The Federal Reserve System prints $100 bills at a cost of 6¢. So who pockets the $99.94 profit?
It was in the late eighties. I was a new faculty member at The Citadel, teaching Money and Banking. A memo was in my box. There was a phone number and a note that someone had questions about the Federal Reserve.
Being dutiful (and not tenured), I returned the call. A man answered. I said that I was from The Citadel and understood that he had some questions about the Fed. An interrogation then began.
Bill Woolsey teaches economics at The Citadel in Charleston, S.C.
"Isn't it true," he demanded, "that the Federal Reserve pays the Treasury three cents for each dollar bill printed?" I replied that this was pretty much true.
He continued, "Isn't it true that the Federal Reserve lends this money to ordinary banks and charges 3% interest?" I noted that while the discount rate was currently at 3%, it has sometimes been higher or lower. I added that the Fed doesn't really lend out currency directly and that these Federal reserve advances aren't very important. He interrupted, "Is it true or not?" I said, "Pretty much so."
His next question was a bit different. He asked, "Isn't it true that the Federal Reserve is privately owned?" I agreed that it was, "kind of."
The rest came out in a bit of a rush. "So, isn't it true that, for every dollar printed, the Federal Reserve covers the three cent cost of printing the currency with the interest and so makes a one dollar profit for the owners. And that's how the international bankers get their money to rule the world."
I said that no, that wasn't true, but I had no quick and easy explanation. And my conspiracy theorist wasn't interested in anything other than a confirmation of the first three premises. His logical deduction of a one dollar profit and his alleged bankers' conspiracy weren't things he needed to have confirmed.
The government prints money and spends it. The result is price inflation, which is often blamed on the greed of businessmen.
I had never heard anything like it. Now, don't get me wrong. I have been a libertarian since I was a teenager in the mid-'70s. The notion that the Federal Reserve, as an engine of inflation, was nefarious seemed natural. It was just this particular approach to the evils of the Fed that was new to me.
Soon after, a former student visited and asked me about Pat Robertson's discussion of the Federal Reserve in his book "The New World Order."1 As my student relayed the story, the Fed pays three cents for each dollar, lends it out at 3% interest and so on. Another student reported on a story about a Washington call girl. She claimed that all the politicians had credit cards. Where did they get the money? The Fed pays three cents per dollar bill and so on. A year later, at a local Libertarian Party meeting, a newcomer was distributing issues of The Spotlight, a publication of the anti-Semitic Liberty Lobby. Among the articles about the dual loyalists in the State department was one about the Fed. It pays three cents per dollar bill, lends it out at 3% interest, and so on. This time, however, it was the international Jewish bankers making all the profit.
A Google search on the Federal Reserve and ownership will generate several hundred thousand hits, many of which allege that the private owners of the Fed are making huge profits from the issue of currency. There are quite a few links to sites that specifically debunk the conspiracy theory. Some links are to Federal Reserve sites that describe the system's ownership structure.
The conventional wisdom among libertarian economists is that central banking is the modern means by which governments continue their traditional policy of debasement — using inflation as a means of public finance. The government prints money and spends it. The result is price inflation, which is often blamed on the greed of businessmen who actually set the prices. Could economists be wrong? So I did some research.
The conspiracy theorists have a point regarding the ownership of the Federal Reserve. The Federal Reserve system is made up of twelve Federal Reserve banks. According to the Atlanta Federal Reserve bank, "They were to be quasi-private bankers' banks, owned by the member banks, which would buy all the stock of the Reserve Banks and receive dividends for it."2
It is impossible for the shareholders of Federal Reserve banks to earn capital gains or suffer capital losses on their stock.
Any Principles of Economics or Money and Banking text describes the situation, usually in similarly ambiguous terms. Baumol and Blinder state, "Technically, each Federal Reserve bank is a corporation; its stockholders are its member banks."3 Mishkin explains, "Each of the Federal Reserve banks is a quasi-public (part private, part government) institution owned by the private commercial banks in the district that are members of the Federal Reserve system."4
The courts have taken notice of the Fed's peculiar status. In the 1982 case, Lewis v. United States (see "The Lewis Decision"), the Ninth Circuit Federal Court of Appeals opined, "Federal reserve banks are not federal instrumentalities for purposes of a Federal Torts Claims Act, but are independent, privately owned and locally controlled corporations." On the other hand, the opinion notes, "The Reserve Banks have properly been held to be federal instrumentalities for some purposes."5
Apparently, there is something unusual about the status of these Federal Reserve banks. Some libertarian economists describe claims about the "private" nature of the Fed with an attitude of "if only." In the context of a proposal to privatize the Federal Reserve banks, Richard Timberlake explains that "The member commercial banks already 'own' the twelve Fed banks," but adds that, "they have no property rights."6 Murray Rothbard notes that "[c]entral banks are often nominally owned by private individuals or, as in the United States, jointly by private banks, but they are always directed by government-appointed officials, and serve as arms of the government."7
According to the Federal Reserve Act, a Federal Reserve bank is a special type of corporation chartered by the Federal government.8 Shortly after the act was passed, the United States was divided into twelve districts and a Federal Reserve bank was organized in each district.9 National banks (private commercial banks chartered by the Federal government) were forced to join the Federal Reserve system. State chartered banks could join if they chose, though most did not.10 Any newly chartered national bank must still join the system and existing or new state chartered banks can still choose to join.
One requirement of membership was for a bank to purchase stock in its district Federal Reserve bank. The amount purchased was fixed by the Act. Each member bank must purchase stock equal to 3% of its capital.11
While the Fed no longer pays off Federal Reserve notes with anything, it continues to account for them as liabilities.
Take a bank's total assets — vault cash, loans, investments, building, and equipment. Then subtract its liabilities — checking accounts, savings accounts, bonds. The difference is the bank's capital, which, in banking lingo, is another term for net worth. Multiply by 3% and that is the dollar value of the Federal Reserve stock a bank must hold.
The par value of the Federal Reserve stock was fixed by the Act at $100 per share.12 As a bank's net worth changes and deviates from the 3% requirement, its Federal Reserve bank issues it new shares or buys back excess shares — always at the $100 par value. If any bank joins the system, its district Federal Reserve bank issues new shares. If any member bank fails, its district Federal Reserve bank pays off the shares.
The Federal Reserve Act contained a provision for selling shares to the general public or even to the U.S. Treasury if necessary to meet a minimum capitalization for each district bank. These provisions weren't needed, and so all shares are held by member banks.13
All member banks are U.S. chartered banks — chartered by the federal government as national banks, or by one of the states. However, the stockholders of the various banks can be U.S. citizens or foreigners.
So, private investors, including foreigners, own the member banks which in turn seem to own Federal Reserve banks. That is the element of truth in the conspiracy theory.
The member banks' "ownership" of the Fed is consistently described as "quasi," technical, or nominal. The key reason is that owning stock in a Federal Reserve bank does not provide the usual benefits of stock ownership.
In 2003, the total dividends to the member banks were $518 million. That amounts to .02% of government spending.
One of the key benefits of the corporate form of business relative to partnerships is that the owners can sell part or all of their interest in a business by selling some or all of their shares. But Federal Reserve banks aren't like ordinary corporations. Aside from the transactions with their Federal Reserve banks to maintain the 3% ratio to capital, the member banks cannot buy additional shares or sell off their shares. They cannot pledge the shares as collateral for loans.14
Most investors purchase stock to earn capital gains, in the hope that it will increase in value. There is no market for Federal Reserve stock — its price remains at the par value of $100. It is impossible for the shareholders of Federal Reserve banks to earn capital gains or suffer capital losses on their stock.
Of course, stockholders in ordinary corporations can also hope for dividends. As the owners of the business, all profits belong to them. In most corporations, the board of directors decides if and when to pay dividends on common stock. But the Federal Reserve banks are different. The Federal Reserve Act fixes dividends at 6% per year.15 That is $6 per year per $100 share. Any additional earnings go to the U.S. Treasury.
If an ordinary corporation is liquidated, any remaining assets belong to the stockholders. But that isn't the situation with the Federal Reserve banks. If the Federal Reserve is liquidated, the member banks get back their $100 per share and pending dividends and anything left over goes to the U.S. Treasury.16
Stockholders generally vote for their corporation's board of directors, and that is true of the stockholders of the Federal Reserve banks. But there are some very unusual voting rules. Usually, stockholders vote their shares, so that the largest stockholders get the most votes. Each member bank, however, gets just one vote regardless of the number of shares it owns in its Federal Reserve bank.17
Each Federal Reserve bank has nine board members. They are divided into three groups. There are three Class A directors, three Class B directors, and three Class C directors.18
The politicians control the Fed in the same sense that they control the judiciary.
The Class A directors can be involved in the banking industry and usually are. The member banks are divided into three groups — large, medium, and small banks. While this is measured by their stockholdings, stock holding is proportional to net worth, which is closely associated with total bank size. The large banks elect one Class A director, the medium-sized banks elect another, and the small banks elect the third.19
Class B directors are elected in much the same way, except that none of them can be bank employees or stockholders. Each member bank gets one vote and the large, medium, and small banks elect one director each.
Class C directors cannot be involved in the banking industry either, but they aren't chosen by the stockholders. They are instead appointed by the Board of Governors in Washington D.C.20
To sum up, the stockholders of each Federal Reserve Bank elect two-thirds of its board of directors. They don't vote by shares, but rather each bank gets one vote. Bank size does influence voting, however, with large, medium, and small banks getting two directors each — one banker and one nonbanker.
For most corporations, the board of directors selected by the stockholders is free to choose top management. While the board of directors of each Federal Reserve bank chooses its president, that decision is subject to approval by the Board of Governors in Washington, D.C.21
There are seven members of the Board of Governors and they are appointed by the president of the United States with the advice and consent of the U.S. Senate. They are appointed for 14-year terms. The chairman is appointed by the president with approval by the Senate for a four-year term.22 The current chairman is Alan Greenspan.
The Board of Governors is clearly a federal government agency. Its members have substantial independence from the president and Congress because of their long terms — less than federal judges, but more than those serving on most federal regulatory commissions.
The Board of Governors dominates the twelve Federal Reserve banks. Not only does it appoint one-third of their boards of directors, it has an effective veto power over the selection of the twelve Federal Reserve bank presidents.
The Federal Reserve Act authorized the board of directors of each Federal Reserve bank to set its own discount rate in consultation with the Board of Governors. This was the interest rate at which Federal Reserve banks made loans (called advances) to member banks.23 While some of those supporting the Federal Reserve Act thought that there would be different discount rates across the United States depending on local conditions, the consultation process with the board of governors resulted in the twelve boards of directors setting a uniform discount rate.24 During the Great Depression, the Banking Act of 1933 changed consultation to a requirement that Federal Reserve banks obtain Board of Governors approval for their discount rates.25 There continued to be a single discount rate for the Federal Reserve system, though it was routinely approved by each Federal Reserve Bank's board of directors.
There are any number of ways in which regulations associated with the Federal Reserve system impose unjustified costs on banks.
In 2003, the Fed changed its lending policy. Today, any financially sound bank (member or not) can obtain loans from its district Federal Reserve bank at the primary credit rate. It is set at 1% above the Federal Funds rate.26 Since the Federal Funds rate is the interest rate at which banks borrow from and lend to other banks for overnight loans, there is little motivation to borrow from the Fed. Financially troubled banks can obtain loans at the secondary credit rate. That rate is set at .5% above the Federal Funds rate and entails added supervision.27 Given this new policy, the "power" of the board of directors of a Federal Reserve bank to set the discount rate has become a dead letter.
While the Federal Reserve Act implies that lending at the discount rate would be the key element of monetary policy, that approach was long ago superseded by open market operations. Open market operations are the purchase or sale of government bonds by the Federal Reserve.
The Federal Reserve Open Market Committee directs open market operations. It is made up of the seven members of the Board of Governors and five Federal Reserve Bank presidents. The president of the New York Federal Reserve always serves and the other four slots rotate among the other eleven Federal Reserve bank presidents.28
The committee sets a target for the Federal Funds rate.29 The open market trading desk at the New York Federal Reserve buys or sells government bonds. Generally, they purchase them at either a faster or slower rate so that surpluses or shortages of funds in the market cause private traders to agree to interest rates on overnight loans close to the target.
When the Federal Reserve Open Market Committee sets its target for the Federal Funds rate, it is also determining the primary and secondary credit rates for loans by the Federal Reserve banks. Today, monetary policy is controlled entirely by the Open Market Committee.
The politicians appoint the Board of Governors, which makes up seven of the twelve members of the committee. That same Board of Governors appoints one-third of the boards of directors, which select the Federal Reserve bank Presidents that make up the remaining five-twelfths of the committee. And the Board of Governors has an effective veto over the selection of Federal Reserve bank presidents.
Because of the 14-year terms for the members of the Board of Governors, today's monetary policy mostly depends on the appointments made by politicians in the past. Short of rewriting the Federal Reserve Act, appointments by today's politicians will only gradually effect future monetary policy. That is why the Federal Reserve System is described as an independent agency within the federal government.
For the Fed, final authority is in the hands of the politicians.
Many of the conspiracy theories claim that the private owners of the Fed are making large profits from the issue of currency — Federal Reserve notes. The twelve Federal Reserve banks are responsible for issuing Federal Reserve notes, but they don't print currency themselves. They pay the Bureau of Printing and Engraving, a division of the U.S. Treasury, for the service. Estimates for the amount the Fed pays for printing each note vary from 2 cents to 6 cents. In 2003, about 8 billion notes were printed. The Fed purchased currency with a face value of $143 billion30 and then paid the U.S. Treasury $508 million.31 That amounts to about 6 cents per note and .3 cents per dollar printed.
It is like having copies made at Kinko's, and even more like the cost of printing checks. The printing cost doesn't have much to do with the amount the checks will be worth when they are written and spent.
While paying less than one cent per dollar issued sounds profitable, the Federal Reserve Banks do not treat this as profit. The Fed accounts for Federal Reserve notes as a liability — a debt of a Federal Reserve bank.32
When the Fed was formed, the United States was on a gold standard and the Fed was obligated to pay off Federal Reserve notes on demand with lawful U.S. money — mostly gold coins and gold certificates. While the Fed no longer pays off Federal Reserve notes with anything, it continues to account for them as liabilities.
After the Fed has currency printed and before it is issued, it is just paper — like a blank check. When the currency is issued to banks or ends up in the hands of other firms or households, it becomes a liability for the Fed. When the currency is deposited by a bank back into the Fed, it is again meaningless paper — like a cancelled check. Unlike a used check, however, the Fed can issue out currency again.
While the Fed accounts for Federal Reserve notes as liabilities, the U.S. government guarantees them as well. If a Federal Reserve bank were to fail, then the U.S. government would pay off the outstanding currency. To protect the U.S. government from losses, it requires that Federal Reserve banks set aside U.S. government bonds or gold certificates as collateral.33 When the United States left the gold standard, there was no longer any possibility of the Fed defaulting on Federal Reserve notes, so the secondary U.S. government guarantee became meaningless. Still, the Federal Reserve banks pledge collateral for Federal Reserve notes.
The Federal Reserve doesn't directly lend currency to banks. When a bank gets an "advance" from the Fed, the Fed just makes an entry into its computer and credits the bank's deposit account. So rather than paying less than one cent per dollar for the money they lend to banks, the Fed actually pays nothing.
Of course, banks can withdraw currency from their deposit accounts at the Federal Reserve banks whenever they want. And they do so regularly, to cover currency withdrawals by their depositors and to stock ATM machines. The Federal Reserve banks have currency printed up as needed to cover withdrawals by the banks. And while the total stock of currency is usually expanding, a substantial portion of the Fed's printing cost is for new currency to replace worn currency that has been withdrawn from circulation and shredded. In 2003, the Fed increased the stock of Federal Reserve notes by $42 billion and replaced $101 billion of worn currency.34
The conspiracy theorists' claim that private owners of the Fed are making bundles of money is false.
Suppose the Fed lent money to a bank, charging 2.25% annual interest (the primary credit rate in August 2004).35 The bank might withdraw the funds and the Fed would be obligated to issue it currency which would cost .3 cents per dollar (or 6 cents per note). When the bank repaid the loan (probably the next day), the Fed would earn a tiny fraction of a cent per dollar. The returned Federal Reserve note, however, wouldn't be revenue. And the Fed could issue it out (perhaps by lending) again and again until it wears out.
Total outstanding loans by the Fed to the banks was $245 million in July 2004.36 At 2.25% interest, that would earn the Fed an income of about $5.5 million per year. But since the total amount of Federal Reserve notes is approximately $700 billion,37 it is apparent that Fed lending to banks does not play a significant role in the creation of currency.
Conspiracy theorists, like Thomas Schauf38 and Eustace Mullins,39 complain that the private owners of the Federal Reserve are profiting from the national debt. Since the Federal Reserve creates money out of thin air through open market operations — purchasing government bonds — they are at least looking in the right direction.
As of July 2004, the Fed held government bonds worth $693 billion.40 Contrary to the claims by some conspiracy theorists that the entire national debt is associated with the issue of currency, the Fed's holdings are about 9% of the $7.5 trillion gross national debt.41 After subtracting securities held by various federal government trust funds, the Fed's holdings are about 15% of the remaining $4.5 trillion net national debt.42
When Fed bond holdings are added to the small amount of its lending to banks, the $11 billion gold reserve, $40 billion in holdings of foreign exchange, along with repurchase agreements, Federal Reserve bank premises, and the like, the Fed's assets cover its liabilities — Federal Reserve notes issued, the $25 billion that banks have deposited at the Fed, the government's $4 billion deposited in the Fed, and various other small items.43
Since government bonds make up the bulk of the Fed's assets, the interest from those bonds provides most of its revenue. In 2003, the Federal Reserve's total income was $24 billion, of which $22 billion came from holdings of government securities.44 While that is a substantial amount of money, the total interest expense for the U.S. government was $153 billion45 and total government spending was $2.157 trillion.46 The Federal Reserve's earnings on bonds were a bit over 14% of the government's interest expense and 1% of total government spending.
Some conspiracy theorists have claimed that personal income tax funds are earmarked to pay interest to the Fed, and if no such interest was paid, there would be no need for the income tax. Fed interest earnings amount to a bit over 2% of the $987 billion in personal income collections in 2003.47 Total interest payments by the government are about 15% of income tax revenues.
The chief problem with the theory that the private owners are making huge profits from the Fed is that the Fed transfers large amounts of money back to the U.S. Treasury each year. In 2003, the amount transferred was $22 billion.48 Since that is exactly how much interest the Fed earned from U.S. securities, the net cost of the Federal Reserve to the U.S. taxpayers was zero.
Zero? The conventional view among economists is that the Fed makes money for the government. How? One way to look at it is that if the Fed didn't own these government bonds, then someone else would. Those investors would not transfer their earnings back to the Treasury. By having the Federal Reserve own a portion of the national debt, the U.S. government saved $22 billion in interest expense in 2003.
Conspiracy theorists like Schauf have proposed that the government replace Federal Reserve notes with "greenbacks" — U.S. Treasury notes that bear no interest.49 They claim that this would free the government from paying interest on part (or even all) of the national debt.
If the government replaced Federal Reserve notes with that sort of currency and retired interest-bearing debt, then the government would not have paid the Federal Reserve $22 billion in interest. But neither would the Fed have transferred the $22 billion back to the Treasury. An exact match doesn't occur every year. In 2002, the Fed earned $25 billion on government bonds and transferred back only $24 billion.50
Still, that didn't create an additional $1 billion "profit" for the member banks that "own" the Federal Reserve. The member banks make six cents on each dollar they are forced to have invested in the Federal Reserve system. In 2003, the total dividends to the member banks were $518 million.51 That amounts to .02% of U.S. government spending. It amounts to about .5% of the $100 billion in total commercial bank earnings.52
The rough equivalence between the interest the Fed earns from the government and the amount it transfers to the U.S. Treasury causes most economists to see these financing issues as a shell game. Since nearly all the interest paid on debt sold to the Fed is transferred back to the U.S. Treasury, there isn't really any interest paid. The government uses the Fed to partly finance its deficit by creating money and spending it. The end result is no different than if the U.S. Treasury just printed up "greenbacks" and spent them. The process is just a bit more "efficient" than the ancient practice of melting down silver coins and mixing in lead. Most economists would argue that the Fed created $36 billion for the government in 2003.53 That is the change in the monetary base (currency and reserves) less the expenses of operating the Federal Reserve system.
Do shady international bankers control the Federal Reserve? Perhaps, but not because they "own" the Federal Reserve system. The politicians have control, in the same sense that they control the federal judiciary. Government appointees make up the majority of the Open Market Committee and those same appointees have an effective veto in selecting the Federal Reserve presidents who make up the remainder of the body. Further, they appoint one-third of each Federal Reserve bank's board of directors, which in turn choose those presidents.
However, if one begins with an understanding that the Fed is fundamentally a political operation, then it is unusual in that bankers have an extra avenue of influence. Like everyone else, they can vote, lobby, and make campaign contributions and so influence the politicians. Unlike everyone else, they can own shares of stock in member banks that "own" the Federal Reserve banks and so influence directors, Federal Reserve bank presidents, and the Open Market Committee.
Do shady international bankers make large profits from the Federal Reserve? It depends on what is meant by "large." Since there is little or no risk in stock whose value remains at par, and the interest rate earned by the Fed on its government securities portfolio is closer to 3% than the 6% dividend, perhaps a substantial cut in payments to the member banks is in order. If the dividend rate were reduced to reflect the current return on the Fed's portfolio, the taxpayers could save as much as $250 million a year in financing the national debt.
However, this potential gain depends on the low levels of interest rates for the last few years. Since 1960, the rate on Treasury bills has been greater than 6% almost 40% of the time. It was consistently above 6% from the fall of 1977 to the summer of 1986. When the T-bill rate peaked at 15% in March of 1980, the Fed was earning substantially more on its security portfolio than the dividend rate it was paying the member banks.54
Further, from a libertarian perspective, there are any number of ways in which regulations associated with the Federal Reserve system impose unjustified costs on banks. Reserve requirements force banks to tie up more funds than they believe necessary in vault cash and Federal Reserve deposits. The banks earn less interest and the Fed and the U.S. Treasury collect roughly what the banks lose. More importantly, by taking away the right of banks to issue redeemable, dollar-denominated banknotes, the Fed's compulsory monopoly on currency issue reduces bank earnings by tens of billions of dollars. How a competitive banking system would distribute those funds between bank stockholders and customers is difficult to predict, but there is a cost to having the government finance its budget deficits by issuing currency.
Who owns the Fed? The owners of a business typically have ultimate authority over operations and serve as residual claimant. Stockholders elect directors, who appoint top management. Stockholders receive the profits — excess revenues after all other claims on funds are paid.
For the Fed, final authority is in the hands of the politicians. They appoint the Board of Governors, who dominate the Federal Reserve banks. Further, any earnings of the Federal Reserve banks beyond expenses, including the 6% dividend to the member banks, goes to the U.S. Treasury. Since the U.S. government has final authority and serves as residual claimant, the most reasonable view is that the Federal Reserve system is government-owned.
The conspiracy theorists' claim that private owners of the Fed are making bundles of money is false. The conventional view among economists (including libertarian ones) that the Fed is a government operation that partially finances fiscal deficits by money creation is fundamentally correct. The live question among libertarians is how to get the government out of the banking system — perhaps by truly privatizing the Fed's operations — in a way that prevents inflation and macroeconomic instability.
Footnotes
1. Pat Robertson, "The New World Order," (G.K. Hall and Co., 1992), pp. 171–85
2. Richard Gamble, "A History of the Atlanta Federal Reserve 1914–1989," (Atlanta Federal Reserve, 1989), http://www.frbatlanta.org/publ.cfm
3. William Baumol and Alan Blinder, "Principles of Macroeconomics," (Tomson-Southwestern, 2004), p. 225
4. Frederic S. Mishkin, "The Economics of Money, Banking, and Financial Markets," (Pearson-Addison-Wesley, 2004) p. 338
5. Lewis v. United States, 680 F.2d 1239 (1982)
6. Richard Timberlake, "Monetary Policy in the United States," (The University of Chicago Press, 1993), p. 417
7. Murray N. Rothbard, "What has the Government Done to Our Money?" (The Mises Institute, 1980), http://www.mises.org/money/3s8.asp
8. United States Code, Title 12, Chap. 3, SubChap. IX, Sec. 341
9. Ibid., Subchap. I, Sec. 222
10. Ibid., Subchap. XIII, Sec. 321
11. Ibid., Subchap. XI, Sec. 282
12. Ibid., Sec. 287
13. The Federal Reserve Act, Sec. 2, 8–13, http://www.federalreserve.gov/GeneralInfo/fract/sect02.htm
14. United States Code, op. cit., Subchap. XI, Sec. 287
15. Ibid., Sec. 289
16. Ibid., Sec. 290
17. United States Code, op. cit., Subchap. XII, Sec. 304
18. Ibid., Sec. 302
19. Ibid., Sec. 304
20. Ibid., Sec. 305
21. U.S. Code, op. cit., Subchap. IX, Sec. 341
22. U.S. Code, op. cit., Subchap. II, Sec. 241–2
23. U.S. Code, op. cit., Subchap. IX, Sec. 347
24. Richard Timberlake, "Money, Banking, and Central Banking" (Harper and Row, 1965), pp. 189–90. This was not always the case. In its early years, the Fed's different banks did have different rates. See p. 213 of "Monetary History of the United States" by Milton Friedman and Anna Schwartz.
25. U.S. Code, op. cit., Subchap. IX, sec. 347
26. The Federal Reserve Discount Window, http://www.frbdiscountwindow.org
27. Ibid.
28. U.S. Code, op. cit., Subchap. IV, Sec. 263
29. The Federal Reserve Board, http://www.federalreserve.gov/fomc/fundsrate.htm
30. Bureau of Printing and Engraving, http://www.moneyfactory.com/section.cfm/2/51
31. 90th Annual Report, (Board of Governors of the Federal Reserve, 2003), p. 129
32. Ibid., p. 129
33. U.S. Code, op. cit., Subchap. VII, sec. 411–12
34. 90th Annual Report, op. cit., p. 279
35. Economic Data, Federal Reserve Bank of St. Louis, http://research.stlouisfed.org/fred2/series/MPCREDIT/118
36. Economic Data, op. cit., http://research.stlouisfed.org/fred2/series/BORROW/45
37. 90th Annual Report, op. cit., p. 260
38. Thomas Schauf, "The Federal Reserve is Privately Owned," http://www.worldnewsstand.net/today/articles/fedprivatelyowned.htm
39. Eustace Mullins, "The Secrets of the Federal Reserve," (Bankers Research Institute, 1984), p. 164
40. Economic Data, http://research.stlouisfed.org/fred2/series/GFDEBTN/5
41. Ibid.
42. Economic Data, op. cit., http://research.stlouisfed.org/fred2/series/FDHBATN/5
43. Factors Affecting Reserve Balances, (Board of Governors of the Federal Reserve System,, Aug. 2004), http://www.federalreserve.gov/releases/h41/Current/
44. 90th Annual Report, op. cit., p. 270
45. Economic Data, op. cit., http://research.stlouisfed.org/fred2/series/FYOINT/5
46. Economic Data, op. cit., http://research.stlouisfed.org/fred2/series/FYONET/5
47. Tax Stats at a Glance (Internal Revenue Service, 2003) http://www.irs.gov/taxstats/article/0,,id=102886,00.html
48. 90th Annual Report, op. cit., p. 129
49. Schauf, op. cit.
50. 90th Annual Report, op. cit., p. 125–6
51. Ibid., p.129
52. Governor Mark Olson, (Federal Reserve Bank Board of Governors, 1983), http://www.federalreserve.gov/boarddocs/speeches/2004/20040301/default.htm
53. Economic Data, op. cit., http://research.stlouisfed.org/fred2/series/BOGUMBNS/45
54. Economic Data, op. cit., http://research.stlouisfed.org/fred2/series/TB6MS/116
© Copyright 2009, Liberty Foundation
Sunday, August 30, 2009
Saturday, August 29, 2009
Ayn Rand - Atlas Shrugged – 1957
“Then you will see the rise of the double standard—the men who live by force, yet count on those who live by trade to create the value of their looted money—the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law—men who use force to seize the wealth of DISARMED victims—then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.
“Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion— when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.
“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: ‘Account overdrawn.’
“When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded.
Ayn Rand - Atlas Shrugged – 1957
Von Mises Institute writes in 2009: “Since its inception in 1913, the Federal Reserve has helped to devalue our dollar by 95%. During the recent economic crisis, it has poured trillions of dollars into the economy with no oversight, made secret agreements with foreign banks and governments, and has refused to tell Congress who is getting the money or to give it the details of what deals are being made."
Rep. Louis T McFadden ( R-PA) and Chairman of the Committee on Banking and Currency, said in 1932:
"THE FEDERAL RESERVE BOARD, A GOVERNMENT BOARD, HAS CHEATED THE GOVERNMENT OF THE UNITED STATES AND THE PEOPLE OF THE UNITED STATES OUT OF ENOUGH MONEY TO PAY THE NATIONAL DEBT. The depredations and the iniquities of the Federal Reserve Board and the Federal Reserve banks acting together have cost this country ENOUGH MONEY TO PAY THE NATIONAL DEBT SEVERAL TIMES OVER."
About the Federal Reserve banks, Rep. McFadden said:
"They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; the rich and predatory money lenders. This is an era of economic misery and for the reasons that caused that misery, the Federal Reserve Board and the Federal Reserve banks are fully liable."
On the subject of media control he stated:
"Half a million dollars was spent on one part of the propaganda organized by those same European bankers for the purpose of misleading public opinion in regard to it."
Rep. McFadden continued: "Every effort has been made by the Federal Reserve Board to conceal its power but the truth is the Federal Reserve Board has USURPED THE GOVERNMENT OF THE UNITED STATES. IT CONTROLS EVERYTHING HERE AND IT CONTROLS ALL OUR FOREIGN RELATIONS. IT MAKES AND BREAKS GOVERNMENTS AT WILL. No man and no body of men is more entrenched in power than the arrogant credit monopoly which operates the Federal Reserve Board and the Federal Reserve banks. These evil-doers have robbed this country of more than enough money to pay the national debt. What the Government has permitted the Federal Reserve Board to steal from the people should now be restored to the people.
"Our people's money to the extent of $1,200,000,000 has within the last few months been shipped abroad to redeem Federal Reserve Notes and to pay other gambling debts of the traitorous Federal Reserve Board and the Federal Reserve banks. The greater part of our monetary stock has been shipped to foreigners. Why should we promise to pay the debts of foreigners to foreigners? Why should American Farmers and wage earners add millions of foreigners to the number of their dependents? Why should the Federal Reserve Board and the Federal Reserve banks be permitted to finance our competitors in all parts of the world? …
"The Federal Reserve Act should be repealed and the Federal Reserve banks, having violated their charters, should be liquidated immediately. FAITHLESS GOVERNMENT OFFICERS WHO HAVE VIOLATED THEIR OATHS SHOULD BE IMPEACHED AND BROUGHT TO TRIAL." [excerpts from Congressional Record] Two attempts were made on McFadden's life, a failed shooting and an apparent poisoning.
"Déjà vu all over again" and again and again and again?
How it Works That The Fed can Delay Their Answers To The American People - Their funders
The Fed qualifies as a federal agency for FOIA purposes. FOIA (5 USC 551) states: "“agency” means each authority of the Government of the United States, whether or not it is within or subject to review by another agency". I believe that, being established by the authority of Congress, the Fed thus falls under FOIA's definition of agency. So in this case, even though it may be thought of as "independent", it's part of the government because it was created with the government's authority.
Stand back far enough and any problem can be put in perspective. Bubbles are just the economy's way of consolidating and expelling waste product. Think rash turning into a boil, before popping.
You think the situation looks bad from here? Do you really think those fools at the top of this crumbling Tower of Babel are getting a good night's sleep?
What are the bankers going to do when the dollar does implode? What are the politicians going to say when the green shoots they sold their souls for turn out to be poison ivy? What is the military going to do when the buckets of money it pays its contractors and suppliers turns into toilet paper?
You want my opinion? States are going to be forced to set up their own public banking systems and funnel the proceeds into their own treasuries, as DC and New york implode.
Ellen Brown seems to be taking the lead on this;
http://www.huffingtonpost.com/ellen-brown/the-public-option-in-bank_b_25...
Proclamation on the Federal Reserve System of the United States of America
www.RevokeTheFed.comMarch 2008
WHEREAS, Article I, Section 8 of the Constitution of the United States of America authorizes Congress "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures";
WHEREAS, on December 13th, 1913 the US Congress enacted the Federal Reserve System;
WHEREAS, the Federal Reserve System is considered an independent agency within the federal government, with oversight of Congress and containing appointed public officials on its board of directors;
WHEREAS, the Federal Reserve System Controls the Federal Reserve Note, the official currency of the great nation of the United States of America;
WHEREAS, there may be controversies regarding the legality and constitutionality of the Federal Reserve System, it is recognized that the said system has operated continuously as the central banking system of the United States since the inception of the Federal Reserve Act of 1913;
WHEREAS, the Constitution of the United States of America granted Congress the authority to create the current Federal Reserve System, it also does grant Congress the authority to modify or revoke the Federal Reserve System;
WHEREAS, the actions of the Fedreral Reserve System represent the credit and currency of the United Stated of America to the citizens of this great nation and to the world;
WHEREAS, the Federal Reserve System, acting independently within the federal government allowed, supported, and even promoted parasitical and non-productive uses of the money and credit of the United States of America;
WHEREAS, the United States and likely the entire world's financial system is undergoing massive de-leveraging of the said parasitical and non-productive uses of the credit and money of the United States of America (as well as other nations' currencies);
WHEREAS, the US dollar, the "Federal Reserve Note" is declining in value due to these parasitical activites, as well as potentially other causes;
WHEREAS, it is recognized that the citizens of the United States and other nations did willingly participate at some level in the creation and propogation of said parasitical activities;
WHEREAS, it is also recognized that the United States of America, a sovereign nation, has the legal, moral, and God given authority to take actions to benefit its citizens and to protect its good name, credit and money in times of difficulty;
WHEREAS, it is recognized that the current time is such a time of great difficulty;
WHEREAS, it is recognized the parasitical financial institutions and their activities are at odds with citizens of the United States of America and the good credit and money thereof;
WHEREAS, the current indications are that the Federal Reserve System is acting to preserve the financial system currently flooded with the parasitical activities;
WHEREAS, the current indications are that the neither the Federal Reserve System, nor the Congress of the United States, nor the people of the United States have access to the books of the institutions being preserved by the Federal Reserve, and therefor the degree of inter-connectivity and risk associated with the institutions and other entities cannot be determined;
WHEREAS, the Federal Reserve System is accepting non-performing assets as collateral for credit with ultimate taxpayer responibility to entities not under its legislative mandate;
IT MUST BE CONCLUDED, that the Federal Reserve System is not acting to the benefit of the people of the United States of America, its credit, money, and good name;
WHEREAS, it is recognized that the political will and capability of the government of the United States of America may not be up to the task of prosecuting this proclamation ; It is also recognized that this may be the only hope for the continued survival of the United States of America as the great nation as it has historically existed.
NOW THEREFORE, it is PROCLAIMED by those supporting this Proclamation that the Congress of the United States of America FULLY NATIONALIZE the Federal Reserve System, and take full control of the credit and money of our great nation; The Congress must take whatever action necessary to seperate out, sequester, disown, or otherwise neutralize the effect of the parasitical financial activities which led to the current crisis; The Congress of the United States of America must reorganize, replace, or terminate the Federal Reserve System as appropriate; or otherwise devise a system for creation of the national currency.
IT IS FURTHER PROCLAIMED, that the Congress of the United States of America in cooperation with the Executive of the United States of America contact allied nations and any other nation willing to participate in the overhaul of the failing and parastical financial sytem currently in operation and create new treaties and alliances as necessary to create a sane and productive system of finance with the express goal of supporting a productive national, and by extension and through voluntary cooperation, world economy;
FURTHERMORE, it is PROCLAIMED that it should be the goal of such an international effort to maintain fair international trading practices allowing for protection in national interest of labor, resources, and productive capabilities;
WHEREAS, it is recognized that such a move on the part of the United States of America may result in the necessity of an isolationist policy IF the other developed nations do not follow our lead; If such occurs, so be it.
SO HELP US GOD!
17 Bn in Golman Sachs Bonuses
I heard there is 17 Bn in bonuses allocated for Goldman Sachs employees - WoW - even if it is 2 Bn when are they paying back the 13 Bn they siphoned off from the AIG bailout ?
Obama - where are you on this issue? Do you agree with the payout? Do you agree with no transparency in holding individuals responsible for past losses?
Obama - where are you on this issue? Do you agree with the payout? Do you agree with no transparency in holding individuals responsible for past losses?
What Happens to the Executivess of a Bank During FDIC Bank Siezure and Closing?
What happens to the salary and bonuses of the executives at a bank that is "rescued" by the FDIC?
Do they forfeit their previous bonuses that were accrued "earned" based on fraudulent financial circumstances?
Are they fired and replaced? Are they blacklisted for future bank jobs?
Or do they continue to born the same typ of fraudulent bank scheme in the future?
Do they forfeit their previous bonuses that were accrued "earned" based on fraudulent financial circumstances?
Are they fired and replaced? Are they blacklisted for future bank jobs?
Or do they continue to born the same typ of fraudulent bank scheme in the future?
Friday, August 28, 2009
Court Orders Fed to Disclose Emergency Bank Loans - Banks Worried - “This is what the American people have been asking for.”
By Mark Pittman 
Aug. 25 (Bloomberg) -- The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit.
Manhattan Chief U.S. District Judge Loretta Preska ruled against the central bank yesterday, rejecting the argument that loan records aren’t covered by the law because their disclosure would harm borrowers’ competitive positions.
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders. Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued on Nov. 7 on behalf of its Bloomberg News unit.
“The Federal Reserve has to be accountable for the decisions that it makes,” said U.S. Representative Alan Grayson, a Florida Democrat on the House Financial Services Committee, after Preska’s ruling. “It’s one thing to say that the Federal Reserve is an independent institution. It’s another thing to say that it can keep us all in the dark.”
‘Inadequate Search’
The judge said the central bank “improperly withheld agency records” by “conducting an inadequate search” after Bloomberg News reporters filed a request under the information act. She gave the Fed five days to turn over documents it told the reporters it located, including 231 pages of reports, and said it must look for more at the Federal Reserve Bank of New York, which runs most of the loan programs.
The central bank “essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed,” Preska wrote. “Conjecture, without evidence of imminent harm, simply fails to meet the Board’s burden” of proof.
David Skidmore, a Fed spokesman who said the board’s staff was reviewing the 47-page ruling, declined to comment on whether the central bank would appeal to the U.S. Court of Appeals in New York.
Federal Reserve Chairman Ben S. Bernanke, who led the biggest expansion of the central bank’s power in its 95-year history, was nominated to a second term today by President Barack Obama.
Banks Worried
Obama promised a new era of government openness when he took office in January, issuing a statement telling agencies “to adopt a presumption in favor of disclosure” in responding to requests under FOIA.
Banks are worried that the disclosure of borrowers’ identities by the Fed, the lender of last resort, would cause customers to empty their bank accounts in a run on the bank, said Scott Talbott, vice president of governmental affairs at the Washington-based Financial Services Roundtable, a lobbying group.
“This issue is: ‘This bank borrowed X billion from the Fed, therefore they must be in trouble, therefore I’m going to pull my money out,” said Talbott. “That’s the type of danger that we’re worried about. That’s the risk.”
Bloomberg LP said in the suit that U.S. taxpayers need to know the terms of Fed lending because the public became an “involuntary investor” in the nation’s banks as the financial crisis deepened and the government began shoring up companies with capital injections and loans. Citigroup Inc. and American International Group Inc. are among those who have said they accepted Fed loans.
‘Unprecedented Ways’
“When an unprecedented amount of taxpayer dollars were lent to financial institutions in unprecedented ways and the Federal Reserve refused to make public any of the details of its extraordinary lending, Bloomberg News asked the court why U.S. citizens don’t have the right to know,” said Matthew Winkler, the editor-in-chief of Bloomberg News. “We’re gratified the court is defending the public’s right to know what is being done in the public interest.”
The Fed’s balance sheet about doubled after lending standards were relaxed in the wake of the collapse of Lehman Brothers Holdings Inc. on Sept. 15, 2008. For the week ended Aug. 19, Fed assets rose 2.3 percent to $2.06 trillion as it continued to buy mortgage-backed securities under a program allowing the central bank to purchase non-government securities for the first time.
Fed Audits
The U.S. House may vote as soon as next month on a bill to require the Fed to submit to audits by the Government Accountability Office, said Representative Scott Garrett, a New Jersey Republican on the Financial Services Committee.
The judge’s ruling “is strikingly good news,” Garrett said. “This is what the American people have been asking for.”
The Freedom of Information Act obliges federal agencies to make government documents available to the press and public. The Bloomberg suit, filed in New York, didn’t seek money damages.
“The public deserves to know what’s being done with the money,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press. “This ought to be a wake-up call for the public that they need to be far more educated about this.”
The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net
Racketeering 101: Bailed Out Banks Threaten Systemic Collapse If Fed Discloses Information - HR1207 rebuttal - MUST READ !!
And so the guns come out blazing. The Clearing House Association, another name for all the banks that were bailed out over the past year with the generous contributions from all of you, dear taxpayers, are now threatening with another instance of complete systemic collapse if Bloomberg's lawsuit is allowed to proceed unchallenged, let alone if any of the "Audit The Fed" measures are actually implemented.
As a reminder, The Clearing House Association consists of ABN Amro, Bank Of America, The Bank Of New York, Deutsche Bank, HSBC, JP Morgan Chase, US Bank and Wells Fargo.
In a declaration filed in the Bloomberg Case (08-CV-9595, Southern District of New York), the banks demonstrate no shame in attempting to perpetuate the status quo with regard to the Federal Reserve and demand that the wool over the eyes of the general population remain firmly planted in perpetuity.
The Clearing House submits this declaration because the Court's Order threatens to impair the ability of our members to access emergency funds through the New York Fed's Discount Window without suffering the severe competitive harm that public disclosure of their identity will cause.
Our members have accessed the New York Fed's Discount Window with the understanding that the Fed will not publicly disclose information about their borrowing, especially their identity. Industry experience, including very recent and searing experience, has shown that negative rumors about a bank's financial condition - even completely unfounded rumors - have caused competitive harm, including bank runs and failures.
Surely transparency would facilitate rumor-mongering to an unprecedented degree. After all rumors spread much easier when everyone knows the true financial condition of banks.
And here, in plain written Times New Roman, you see what racketeering by a major bank consortium looks like:
If the names of our member banks who borrow emergency funds are publicly disclosed, the likelihood that a borrowing bank's customers, counterparties and other market participants will draw a negative inference is great. Public speculation that a financial institution is experiencing liquidity shortfalls - which would be a natural inference from having tapped emergency funds - has caused bank customers to withdraw deposits, counterparties to make collateral calls and lenders to accelerate loan repayment or refuse to make new loans. When an institution's customers flee and its credit dries up the institution may suffer severe capital and liquidity strains leaving it in a weakened competitive position.
Pardon me if I am a broken record here, but would rumors not spread much less if there was more transparency, if investors and other financial intermediaries were fully aware of the conditions of their counterparties, if banks did not have to cover their billions in reserve losses by pretending they are viable and essentially being constant wards of the state?
The Banks' racketeering has gone on for far too long.
And yet, it does not stop: the conclusion from the banks' letter:
In sum, our experience differs from the factual conclusions the Court appears to have reached about the nature of competition in the banking industry:
* The competitive harm to institutions that are publicized as needing emergency funding is not "speculative," but demonstrated by the recent multiple failures of financial institutions whenever information about their funding difficulty has been disclosed.
* The disclosure does not involve mere "embarassing publicity" but information that could result in the immediate demise of an institution.
* The disclosure would not merely "stigmatize [ ]"the institution or make it "look [ ] weak," but goes to its very viability.
* The disclosure of accessing emergency funding is not an "inherent risk" of market participation, but an extraordinary risk in extraordinary circumstances.
* Competitors can use the disclosure to advertise or publicize that they are financial stronger because they don't need emergency funding.
In a nutshell - the banks want their complete opacity cake and eat it too, or else, the racket goes, the transparency that will somehow promote massive rumor mongering will again destroy capitalism. In the meantime, the Ken Lewises of the world can continue touting how stable their businesses are based on optimistic future projections, while implicitly, they continue to survive merely thanks to the cash granted them by you, taxpayers.
Full filing here:
http://www.zerohedge.com/sites/default/files/Clearinghouse_Decl.pdf
As a reminder, The Clearing House Association consists of ABN Amro, Bank Of America, The Bank Of New York, Deutsche Bank, HSBC, JP Morgan Chase, US Bank and Wells Fargo.
In a declaration filed in the Bloomberg Case (08-CV-9595, Southern District of New York), the banks demonstrate no shame in attempting to perpetuate the status quo with regard to the Federal Reserve and demand that the wool over the eyes of the general population remain firmly planted in perpetuity.
The Clearing House submits this declaration because the Court's Order threatens to impair the ability of our members to access emergency funds through the New York Fed's Discount Window without suffering the severe competitive harm that public disclosure of their identity will cause.
Our members have accessed the New York Fed's Discount Window with the understanding that the Fed will not publicly disclose information about their borrowing, especially their identity. Industry experience, including very recent and searing experience, has shown that negative rumors about a bank's financial condition - even completely unfounded rumors - have caused competitive harm, including bank runs and failures.
Surely transparency would facilitate rumor-mongering to an unprecedented degree. After all rumors spread much easier when everyone knows the true financial condition of banks.
And here, in plain written Times New Roman, you see what racketeering by a major bank consortium looks like:
If the names of our member banks who borrow emergency funds are publicly disclosed, the likelihood that a borrowing bank's customers, counterparties and other market participants will draw a negative inference is great. Public speculation that a financial institution is experiencing liquidity shortfalls - which would be a natural inference from having tapped emergency funds - has caused bank customers to withdraw deposits, counterparties to make collateral calls and lenders to accelerate loan repayment or refuse to make new loans. When an institution's customers flee and its credit dries up the institution may suffer severe capital and liquidity strains leaving it in a weakened competitive position.
Pardon me if I am a broken record here, but would rumors not spread much less if there was more transparency, if investors and other financial intermediaries were fully aware of the conditions of their counterparties, if banks did not have to cover their billions in reserve losses by pretending they are viable and essentially being constant wards of the state?
The Banks' racketeering has gone on for far too long.
And yet, it does not stop: the conclusion from the banks' letter:
In sum, our experience differs from the factual conclusions the Court appears to have reached about the nature of competition in the banking industry:
* The competitive harm to institutions that are publicized as needing emergency funding is not "speculative," but demonstrated by the recent multiple failures of financial institutions whenever information about their funding difficulty has been disclosed.
* The disclosure does not involve mere "embarassing publicity" but information that could result in the immediate demise of an institution.
* The disclosure would not merely "stigmatize [ ]"the institution or make it "look [ ] weak," but goes to its very viability.
* The disclosure of accessing emergency funding is not an "inherent risk" of market participation, but an extraordinary risk in extraordinary circumstances.
* Competitors can use the disclosure to advertise or publicize that they are financial stronger because they don't need emergency funding.
In a nutshell - the banks want their complete opacity cake and eat it too, or else, the racket goes, the transparency that will somehow promote massive rumor mongering will again destroy capitalism. In the meantime, the Ken Lewises of the world can continue touting how stable their businesses are based on optimistic future projections, while implicitly, they continue to survive merely thanks to the cash granted them by you, taxpayers.
Full filing here:
http://www.zerohedge.com/sites/default/files/Clearinghouse_Decl.pdf
Thursday, August 27, 2009
Five Myths About Health Care in the Rest of the World
Sunday, August 23, 2009
Five Myths About Health Care in the Rest of the World
The Washington Post
By T.R. Reid
Sunday, August 23, 2009
The Washington Post
By T.R. Reid
Sunday, August 23, 2009
As Americans search for the cure to what ails our health-care system, we've overlooked an invaluable source of ideas and solutions: the rest of the world. All the other industrialized democracies have faced problems like ours, yet they've found ways to cover everybody -- and still spend far less than we do.
I've traveled the world from Oslo to Osaka to see how other developed democracies provide health care. Instead of dismissing these models as "socialist," we could adapt their solutions to fix our problems. To do that, we first have to dispel a few myths about health care abroad:
1. It's all socialized medicine out there.
Not so. Some countries, such as Britain, New Zealand and Cuba, do provide health care in government hospitals, with the government paying the bills. Others -- for instance, Canada and Taiwan -- rely on private-sector providers, paid for by government-run insurance. But many wealthy countries -- including Germany, the Netherlands, Japan and Switzerland -- provide universal coverage using private doctors, private hospitals and private insurance plans.
In some ways, health care is less "socialized" overseas than in the United States. Almost all Americans sign up for government insurance (Medicare) at age 65. In Germany, Switzerland and the Netherlands, seniors stick with private insurance plans for life. Meanwhile, the U.S. Department of Veterans Affairs is one of the planet's purest examples of government-run health care.
2. Overseas, care is rationed through limited choices or long lines.
Generally, no. Germans can sign up for any of the nation's 200 private health insurance plans -- a broader choice than any American has. If a German doesn't like her insurance company, she can switch to another, with no increase in premium. The Swiss, too, can choose any insurance plan in the country.
In France and Japan, you don't get a choice of insurance provider; you have to use the one designated for your company or your industry. But patients can go to any doctor, any hospital, any traditional healer. There are no U.S.-style limits such as "in-network" lists of doctors or "pre-authorization" for surgery. You pick any doctor, you get treatment -- and insurance has to pay.
Canadians have their choice of providers. In Austria and Germany, if a doctor diagnoses a person as "stressed," medical insurance pays for weekends at a health spa.
As for those notorious waiting lists, some countries are indeed plagued by them. Canada makes patients wait weeks or months for nonemergency care, as a way to keep costs down. But studies by the Commonwealth Fund and others report that many nations -- Germany, Britain, Austria -- outperform the United States on measures such as waiting times for appointments and for elective surgeries.
In Japan, waiting times are so short that most patients don't bother to make an appointment. One Thursday morning in Tokyo, I called the prestigious orthopedic clinic at Keio University Hospital to schedule a consultation about my aching shoulder. "Why don't you just drop by?" the receptionist said. That same afternoon, I was in the surgeon's office. Dr. Nakamichi recommended an operation. "When could we do it?" I asked. The doctor checked his computer and said, "Tomorrow would be pretty difficult. Perhaps some day next week?"
3. Foreign health-care systems are inefficient, bloated bureaucracies.
Much less so than here. It may seem to Americans that U.S.-style free enterprise -- private-sector, for-profit health insurance -- is naturally the most cost-effective way to pay for health care. But in fact, all the other payment systems are more efficient than ours.
U.S. health insurance companies have the highest administrative costs in the world; they spend roughly 20 cents of every dollar for nonmedical costs, such as paperwork, reviewing claims and marketing. France's health insurance industry, in contrast, covers everybody and spends about 4 percent on administration. Canada's universal insurance system, run by government bureaucrats, spends 6 percent on administration. In Taiwan, a leaner version of the Canadian model has administrative costs of 1.5 percent; one year, this figure ballooned to 2 percent, and the opposition parties savaged the government for wasting money.
The world champion at controlling medical costs is Japan, even though its aging population is a profligate consumer of medical care. On average, the Japanese go to the doctor 15 times a year, three times the U.S. rate. They have twice as many MRI scans and X-rays. Quality is high; life expectancy and recovery rates for major diseases are better than in the United States. And yet Japan spends about $3,400 per person annually on health care; the United States spends more than $7,000.
4. Cost controls stifle innovation.
False. The United States is home to groundbreaking medical research, but so are other countries with much lower cost structures. Any American who's had a hip or knee replacement is standing on French innovation. Deep-brain stimulation to treat depression is a Canadian breakthrough. Many of the wonder drugs promoted endlessly on American television, including Viagra, come from British, Swiss or Japanese labs.
Overseas, strict cost controls actually drive innovation. In the United States, an MRI scan of the neck region costs about $1,500. In Japan, the identical scan costs $98. Under the pressure of cost controls, Japanese researchers found ways to perform the same diagnostic technique for one-fifteenth the American price. (And Japanese labs still make a profit.)
5. Health insurance has to be cruel.
Not really. American health insurance companies routinely reject applicants with a "preexisting condition" -- precisely the people most likely to need the insurers' service. They employ armies of adjusters to deny claims. If a customer is hit by a truck and faces big medical bills, the insurer's "rescission department" digs through the records looking for grounds to cancel the policy, often while the victim is still in the hospital. The companies say they have to do this stuff to survive in a tough business.
Foreign health insurance companies, in contrast, must accept all applicants, and they can't cancel as long as you pay your premiums. The plans are required to pay any claim submitted by a doctor or hospital (or health spa), usually within tight time limits. The big Swiss insurer Groupe Mutuel promises to pay all claims within five days. "Our customers love it," the group's chief executive told me. The corollary is that everyone is mandated to buy insurance, to give the plans an adequate pool of rate-payers.
The key difference is that foreign health insurance plans exist only to pay people's medical bills, not to make a profit. The United States is the only developed country that lets insurance companies profit from basic health coverage.
In many ways, foreign health-care models are not really "foreign" to America, because our crazy-quilt health-care system uses elements of all of them. For Native Americans or veterans, we're Britain: The government provides health care, funding it through general taxes, and patients get no bills. For people who get insurance through their jobs, we're Germany: Premiums are split between workers and employers, and private insurance plans pay private doctors and hospitals. For people over 65, we're Canada: Everyone pays premiums for an insurance plan run by the government, and the public plan pays private doctors and hospitals according to a set fee schedule. And for the tens of millions without insurance coverage, we're Burundi or Burma: In the world's poor nations, sick people pay out of pocket for medical care; those who can't pay stay sick or die.
This fragmentation is another reason that we spend more than anybody else and still leave millions without coverage. All the other developed countries have settled on one model for health-care delivery and finance; we've blended them all into a costly, confusing bureaucratic mess.
Which, in turn, punctures the most persistent myth of all: that America has "the finest health care" in the world. We don't. In terms of results, almost all advanced countries have better national health statistics than the United States does. In terms of finance, we force 700,000 Americans into bankruptcy each year because of medical bills. In France, the number of medical bankruptcies is zero. Britain: zero. Japan: zero. Germany: zero.
Given our remarkable medical assets -- the best-educated doctors and nurses, the most advanced hospitals, world-class research -- the United States could be, and should be, the best in the world. To get there, though, we have to be willing to learn some lessons about health-care administration from the other industrialized democracies.
T.R. Reid, a former Washington Post reporter, is the author of "The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care," to be published Monday.
Wednesday, August 26, 2009
Amen Ted Kennedy
I am thinking of Ted Kennedy passing last night, hearing about him today, thinking of how much he has done for us in Massachusetts and the Nation. I will really miss him, the way he personally helped many of us. I remember when he and his staff helped us personally....
Through all your trials and tribulations, your works for humanity, God bless you...
Through all your trials and tribulations, your works for humanity, God bless you...
Saturday, August 22, 2009
I’m referring, of course, to the hypnotic, gyrating, seizure-inducing Flash ads like this one:
During the credit bubble, these ads were everywhere. Fan sites and blogs sprang up in devotion (or annoyance). Then as the credit markets began to freeze up, Experian/LowerMyBills began cutting its advertising.
Up until today, I hadn’t seen these once-ubiquitous ads in about a year. But I just had a sighting on Calculated Risk, which ran a happy-lender-dance banner ad reading, “Obama Backs Insurance Regulation.” Still, it may be too soon to know whether the ads — like the economy and credit markets they’re intertwined with — are truly staging a comeback.Wednesday, August 19, 2009
Coming Soon: Banking Crisis of Historic Proportions
http://seekingalpha.com/article/156269-coming-soon-banking-crisis-of-historic-proportions
Third Factor: Defaults Are Going to Increase for Several More Quarters
Fourth Factor: The FDIC Is in Tr
Fifth Factor: We May Be Going to Historic Lows in Bank Credit
Is There Any Hope?
With everyone (well, almost everyone - I am one of the lonely skeptics) convinced that we have stepped back from the "edge of the abyss", the title of this article may be viewed as laughable. When you connect the dots, as I will in this article, you will at least stop laughing, and, maybe, realize that we still have a big problem.
We have a confluence of five factors that have the potential to create damage to banking not seen in 80 years, and that includes the Great Depression. We'll hit these factors one at a time.
First Factor: Banks Are Not Doing Enough Business
Second Factor: Banks Are Failing at a Rate Not Anticipated Two Months AgoThird Factor: Defaults Are Going to Increase for Several More QuartersThird Factor: Defaults Are Going to Increase for Several More Quarters
Fourth Factor: The FDIC Is in Tr
Fifth Factor: We May Be Going to Historic Lows in Bank Credit
Is There Any Hope?
Saturday, August 15, 2009
I. O. U. I. O. U. - social security and universal healthcare - think about this ...
The healthcare universal system will be one more I. O. U. funded by taxes to take money from, just like social security which used to be a trust fund dedicated to itself... you see, congress and senate will have a new tax bucket to do what ever they want to with, without American citizen votes ...
Think about this:
The US has continues to demonstrate a relative stability in the world that is unmatched and never falters, a tax base that is composed of obedient workers who do not protest and will never make attempts to overthrow their government even as their dollar continues to lose value and their standard of living is eroded. US officials continue to expand their unequaled military and police systems to maintain this. Countries having internal upheaval look to the US as a safe place to invest and continue to invest into the future, to shelter assets against possible seizure from their citizens.
The future source of workers and tax base to draw upon is unconditionally guaranteed by law, unlike countries like Iran, Saudi Arabia, Russia, and even France. In France in example, CEOs and executives, Bakers and traders make seven times less than their counterparts in the US - this does not change and the US system will never change.
The US financial institutions and elites such as Goldman Sachs and JP Morgan continue to run America, having a privileged and permanent partnership with the President, Congress and Senate, who occasionally show an artificial display of outrage against the absurd actions of these firms, throwing a bone to those Americans who take the time to research what is really going on. That they continue to get away with their actions demonstrates to the world the US has obedient workers who do not care and will never rise up or protest.
( Think French revolution and the guillotine )
Even though these institutions are world wide, their headquarters reside in the US... These institutions take all that they can to a point of not destroying their American host because they would never be allowed to commence and sustain such operations, salaries and compensation, and deceitful front running program trading in any other nation or country
Couple this with the strongest military and central intelligence agency in the world. The Federal Bureau of Investigation, National Security Administration, State Police, Local Police and Court systems - any and every uprising will be immediately stopped, prosecuted and incarcerated.
The only outcries heard are small town halls on the proposed universal health care bill.
that's all folks ...
Think about this:
The US has continues to demonstrate a relative stability in the world that is unmatched and never falters, a tax base that is composed of obedient workers who do not protest and will never make attempts to overthrow their government even as their dollar continues to lose value and their standard of living is eroded. US officials continue to expand their unequaled military and police systems to maintain this. Countries having internal upheaval look to the US as a safe place to invest and continue to invest into the future, to shelter assets against possible seizure from their citizens.
The future source of workers and tax base to draw upon is unconditionally guaranteed by law, unlike countries like Iran, Saudi Arabia, Russia, and even France. In France in example, CEOs and executives, Bakers and traders make seven times less than their counterparts in the US - this does not change and the US system will never change.
The US financial institutions and elites such as Goldman Sachs and JP Morgan continue to run America, having a privileged and permanent partnership with the President, Congress and Senate, who occasionally show an artificial display of outrage against the absurd actions of these firms, throwing a bone to those Americans who take the time to research what is really going on. That they continue to get away with their actions demonstrates to the world the US has obedient workers who do not care and will never rise up or protest.
( Think French revolution and the guillotine )
Even though these institutions are world wide, their headquarters reside in the US... These institutions take all that they can to a point of not destroying their American host because they would never be allowed to commence and sustain such operations, salaries and compensation, and deceitful front running program trading in any other nation or country
Couple this with the strongest military and central intelligence agency in the world. The Federal Bureau of Investigation, National Security Administration, State Police, Local Police and Court systems - any and every uprising will be immediately stopped, prosecuted and incarcerated.
The only outcries heard are small town halls on the proposed universal health care bill.
that's all folks ...
Bloomberg: House Health-Care Proposal Adds $600 Billion in Taxes (Update2)
By Laura Litvan
June 12 (Bloomberg) -- Health-care overhaul legislation being drafted by House Democrats will include $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid, Ways and Means Committee Chairman Charles Rangel said.
Democrats will work on the bill’s details next week as they struggle through “what kind of heartburn” it will cause to agree on how to pay for revamping the health-care system, Rangel, a New York Democrat, said today. The measure’s cost is reaching well beyond the $634 billion President Barack Obama proposed in his budget request to Congress as a 10-year down payment for the policy changes.
Asked whether the cost of a health-care overhaul would be more than $1 trillion over a decade, Rangel said, “the answer is yes.” Some Senate Republicans, including Senator Orrin Hatch of Utah, say the costs will likely exceed $1.5 trillion.
House Democrats plan to release their legislation next week. Obama is working with Congress to get legislation to his desk by October.
Democrats in the House and Senate are crafting legislation that would require all Americans to have health insurance, prohibit insurers from refusing to cover pre-existing conditions and place other restrictions on the industry.
Online Exchanges
The legislation would establish online exchanges for individuals to purchase insurance and would require employers to provide health benefits to workers or pay a penalty. Some Democrats also are backing creation of a government-run program to expand coverage to the uninsured. The issue is the subject of bipartisan negotiations with Republican who oppose the so-called public option.
Rangel said Democrats are still considering options for tax increases that might be in the bill, including a possible end to the income tax exclusion for employer-paid health benefits.
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, is considering a proposal to apply income taxes to health-care plans if they are significantly more expensive than the basic health plan for federal employees -- $13,000 for a family of four.
Rangel said House Democrats want to avoid the deeper cuts to projected spending under Medicare and Medicaid that Obama has been putting forth. House Democrats want to achieve cost-savings by cuts in payments to private insurance plans under Medicare.
Covering the Costs
Obama has pledged that health-care changes won’t add to the deficit. To accomplish that, he’s proposed getting about $600 billion by reducing tax deductions available to the wealthy, and by trimming Medicare payments to insurance companies.
That won’t be enough to cover the overhaul costs. Obama said this week he plans in the coming days to disclose more proposals for raising “additional sources of revenue.” In a letter last week to Senate Democrats drafting legislation he said he will be proposing between $200 billion and $300 billion in further Medicare and Medicaid cuts.
Obama plans to give a speech Monday in Chicago to the American Medical Association as part of his campaign to build up support for what could be the biggest changes to healthcare policy since Medicare was established in 1965.
Rangel said that while House Democrats will likely release more details about health policy changes in their legislation next week, the package of offsetting tax increases and spending cuts likely will come later. Democrats, he said, want to put forth the more-positive aspects of an overhaul first. Rangel also wants to let lawmakers have time to study and weigh in on proposed offsets.
“We have a problem in not wanting to attract enough negative attention to the bill in terms of the pay-fors,” he said. “Let them get a good feel for the coverage.”
To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net
Last Updated: June 12, 2009 19:05 EDTSubmitted by Tyler Durden on 08/14/2009 12:29 -0500
Is HSBC Europe Chairman Subject Of Major Criminal Investigation
"Sources close to the Carroll Foundation Charitable Trust board of trustees have confirmed that compelling criminal evidence Carroll Trust Dossiers have been submitted to Scotland Yard and the FBI surrounding the fraudulent incorporation of dummy Gerald Carroll Trust HSBC bank accounts and the resultant embezzlement of over $150,000,000, (one hundred and fifty million dollars) of Carroll Trust liquid funds located and held in offshore tax havens within the framework of an international criminal syndicate operation."
Friday, August 14, 2009
American people’s ignorance
The American people’s ignorance, stupidity, and disinterest in the governance of this nation have allowed an oligopoly of politicians, bankers, and powerful corporations to seize control of the country and loot its riches for their personal gain. By failing to educate themselves, millions of ignorant Americans have lost all of their power and are now dictated to by the few with knowledge. The elite who dictate the path of our country do not want the masses to become educated. Their power would be in jeopardy. The American public school system insures the retention of their power and wealth. “Anyway, no drug, not even alcohol, causes the fundamental ills of society. If we're looking for the source of our troubles, we shouldn't test people for drugs, we should test them for stupidity, ignorance, greed and love of power.”
P.J. O’Rourke
The Ugly Numbers
Educational attainment is the single biggest determinant of lifetime income. As of 2008, 14% of Americans over 18 years old haven’t graduated high school, 31% have achieved a high school degree, 27% have earned a bachelor’s degree, and only 9% have earned an advanced degree. The median household income in the U.S. is $46,326. The median household income of Asian households is 24% higher at $57,518. The median household income of Black households is 35% lower at $30,134. Asian households have a fantastic educational achievement, with 49% of Asians achieving a bachelor’s degree or higher. Black households have a higher percentage with no high school degree (18%) than they do with a bachelor’s degree or higher (17%). Hispanic households have even more dreadful levels of educational attainment with only 12% achieving a bachelor’s degree or higher, while a full 37% of Hispanics have not graduated high school. Even though 69 million Americans have attained a high school degree, many are functionally illiterate as our public school system has just matriculated them through the system.
P.J. O’Rourke
The Ugly Numbers
Educational attainment is the single biggest determinant of lifetime income. As of 2008, 14% of Americans over 18 years old haven’t graduated high school, 31% have achieved a high school degree, 27% have earned a bachelor’s degree, and only 9% have earned an advanced degree. The median household income in the U.S. is $46,326. The median household income of Asian households is 24% higher at $57,518. The median household income of Black households is 35% lower at $30,134. Asian households have a fantastic educational achievement, with 49% of Asians achieving a bachelor’s degree or higher. Black households have a higher percentage with no high school degree (18%) than they do with a bachelor’s degree or higher (17%). Hispanic households have even more dreadful levels of educational attainment with only 12% achieving a bachelor’s degree or higher, while a full 37% of Hispanics have not graduated high school. Even though 69 million Americans have attained a high school degree, many are functionally illiterate as our public school system has just matriculated them through the system.
Wednesday, August 12, 2009
New York Post: SCANDAL BIGGER THAN BERNIE
August 12, 2009 --
HARRY Markopolos -- the whistleblower on Bernie Madoff who proved to be much smarter than the SEC -- says there are evildoers out there who will make the Ponzi scum "look like small-time." Markopolos gave a speech to 400 of the faithful at the Greek Orthodox Church in Southampton and predicted major scandals will soon be revealed about the unregulated, $600 trillion, credit-default swap market. "To put it in simple terms, it is like buying fire insurance policies from five different insurance companies on your neighbor's house and then burning down the house," he said. After his lecture, Hampton Sheet publisher Joan Jedell reports Markopolos was feted at a dinner at Nello Summertimes hosted by John Catsimatidis and his wife, Margo, who were joined by Al D'Amato and Greek shipping magnates Nicholas Zoullas and Spiros Milonas.
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