driver for the average worker then what's the fear of an audit? That's why audit is necessary.
What all this fear about an adult? If the Fed has been acting in the best interest of the people then why shouldn't there actions not be transparent and explainable? If everything the Fed does is readily available on there web site then why push back against an audit? What kind of squirmy worms are underneath the Fed's that they don't want want the people to see?
If the Fed's endless bailouts of Wall St. and its cabal of banks it really works for is such a boon to the people then what's the fear? If the inflation tax levied on the people and transferred to the pockets of the financial oligarchs is such a prosperity driver for the average worker then what's the fear of an audit? That's why audit is necessary.
4
Inflation is good for debtors and bad for creditors. It's obvious if you think about it.
1
A little understanding of how capitalism works might help contain your rage. The fundamental premise of Capitalism is the time value of money, which simple put says a dollar today is worth more than a dollar next year (or what ever extension into the future you wish). If you have read any contract you likely have seen words similar to "time is the essence of this agreement". Time truly is the anti-money, so if you want to make money, do it in a hurry--or start espousing that other economic view that repudiated this premise: Communism.
1
Jim Grant recently said the Capitalism without failure is socialism for the wealthy. We don't have capitalism anymore we have central bank price control, risk suppression, and artificial asset inflation. That's not capitalism period. Maybe you need to look up from your academic viewpoint and look at the world around you.
To be effective in its' roles of controlling inflation and promoting growth, the Fed must be independent, especially independent of Congressional policy influence. If Congress gains "audit power" of the Fed as envisioned by Rand Paul, the Fed is no longer independent.
10
So have a third party do the audit. If there is nothing to hide then why the fuss. The Federal Reserve isn't independent. Many on the board also run the banks. Jamie Dimon is on the Federal Reserve of New York Board. How much has JP Morgan paid in fines this year for nefarious activities. With board members like that I think the Fed should be audited.
3
'Independent?' Absurd.
The FED is not, never has been, and never will be, 'Independent.'
Wrong? Try this 'Thought Experiment':
Tomorrow, the FED announces it will no longer be involved in federal debt financing in any form at all - no purchases, no refinancing, no expansion of the money supply so federal borrowing does not blow interest rates into the stratosphere.
Henceforth, to borrow money, Uncle Sam must get in line with the rest of us.
See how long so-called FED 'Independence' lasts.
About ten minutes, more or less.
The FED is not, never has been, and never will be, 'Independent.'
Wrong? Try this 'Thought Experiment':
Tomorrow, the FED announces it will no longer be involved in federal debt financing in any form at all - no purchases, no refinancing, no expansion of the money supply so federal borrowing does not blow interest rates into the stratosphere.
Henceforth, to borrow money, Uncle Sam must get in line with the rest of us.
See how long so-called FED 'Independence' lasts.
About ten minutes, more or less.
3
You are confusing the Board of Directors of the Federal Reserve of New York with the Board of Governors of the Federal Reserve. Board of Governors are appointed by the President of the United States and approved by Congress. They are sit on the FOMC and set monetary policy. The Boards of Directors of the individual Federal Reserve Banks are in charge of overseeing the banking industry in their region. Jamie Dimon served on the New York Board but since he was a banking executive he could not vote to elect the New York Federal Reserve President nor could he vote on regulatory policies. He is no longer on the board either:
http://www.newyorkfed.org/aboutthefed/org_nydirectors.html
http://www.newyorkfed.org/aboutthefed/org_nydirectors.html
1
Mr. Irwin and Readers: Overall, I generally agree with the tenor of your analytical observations. However, there are certain areas of Fed policy that merit more transparency. Consider the use of leverage by individual investors and the firms in the financial sector in general. Individual investors can only leverage one dollar in stock equity investment with one dollar in debt. However, some financial firms can leverage up to 15 times their equity capital with debt. Such risky capital structures allow these firms to privatize large profits from the high risk loans they make to debtors with this borrowed money. But, should these loans begin to fail, say in an overextended new and used auto loan market, then these losses may be made public, with taxpayers covering such losses. A form of moral hazard may reoccur again, with risky profits privatized and losses eaten by the public. The New York Fed under Geitner's direction was heavily criticized for its handling of the volatile derivatives' markets. Again, these highly leveraged bets take small money making opportunities and magnify them via risky debt financing. The "shadowy" or "dark" market for loan swaps is still too unregulated; often with the contracting parties unsure of the order of repayment, and exactly who is holding the ultimate liability for repayment. There are steps that the Fed can take to try to quantify the Fed's ultimate liabilities and risk exposure in these convoluted markets, even post Dodd-Frank. 2/10 6:52 p
6
My problem is what the Congress had to sue to see who the Fed made the $16 trillion in zero to .5% loan too. Why would the US Congress need to go to court to find out that these same banks that cause over $30 trillion in wealth losses?
If we had this information before hand we would have know that a lot of these banks were bankrupt. The Fed gave a unfair advantage to the bank to have funds to fight out the very people they ripped off.
How does an entity made $16 trillion in loan and purchase another $2 trillion in securities and over stuff when they don't physically that type of money on its balance sheets? I get it, its the Fiat system, where it is what we say it is instead of a actual value of something!
If we had this information before hand we would have know that a lot of these banks were bankrupt. The Fed gave a unfair advantage to the bank to have funds to fight out the very people they ripped off.
How does an entity made $16 trillion in loan and purchase another $2 trillion in securities and over stuff when they don't physically that type of money on its balance sheets? I get it, its the Fiat system, where it is what we say it is instead of a actual value of something!
1
The FED is transparent about its balance sheet holdings, but not about the risk these holdings incur. Here is one example of FED behavior that should be examined.
The FED started paying interest on reserves in late 2008, as part of the Emergency Economic Stabilization Act of 2008. [To be fair, these interest payments had been scheduled to begin in 2011.] This caused the FED reserves to sky-rocket from 79B in 2008 to 2.6T as of Q3 2014. Most of this was due to a rise in voluntary excess deposits rather than an increase in required reserve deposits.
Banks have different types of risk and different required risk enhancements to help cover those risks. Market Valuation risk means that the value of a Bank's assets might plunge such that it has a net balance sheet value of less than zero. Capitalization requirements, meaning the holding of an excess of assets over liabilities, help cover this risk. However, there is also earnings risk. Banks, which generally pay interest on deposits and receive interest on loans, are subject to the risk of having a negative earnings cashflow if interest rates move. If Banks pay shorter term deposit interest and then receive longer term loan interest, then there is earnings risk due to the possibility of an interest rate rise. Since rates are at historic lows, this earnings risk is a genuine systemic banking risk today.
By paying interest on deposits from Banks, the FED has quietly assumed this substantial systemic earnings risk themselves.
The FED started paying interest on reserves in late 2008, as part of the Emergency Economic Stabilization Act of 2008. [To be fair, these interest payments had been scheduled to begin in 2011.] This caused the FED reserves to sky-rocket from 79B in 2008 to 2.6T as of Q3 2014. Most of this was due to a rise in voluntary excess deposits rather than an increase in required reserve deposits.
Banks have different types of risk and different required risk enhancements to help cover those risks. Market Valuation risk means that the value of a Bank's assets might plunge such that it has a net balance sheet value of less than zero. Capitalization requirements, meaning the holding of an excess of assets over liabilities, help cover this risk. However, there is also earnings risk. Banks, which generally pay interest on deposits and receive interest on loans, are subject to the risk of having a negative earnings cashflow if interest rates move. If Banks pay shorter term deposit interest and then receive longer term loan interest, then there is earnings risk due to the possibility of an interest rate rise. Since rates are at historic lows, this earnings risk is a genuine systemic banking risk today.
By paying interest on deposits from Banks, the FED has quietly assumed this substantial systemic earnings risk themselves.
3
"Auditing the fed" is the war cry of those who can't or won't take the time to read the publicly available information and then can't understand the information anyways. They are just parrots mimicing their favorite talking head conspiracy theorist.
31
How many conspiracy theories when it comes to the banking industry have become conspiracy fact? Let's count them...
1.) Conspiracy theory- Interests rates are manipulated.
Conspiracy fact- LIBOR scandal
2.) Conspiracy theory- foreign exchange rates manipulated
Conspiracy fact- FOREX scandal
3.) Conspiracy theory- precious metal prices manipulated
Conspiracy fact- metal prices set
4.) Conspiracy theory- federal reserve propping up stock market
Conspiracy fact-Federal Reserve buys stock
5.) Conspiracy theory- Federal Reserve QE aggravates inequality
Conspiracy fact- Yellen notes inequality QE ends
6.) Conspiracy theory- nations want gold returned from Fed
Conspiracy fact- Germany, Netherlands etc. get gold back
7.) Conspiracy theory- Fed no longer has 60 tons of America's gold
Conspiracy fact- only an audit can confirm so let's see it.
1.) Conspiracy theory- Interests rates are manipulated.
Conspiracy fact- LIBOR scandal
2.) Conspiracy theory- foreign exchange rates manipulated
Conspiracy fact- FOREX scandal
3.) Conspiracy theory- precious metal prices manipulated
Conspiracy fact- metal prices set
4.) Conspiracy theory- federal reserve propping up stock market
Conspiracy fact-Federal Reserve buys stock
5.) Conspiracy theory- Federal Reserve QE aggravates inequality
Conspiracy fact- Yellen notes inequality QE ends
6.) Conspiracy theory- nations want gold returned from Fed
Conspiracy fact- Germany, Netherlands etc. get gold back
7.) Conspiracy theory- Fed no longer has 60 tons of America's gold
Conspiracy fact- only an audit can confirm so let's see it.
6
I thought the whole idea of auditing the Fed was that it would somehow force us to go back to the gold standard. People who know nothing of economics (or much else) seem to see it that way.
8
Maybe they just want to verify the gold is there. Recently when Germany requested its gold back the Federal Reserve replied it would take 7 years. That seems odd. Why did the Netherlands get its gold back with out delay. What has the Netherlands done for the U.S. that Germany has not. I know the Netherlands conducted the investigation on the shooting down of the Malaysian plane over the Ukraine but Germany has engaged in Russian sanctions even though it hurts their economy.
Ron Paul is the archetype.
As there is nothing to hide, so the author as a journalist should push for auditing the FED !
And who read the following link, understand that many things have to be elaborated federalreserve.gov/faqs/about_14986.htm
It says everything and its opposite...
Here some examples :
- "the Federal Reserve derives its authority from the Congress of the United States.", but :
- "it does not receive funding appropriated by the Congress"
While they claim :
- "It is not "owned" by anyone and is not a private, profit-making institution", but :
- "The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System"
It sounds weird. For all those that don't know, Bank of France was private during many years and officially up to 1936 : http://scholarcommons.sc.edu/cgi/viewcontent.cgi?article=1178&contex... and among 200 families, only some special shareholders were influential. Who believe they have voluntarily forgo their dividends ? The Fed page above states there is a 6% dividend, so that it seems to be a profit-making institution.
Just in 1973 was passed the so-called Rothschild Law by a former banker, who became French President and whose name is Pompidou. (Current French Finance minister's name is Macron and comes from Rothschild bank too.)
And the 1973's law dubbed Rothschild law has become the rule for all European Union through Article 123 of the Lisbon Treaty...
Finally, what about gold ?...
And who read the following link, understand that many things have to be elaborated federalreserve.gov/faqs/about_14986.htm
It says everything and its opposite...
Here some examples :
- "the Federal Reserve derives its authority from the Congress of the United States.", but :
- "it does not receive funding appropriated by the Congress"
While they claim :
- "It is not "owned" by anyone and is not a private, profit-making institution", but :
- "The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System"
It sounds weird. For all those that don't know, Bank of France was private during many years and officially up to 1936 : http://scholarcommons.sc.edu/cgi/viewcontent.cgi?article=1178&contex... and among 200 families, only some special shareholders were influential. Who believe they have voluntarily forgo their dividends ? The Fed page above states there is a 6% dividend, so that it seems to be a profit-making institution.
Just in 1973 was passed the so-called Rothschild Law by a former banker, who became French President and whose name is Pompidou. (Current French Finance minister's name is Macron and comes from Rothschild bank too.)
And the 1973's law dubbed Rothschild law has become the rule for all European Union through Article 123 of the Lisbon Treaty...
Finally, what about gold ?...
3
The Fed has for decades maintained a deliberate policy of obfuscating its actions and its goals. To argue otherwise is a disingenuous attempt to dump well-documented history down the memory hole. And what the Fed has consistently hidden is its overarching support for the preservation of the primacy of capital over labor, which makes the real story here the mysterious reasoning behind the right's antipathy toward the Fed.
14
:, but keep in mind that those financial statements are audited already, in 2013 by Deloitte & Touche, one of the giant accounting firms that verify the books of virtually all major companies in America. "
I'm not sure this helps your case at all. Remember the numerous auditing debacles of the past few years
I'm not sure this helps your case at all. Remember the numerous auditing debacles of the past few years
5
So no one is qualified to conduct large audits? Then why call for an auditing of the Fed?
10
Two words...Arthur Anderson. (LOL)
Well, I suppose "Audit the Fed" is progress, given that Presidential candidate Rick Perry instead threatened violence against the Fed Chairman if he ever visited Texas.
"I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas"
But what this is really all about is the suspicion that the Fed (under a Republican Chairman, no less) was manipulating monetary policy to re-elect President Obama.
This is understandable given that any policy put forth by the Administration to help the economy and therefore average people is immediately branded as electoral manipulation, in the same vein as Benghazi and IRS investigations.
If Congressional committees wanted to focus on something real for a change, they might consider investigating the commodities markets and the opaque "dark pools" in which they are traded. Soaring prices of oil and other commodities defy laws of supply and demand and cause real injury to consumers and small businesses who can't hedge prices. A huge number of small trucking companies were put out of business when oil soared to $140 a barrel.
With all of the ink spilled about high asset prices these days, commodity price fluctuations have been oddly ignored.
"I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas"
But what this is really all about is the suspicion that the Fed (under a Republican Chairman, no less) was manipulating monetary policy to re-elect President Obama.
This is understandable given that any policy put forth by the Administration to help the economy and therefore average people is immediately branded as electoral manipulation, in the same vein as Benghazi and IRS investigations.
If Congressional committees wanted to focus on something real for a change, they might consider investigating the commodities markets and the opaque "dark pools" in which they are traded. Soaring prices of oil and other commodities defy laws of supply and demand and cause real injury to consumers and small businesses who can't hedge prices. A huge number of small trucking companies were put out of business when oil soared to $140 a barrel.
With all of the ink spilled about high asset prices these days, commodity price fluctuations have been oddly ignored.
17
Auditing the Fed isn't about auditing the Fed at all, and you should know as much. Shame on you for setting it up as a straw man, easily dispensed with how transparent the Fed's operations are, which is true so far as that goes.
Auditing the Fed is about power. It is about asking who it serves and who it should serve--Wall Street or Main Street? It is about asking the question of whether it is better to have an unelected cabal of economists, (yeah economists, those guys who correctly predicted nine of the last five recessions, etc.) setting market prices and allocating market investments through manipulations of the price and quantity of money. Regardless Greenspan's libertarian leanings when he was chairman, the Fed is the American version of the Politburo. It sets prices and thereby allocates resources for the whole economic system. For transactions mediated by money, there is not an economic decision that goes untouched by its antics.
"Audit the Fed" people wonder whether this is really a good thing.
And maybe they should. After all, the vaunted Federal Reserve's economic management includes the Great Depression and the Great Recession. And with $4.4 trillion of assets (valued according to whatever the Fed says they are worth, as for most there is no market other than the Fed), roughly a fourth of annual GDP, sitting on its books, it might not hurt to at least question who it is the Fed serves every once in a while.
Auditing the Fed is about power. It is about asking who it serves and who it should serve--Wall Street or Main Street? It is about asking the question of whether it is better to have an unelected cabal of economists, (yeah economists, those guys who correctly predicted nine of the last five recessions, etc.) setting market prices and allocating market investments through manipulations of the price and quantity of money. Regardless Greenspan's libertarian leanings when he was chairman, the Fed is the American version of the Politburo. It sets prices and thereby allocates resources for the whole economic system. For transactions mediated by money, there is not an economic decision that goes untouched by its antics.
"Audit the Fed" people wonder whether this is really a good thing.
And maybe they should. After all, the vaunted Federal Reserve's economic management includes the Great Depression and the Great Recession. And with $4.4 trillion of assets (valued according to whatever the Fed says they are worth, as for most there is no market other than the Fed), roughly a fourth of annual GDP, sitting on its books, it might not hurt to at least question who it is the Fed serves every once in a while.
5
You're right. SHAME on Mr. Irwin for assuming that the verb "audit" in "Audit the Fed" means what any dictionary says it means: "an official examination and verification of accounts and records, especially of financial accounts." SHOCK!
The right measure for whether the Fed has succeeded in it what the Federal Reserve Act says it should do "to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States" is to look at the number of financial crises before the Fed existed. There were crises in: 1819, 1837 1857, 1873, 1884, 1893, 1896 and 1907. Since the fed was established we have: 1929-1933, 1987 (sort of. Not a banking crisis) and 2008. I'd say that's pretty good.
The right measure for whether the Fed has succeeded in it what the Federal Reserve Act says it should do "to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States" is to look at the number of financial crises before the Fed existed. There were crises in: 1819, 1837 1857, 1873, 1884, 1893, 1896 and 1907. Since the fed was established we have: 1929-1933, 1987 (sort of. Not a banking crisis) and 2008. I'd say that's pretty good.
16
Yeah and income equality has skyrocketed and a pattern of financialization has set in. Financialization refers to a “pattern of accumulation in which profit making occurs increasingly through financial channels rather than through trade and commodity production.” In addition look at the depth of despair for Main Street during 1929-1933, 1987, and 2008- present. You can't ingot that the Federal Reserve has been good for the 1%. The Occupy movement didn't occur because people were bored. It is difficult to challenge an industry that uses complex jargon to hide the fact their structured investment vehicles are little more than gambling.
3
The monetary policy has effectively been good for the 1% because fiscal policy has not followed suit. Instead of gambling on the stock market, if the easy loans from the Fed had gone out to developing infrastructure, here, say, then it woud've helped the overall economy more. But this didn't happen because of a failure in fiscal policy.
It takes money to make money is the old adage. Rich people (I mean the top 25% of the income distribution - bottom 25% is poor, and the 50% in between are lower and upper middle class, if you have four divisions) are likely to better both in terms of fiscal and monetary policy since they're in that distribution. The 1% class is not a monolith, but there needs to be more mixing overall in this world I think.
It takes money to make money is the old adage. Rich people (I mean the top 25% of the income distribution - bottom 25% is poor, and the 50% in between are lower and upper middle class, if you have four divisions) are likely to better both in terms of fiscal and monetary policy since they're in that distribution. The 1% class is not a monolith, but there needs to be more mixing overall in this world I think.
1
I appreciate this article and I think it is an important one for all Americans. Few things impact all Americans as deeply as FED Policy and so it is important that citizens understand what the FED does.
Where the article comes up short is not explaining why there is a need for at least some secrecy in FED debate. Why? Because a simple change in the fed funds rate impacts valuations for everything from bonds to real estate to currencies. Thus if an unscrupulous hedge fund investor, of which there are many, was able to get early access to that information, they could make a lot of money illegally.
There is a balance within any democracy between transparency and security. Unfortunately that need for security frightens many people who are naturally skeptical. Skepticism when it comes to the governbment is well warranted but when it becomes extreme, it leads to tin foil hat conspiracy theories among the Ron Paul crowd. Sadly there is no amount of transparency that will assuage the fears of the ultra-right conspiracy theorists.
Where the article comes up short is not explaining why there is a need for at least some secrecy in FED debate. Why? Because a simple change in the fed funds rate impacts valuations for everything from bonds to real estate to currencies. Thus if an unscrupulous hedge fund investor, of which there are many, was able to get early access to that information, they could make a lot of money illegally.
There is a balance within any democracy between transparency and security. Unfortunately that need for security frightens many people who are naturally skeptical. Skepticism when it comes to the governbment is well warranted but when it becomes extreme, it leads to tin foil hat conspiracy theories among the Ron Paul crowd. Sadly there is no amount of transparency that will assuage the fears of the ultra-right conspiracy theorists.
22
Jamie Dimon of JP Morgan sits on the board of the New York Federal Reserve. How is the information that you offer regarding the change in fed fund rates supposed to appease our concerns over the Federal Reserve. What you are telling us is making us feel even less secure over the way the Fed operates. If the CEO of JP Morgan is privy to these changes then we all should be. I wouldn't call myself a Democrat but I lean left and your comment has not assuaged my fears.
I find it amusing that you try to discredit people by using the term conspiracy theorist. I suppose you called those who felt interest rates were being manipulated conspiracy theorists too until the LIBOR scandal broke. They were probably conspiracy theorists who contended foreign exchange markets were manipulated until it was found FOREX was manipulated. People who look for the truth no matter how uncomfortable it may be to others are not all wearing tin foil hats and to insinuate otherwise makes you look rather naïve.
I find it amusing that you try to discredit people by using the term conspiracy theorist. I suppose you called those who felt interest rates were being manipulated conspiracy theorists too until the LIBOR scandal broke. They were probably conspiracy theorists who contended foreign exchange markets were manipulated until it was found FOREX was manipulated. People who look for the truth no matter how uncomfortable it may be to others are not all wearing tin foil hats and to insinuate otherwise makes you look rather naïve.
2
Jamie Dimon was not privy to interest rate policy ahead of time. You are conflating the New York Federal Reserve with the Federal Open Markets Committee. Besides, he is not a board member anymore.
It should help people who think that without the Federal Reserve we would be worse off. I think any short perusal of this document and many others from different viewpoints will leave you thinking otherwise.
What we see is the powers of the central bank over the economy has now become effectively a quasi-communist-socialist central planner of economic outcomes. Its main transmission vehicle is asset price, mostly stock prices, that are largely owned by a tiny fraction of individuals and corporations. It center piece of leverage is a fractional banking debt based fiat money confidence game. A Federal Reserve Note back by nothing other than forced confiscation via inflation.
It has through its expansive powers pledged every penny of individuals, families, and corporations wealth and savings as collateral for its "open" market operations of price fixing, interest rate suppression, and asset inflation and endless bailouts of banks, Wall St., and has novocaine the risk assessment in global banking and speculative financial markets/system.
Don't audit? Flip the rock over and see what kind of creepy crawlers are under it and let the results speak for themselves.