How the Federal Reserve, banks and government are screwing the country

[DSieve]

...
People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.
...

The Big Takeover

It's a long article, but well worth reading and understanding.

Following that article, the government suspended the head of the Office of Thrift Supervision:

The acting director of the Office of Thrift Supervision has been put on leave pending a review of the agency’s role in the backdating of capital infusions by some banks, the agency said Thursday evening.

OTS said in a surprise statement that Scott Polakoff, who has been serving as acting director of the OTS, would be replaced by OTS Chief Counsel John Bowman during the review by the Treasury Department.

The OTS, a division of the Treasury Department, has come under fire after it was revealed last year that the agency had allowed IndyMac Bancorp Inc. (IDMCQ) to backdate a May 2008 $18 million capital infusion to the first quarter. IndyMac failed a few months later, a collapse that cost the Federal Deposit Insurance Corp. $10.7 billion, the costliest failure in U.S. history. A subsequent review of the issue by the OTS uncovered four other cases of backdating by banks, cases which the agency said in a January letter to U.S. lawmakers “were not acceptable to current OTS standards.” Allowing the banks to backdate capital infusions to earlier quarters could allow firms to avoid regulatory penalties for having too little capital.

The Treasury Department Inspector General is investigating the matter, and it is unclear what sparked Polakoff’s sudden departure…

OTS Acting Director Polakoff Put On Leave

[DSieve]

Another long article reinforcing the Rolling Stone piece:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
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The Quiet Coup

[DSieve]

Geithner's plan to push all risks for toxic assets on the taxpayer while rewarding bankers:

[DSieve]

Getting mad yet? Ron Paul is spearheading HR 1207 (The Federal Reserve Transparency Act of 2009) - a bill to audit the Federal Reserve. It's gaining momentum:



Check out the Campaign for Liberty for latest updates or information on how to contact your Representative and urge them to support this bill.

[DSieve]

Ron Paul gets an opportunity to explain it (the problem) on TV:

[DSieve]

Dick Morris warns that the G20 summit is negotiating to put the Fed and SEC under IMF control:

[DSieve]

Try reading Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse by Thomas Woods. I highly recommend it.

[DSieve]

...
Policy makers are pursing an unprecedented strategy to revive the economy by providing credit to companies other than banks and cutting the main interest rate to as low as zero. The Fed plans to buy as much as $1.25 trillion in agency mortgage- backed securities this year and is providing financing for securities backed by loans to consumers and small businesses.

The increased credit has provoked concerns prices will surge. Central bank officials are “dramatically underplaying the risks and liability side of the balance sheet,” former St. Louis Fed President William Poole said in an interview at the conference.

“We are very vulnerable to an inflation explosion,” said Poole, a senior economic adviser to Merk Investments LLC in Palo Alto, California.

Former Fed Chairman Paul Volcker said Congress will probably review the authority granted to the Fed following the expansion in its assets.

Political Reaction

“I don’t think the political system will tolerate the degree of activity that the Federal Reserve, in conjunction with the Treasury, has taken,” Volcker, head of President Barack Obama’s Economic Recovery Advisory Board, said in remarks to the conference at Vanderbilt University.

U.S. lawmakers from both political parties, including House Financial Services Committee Chairman Barney Frank, have expressed concern in recent months that the central bank has overstepped its authority by providing emergency credit.

“I think for better or for worse we are at a point where the Federal Reserve Act, after all that has been happening in the last year or more, is going to be reviewed,” Volcker said.

Central bank officials are “underestimating the political forces they’re going to face once the recovery starts,” said Poole, a contributor to Bloomberg News.
...

Fed’s Kohn, Dudley Defend Size, Scope of Emergency Loan Plans

HR 1207 FTW!

[DSieve]

Following is a copy of New York Attorney General Andrew Cuomo’s letter to federal regulators and oversight committees regarding Bank of America Corp.’s acquisition of Merrill Lynch & Co. Inc.

The letter was sent to Christopher Dodd, chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs; Mary Schapiro, chairman of the Securities and Exchange Commission; Barney Frank, chairman of the House Financial Services Committee; and Elizabeth Warren, chair of the Congressional Oversight Panel.

April 23, 2009

Re: Bank of America-Merrill Lynch Merger Investigation

Dear Chairpersons Dodd, Frank, Schapiro and Warren:

I am writing regarding our investigation of the events surrounding Bank of America’s merger with Merrill Lynch late last year. Because you are the overseers and regulators of the Troubled Asset Relief Program (“TARP”), the banking industry, and the Treasury Department, we are informing you of certain results of our investigation. As you will see, while the investigation initially focused on huge fourth quarter bonus payouts, we have uncovered facts that raise questions about the transparency of the TARP program, as well as about corporate governance and disclosure practices at Bank of America. Because some matters relating to our investigation involve federal agencies and high-ranking federal officials charged with managing the TARP program, we believe it is important to inform the relevant federal bodies of our current findings. We have attached relevant documents to this letter for your review.

On September 15, 2008, Merrill Lynch entered into a merger agreement with Bank of America. The merger was negotiated and due diligence was conducted over the course of a tumultuous September 13-14 weekend. Time was of the essence for Merrill Lynch, as the company was not likely to survive the following week without a merger. The merger was approved by shareholders on December 5, 2008, and became effective on January 1, 2009.

The week after the shareholder vote - and days after Merrill Lynch set its bonuses Merrill Lynch quickly and quietly booked billions of dollars of additional losses. Merrill Lynch’s fourth quarter 2008 losses turned out to be $7 billion worse than it had projected prior to the merger vote and finalizing its bonuses. These additional losses, some of which had become known to Bank of America executives prior to the merger vote, were not disclosed to shareholders until mid-January 2009, two weeks after the merger had closed on January 1, 2009.

On Sunday, December 14, 2008, Bank of America’s CFO advised Ken Lewis, Bank of America’s CEO, that Merrill Lynch’s financial condition had seriously deteriorated at an alarming rate. Indeed, Lewis was advised that Merrill Lynch had lost several billion dollars since December 8, 2008. In six days, Merrill Lynch’s projected fourth quarter losses skyrocketed from $9 billion to $12 billion, and fourth quarter losses ultimately exceeded $15 billion.

Immediately after learning on December 14,2008 of what Lewis described as the “staggering amount of deterioration” at Merrill Lynch, Lewis conferred with counsel to determine if Bank of America had grounds to rescind the merger agreement by using a clause that allowed Bank of America to exit the deal if a material adverse event (“MAC”) occurred. After a series of internal consultations and consultations with counsel, on December 17, 2008, Lewis informed then-Treasury Secretary Henry Paulson that Bank of America was seriously considering invoking the MAC clause. Paulson asked Lewis to come to Washington that evening to discuss the matter.

At a meeting that evening Secretary Paulson, Federal Reserve Chairman Ben Bernanke, Lewis, Bank of America’s CFO, and other officials discussed the issues surrounding invocation of the MAC clause by Bank of America. The Federal officials asked Bank of America not to invoke the MAC until there was further consultation. There were follow-up calls with various Treasury and Federal Reserve officials, including with Treasury Secretary Paulson and Chairman Bernanke. During those meetings, the federal government officials pressured Bank of America not to seek to rescind the merger agreement. We do not yet have a complete picture of the Federal Reserve’s role in these matters because the Federal Reserve has invoked the bank examination privilege.

Bank of America’s attempt to exit the merger came to a halt on December 21, 2008. That day, Lewis informed Secretary Paulson that Bank of America still wanted to exit the merger agreement. According to Lewis, Secretary Paulson then advised Lewis that, if Bank of America invoked the MAC, its management and Board would be replaced:

[W]e wanted to follow up and he said, ‘I’m going to be very blunt, we’re very supportive on Bank of America and we want to be of help, but’ --as I recall him saying “the government,” but that may or may not be the case - “does not feel it’s in your best interest for you to call a MAC, and that we feel so strongly,” --I can’t recall if he said “we would remove the board and management if you called it” or if he said “we would do it if you intended to.” I don’t remember which one it was, before or after, and I said, “Hank, let’s deescalate this for a while. Let me talk to our board.” And the board’s reaction was of “That threat, okay, do it. That would be systemic risk.”

In an interview with this Office, Secretary Paulson largely corroborated Lewis’s account. On the issue of terminating management and the Board, Secretary Paulson indicated that he told Lewis that if Bank of America were to back out of the Merrill Lynch deal, the government either could or would remove the Board and management. Secretary Paulson told Lewis a series of concerns, including that Bank of America’s invocation of the MAC would create systemic risk and that Bank of America did not have a legal basis to invoke the MAC (though Secretary Paulson’s basis for the opinion was entirely based on what he was told by Federal Reserve officials).

Secretary Paulson’s threat swayed Lewis. According to Secretary Paulson, after he stated that the management and the Board could be removed, Lewis replied, “that makes it simple. Let’s deescalate.” Lewis admits that Secretary Paulson’s threat changed his mind about invoking that MAC clause and terminating the deal.

Secretary Paulson has informed us that he made the threat at the request of Chairman Bernanke. After the threat, the conversation between Secretary Paulson and Lewis turned to receiving additional government assistance in light of the staggering Merrill Lynch losses.

Lewis spoke with individual Board members after his conversation with Secretary Paulson. The next day, December 22, 2008, the Board met and was advised of Lewis’s decision not to invoke the MAC. The minutes of that meeting listed the key points of Lewis’s calls with Secretary Paulson and Chairman Bemanke:

(i) first and foremost, the Treasury and Fed are unified in their view that the failure of the Corporation to complete the acquisition of Merrill Lynch would result in systemic risk to the financial system in America and would have adverse consequences for the Corporation; (ii) second, the Treasury and Fed state strongly that were the Corporation to invoke the material adverse change (“MAC”) clause in the merger agreement with Merrill Lynch and fail to close the transaction, the Treasury and Fed would remove the Board and management of the Corporation; (iii) third, the Treasury and Fed have confirmed that they. will provide assistance to the Corporation to restore capital and to protect the Corporation against the adverse impact of certain Merrill Lynch assets: and (iv) fourth, the Fed and Treasury stated that the investment and asset protection promised could not be provided or completed by the scheduled closing date of the merger, January 1, 2009; that the merger should close as schedu[ed, and that the Corporation can rely on the Fed and Treasury to complete and deliver the promised support by January 20, 2009, the date scheduled for the release of earnings by the Corporation.

The Board Minutes further state that the “Board clarify[ied] that is [sic] was not persuaded or influenced by the statement by the federal regulators that the Board and management would beremoved by the federal regulators if the Corporation were to exercise the MAC clause and failed to complete the acquisition of Merrill Lynch.”

Another Board meeting was held on December 30, 2008. The minutes of that meeting stated that “Mr. Lewis reported that in his conversations with the federal regulators regarding the Corporation’s pending acquisition of Merrill Lynch, he had stated that, were it not for the serious concerns regarding the status of the United States financial services system and the adverse consequences of that situation to the Corporation articulated by the federal regulators (the “adverse situation”), the Corporation would, in light of the deterioration of the operating results and capital position of Merrill Lynch, assert the material adverse change clause in its merger agreement with Merrill Lynch and would seek to renegotiate the transaction.”

Despite the fact that Bank of America had determined that Merrill Lynch’s financial condition was so grave that it justified termination of the deal pursuant to the MAC clause, Bank of America did not publicly disclose Merrill Lynch’s devastating losses or the impact it would have on the merger. Nor did Bank of America disclose that it had been prepared to invoke the MAC clause and would have done so but for the intervention of the Treasury Department and the Federal Reserve.

Lewis testified that the question of disclosure was not up to him and that his decision not to disclose was based on direction from Paulson and Bernanke: “I was instructed that ‘We do not want a public disclosure. ‘”

Secretary Paulson, however, informed this Office that his discussions with Lewis regarding disclosure concerned the Treasury Department’s own disclosure obligations. Prior to the closing of the deal, Lewis had requested that the government provide a written agreement to provide additional TARP funding before the close of the Merrill Lynch/Bank of America merger. Secretary Paulson advised Lewis that a written agreement could not be provided without disclosure.

Lewis testified that there was no discussion with the Board about disclosure to shareholders. However, on the night of December 22, 2008, Lewis emailed the Board, “I just talked with Hank Paulson. He said that there was no way the Federal Reserve and the Treasury could send us a letter of any substance without public disclosure which, of course, we do not want.” The December 30 Board meeting minutes further reflect that Bank of America was trying to time its disclosure of Merrill Lynch’s losses to coincide with the announcement of its earnings in January and the receipt of additional TARP funds: “Mr. Lewis concluded his remarks by stating that management will continue to work with the federal regulators to transform the principles that have been discussed into an appropriately documented commitment to be codified and implemented in conjunction with the Corporation’s earning [sic] release on January 20, 2009.”

It also bears noting that while no public disclosures were made by Bank of America, Lewis admitted that Bank of America’s decision not to invoke the MAC clause harmed any shareholder with less than a three year time-horizon:

Q. Wasn’t Mr. Paulson, by his instruction, really asking Bank of America shareholders to take a good part of the hit of the Merrill losses?

A. What he was doing was trying to stem a financial disaster in the financial markets, from his perspective.

Q. From your perspective, wasn’t that one of the effects of what he was doing?

A. Over the short term, yes, but we still thought we had an entity that filled two big strategic holes for us and over long term would still be an interest to the shareholders.

Q. What do you mean by “short-term”?

A. Two to three years.

Notably, during Bank of America’s important communications with federal banking officials in late December 2008, the lone federal agency charged with protecting investor interests, the Securities and Exchange Commission, appears to have been kept in the dark. Indeed, Secretary Paulson informed this Office that he did not keep the SEC Chairman in the loop during the discussions and negotiations with Bank of America in December 2008.

As this crucial recovery process continues, it is important that taxpayers have transparency into decision-making. It is equally important that investor interests are protected and respected. We hope the information herein is useful to you in your federal regulatory and oversight capacities and we remain ready to assist further in any way. We also note that we have been coordinating our inquiry with the Special Inspector General for the Troubled Asset Relief Program, whose investigation also remains open.

Andrew M. Cuomo

Attorney General of the State of New York

New York Attorney General Andrew Cuomo’s letter to federal regulators and oversight committees regarding Bank of America Corp.’s acquisition of Merrill Lynch & Co. Inc.

[DSieve]

ONE HUNDRED ELEVENTH CONGRESS

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
April 23,2009


Mr. Ben S. Bernanke
Chairman
Board of Governors of the Federal Reserve System
Twentieth St. and Constitution Ave. N.W.
Washington, D.C. 20551


Dear Mr. Bernanke:

As you know, on March 30,2009 the Domestic Policy Subcommittee sent the Federal Reserve (..Fed") a request for documents pertaining to discussions between the Fed, Treasury and Bank of America ("BOA") that concerned BOA's acquisition of Menill Lynch & Co. Unfortunately, the Fed and Treasury have allowed the deadline to pass without producing the requested doôuments or informing the Committee about a date of compliance.

Today, The Wall Street Journal's article on Ken Lewis's statement under oath with the New York State Attorney General strongly implies that you and Secretary Paulson instructed Bank of America to file fraúdulent reporting documents with the Securities and Exchange Commission (,.SEC"). As you know, Mr. Kucinich asked SEC for an investigation into whether BOA made material omissions in filings with SEC, and SEC has confirmed that such an investigation is underway. If Mr. Lewis' statement, as reported by the Journal, of discussions that occurred between you, Mr. Paulson and himself is accurate, then federal officials were potentially involved in knowingly denying BOA investors material information.

The implications of Mr. Lewis' testimony, if accurate, are extremely serious. Under these circumstances failure to comply with the Subcommittee's request raises the prospect that we will be forced to consider compulsory means to achieve compliance with our request. However, we would prefer your voluntary compliance.

Therefore, we repeat the earlier request, and expand it to include "all documents prepared for intemal use related io discussions with Bank of America and/or Treasury about compensation packages, bonuses, annual losses at Menill Lynch, and federal guarantees against losses on Merril Lynch assets, for the period August 1, 2008 through January 19,2009." We emphasize that the original and this expanded request also covers discussions relating to public disclosure of information about compensation packages, bonuses, and annual losses at Merrill Lynch, for the period referenced above. This request, we also emphasize, covers any federal loans or guarantees against potential losses at Merrill/BOA and public disclosure of those loans or guarantees. We further request that you provide a written response specifically to the implication that you subomed the filing of misleading information by BOA with SEC.

The Oversight and Government Reform Committee is the principal oversight committee in the House of Representatives and has broad oversight jurisdiction as set forth in House Rule X. An attachment to this letter provides information on how to respond to the Subcommittee's
request.

In recognition of the fact that we are expanding the original request, but that a substantial portion of it reiterates a previous request, we ask that you provide all of these documents and the written response as soon as possible, but in no case later than 5:00 p.m. on Monday, May 4,
2009.

If you have any questions regarding this request, please contact Jaron Bourke, Staff Director ....

Sincerely,

Dennis J. Kucinich
Chairman
Domestic Policy Subcommittee

Edolphus Towns
Chairman
Oversight and Government Reform Committee
...

http://domesticpolicy.oversight.hous...0423194951.pdf

Timmy got a similar love letter:

http://domesticpolicy.oversight.hous...0423195040.pdf

[DSieve]

The Senate apparently believe the Fed is sacrosanct:

Dear Friend of Liberty,

Earlier today, the first shot in our battle to pass Audit the Fed through the U.S. Senate was fired on the Senate floor by Senator Jim DeMint of South Carolina.

Senator DeMint, who has a well-deserved reputation for taking the battle to the other side in the Senate, once again proved why he is such a valuable ally in our fight to bring transparency and accountability to the Federal Reserve.

A little while ago, the Senate voted to pass HR 2918, the Legislative Branch Appropriations Act. This $3 billion bill contains, among many other things, provisions for GAO audits on certain agencies.

Seizing on a chance to take quick action to bring Audit the Fed up for a vote, and with the GAO provisions in mind, Senator DeMint attached the full text of S 604, the Senate version of Ron Paul's Audit the Fed bill, to HR 2918 as Senate Amendment 1367 before it was considered for final passage.

However, Senate Democrats refused to even allow a vote on the amendment! That's right. The internationalist, Fed-loving elite in the Senate used a parliamentary tactic to shut down DeMint's amendment.

After Senator DeMint brought Audit the Fed to the floor, Senator Ben Nelson of Nebraska raised a "point of order" to prevent a vote, claiming that the amendment violated Senate Rule 16 by "legislating" on an appropriations bill. The Senate president agreed, and the amendment was shot down.

Senator DeMint did not back down, though, and directly challenged Senate leadership by pointing out the other GAO audits contained in the bill. As Senator DeMint listed them off, the Senate president was forced to agree with Senator DeMint that each one he described, all of which would be left in for final passage, also violated Senate Rule 16.

Which tells us at least one thing: the problem wasn't with "legislating" on the bill or violating Senate Rules (which is commonly done). Shooting down the amendment was about preventing a thorough audit of the Federal Reserve for the first time in its history!

Senate leadership is hoping this issue will just fade away so they can get on to what they deem to be more "important" business, like dictating what kind of healthcare plan you and I can carry or passing destructive Cap-and-Tax legislation.

But the American people deserve answers on what the Fed has done with trillions of our tax dollars and what they are committing us and future generations to as part of their secret deals with foreign central banks and governments.

The leadership decided today to turn their backs on transparency, but our fight is just beginning.

As Senator DeMint made clear on the floor, the Audit the Fed bill has wide bipartisan support. He rightly warned the Senate that even if they delay today, they WILL have to deal with the issue on the floor.

It is up to you and me to back up Senator DeMint's words by making sure the momentum continues to build and the bill comes up for a final vote.

The rejection of the Audit amendment is just the first battle in our war. Now is the time to really put the pressure on the U.S. Senate to Audit the Fed!

Senator DeMint fired the opening salvo and showcased the hypocrisy of the Senate for allowing other GAO audits to be included in the bill while refusing to even allow a vote on Fed transparency.

[DSieve]

Testimony in Support of HR 1207, The Federal Reserve Transparency Act of 2009 House Financial Services Committee
September 25, 2009

I am speaking this morning in support of HR 1207, the Federal Reserve Transparency Act. As the Committee knows, this bill would require a full audit of the Federal Reserve by the Government Accountability Office (GAO).

On November 10, 2008, Bloomberg News ran the following headline: “Fed Defies Transparency Aim in Refusal to Disclose.” The story pointed out that the Fed was refusing to identify the recipients of trillions of dollars in emergency loans or the dubious assets the central bank was accepting as collateral. When the initial $700 billion congressional bailout was being debated last September, Fed chairman Ben Bernanke and then-Secretary of the Treasury Hank Paulson couldn’t emphasize their commitment to transparency strongly enough. But “two months later, as the Fed [lent] far more than that in separate rescue programs that didn’t require approval by Congress, Americans [had] no idea where their money [was] going or what securities the banks [were] pledging in return.”

Matthew Winkler, editor-in-chief of Bloomberg News, put it simply: “Taxpayers – involuntary investors in this case – have a right to know who received loans, in what amounts, for which collateral, and why specific loans were made.”

This has been portrayed as a trivial matter being pursued by some cynical and uppity Americans who don’t know their place. But there is no good reason for Americans not to know the recipients of the Fed’s emergency lending facilities. There is no good reason for them to be kept in the dark about the Fed’s arrangements with foreign central banks. These things affect the quality of the money that our system obliges the American public to accept.

The Fed’s arguments against the bill are unlikely to persuade, and will undoubtedly strike the average American as little more than special pleading. Perhaps the most frequent of the claims is that a genuine audit would jeopardize the alleged independence of the Fed. Congress could come to influence or even dictate monetary policy.

This is a red herring. The bill is not designed to empower politicians to increase the money supply, choose interest-rate targets, or adopt any of the rest of the Fed’s central planning apparatus, all of which is better left to the free market than to the Fed or Congress. It seeks nothing more than to open the Fed’s books to public scrutiny. Congress has a moral and legal obligation to oversee institutions it brings into existence. The convoluted scenarios by which merely opening the books will lead to an inflationary catastrophe at the hands of Congress are difficult to take seriously.

At the same time, as we hear this objection repeated time and again, we might wonder just how independent the Fed really is, what with its chairman up for reappointment by the president every four years. Have these critics never heard of the political business cycle? Fed chairmen have been known to ingratiate themselves into the president’s favor close to election time by means of loose monetary policy and the false (and temporary) prosperity it brings about. Let us not insult Americans’ intelligence by pretending this phenomenon does not exist.

Moreover, try to imagine a Fed chairman doggedly seeking to maintain the value of the dollar even if it meant refusing to monetize a massive deficit to fight a war or “stimulate” a depressed economy. It is not possible.

If there is any truth to the idea of Fed independence, it lay in precisely this: the Fed may reward favored friends and constituencies with trillions of dollars in various kinds of assistance, while keeping the public completely in the dark. If that is the independence we’re talking about, no self-respecting American would hesitate for a moment to challenge it.

A related argument warns that the legislation threatens to politicize lender-of-last-resort decisions. Again, this is untrue. But even if it were true, how would that represent a departure from current practice? I hope we are not asking Americans to believe that the decisions to bail out various financial institutions over the past two years, and in particular to allow them to become depository institutions overnight that they might qualify for assistance, were made on the basis of a pure devotion to the common good and were not political at all. Most Americans, not unreasonably, seem convinced of another thesis: that Goldman Sachs, for instance, might be just a little bit more politically well connected than the rest of us.

Opponents of HR 1207 have sometimes tried to claim that the Fed is already adequately audited. If this were true, why is the Fed in panic mode over this bill? It is the broad areas these audits exclude that the American public is increasingly interested in investigating, and these are the gaps that HR 1207 seeks to fill.

The conventional wisdom seems to be that the monetary system we have now is sound and beyond reproach, and certainly better than any system that preceded it. My purpose today is not to render judgment upon such views, however deeply misguided I happen to consider them, and however inaccurate their implicit view of nineteenth-century financial panics. My point is simply this: if our monetary system were really as strong, robust, and beyond criticism as its cheerleaders claim, why does it need to rely so heavily on public ignorance? How can it be a sound banking system that depends on keeping the public in the dark about the condition of its financial institutions?

Let me also make clear that supporters of this legislation are strongly opposed to a watered-down version of the bill – which, incidentally, would only increase public suspicion that someone is hiding something.

If the Federal Reserve Transparency Act passes and the audit takes place, the American people will have achieved a great victory. If the legislation fails, more and more Americans will begin to wonder what the Fed could be so anxious to keep hidden, and the pressure for transparency will simply intensify. A recent poll finds 75 percent of Americans already in favor of auditing the Fed. The writing is on the wall.

The Federal Reserve may as well get used to the idea that the audit is coming. That would be a far more sensible approach than the counterproductive and condescending one it has adopted thus far, in which the peons who populate the country are urged to quit pestering their betters with all these impertinent questions. The Fed should take to heart the words of consolation the American people are given whenever a new government surveillance program is uncovered: if you’re not doing anything wrong, you have nothing to worry about.

The superstitious reverence that Americans have been taught to have for the Federal Reserve is unworthy of the dignity of a free people. The Fed enjoys a government-granted monopoly on the creation of legal-tender money. It is not an unreasonable imposition for Americans to demand to know about the activities of such an institution. It is common sense.

http://www.house.gov/apps/list/heari..._testimony.pdf

Video:

http://cspan.org/Watch/Media/2009/09...0Overhaul.aspx

[DSieve]

In case Youtube pulls the video, you can also watch it here:

http://www.campaignforliberty.com/blog.php?view=25905