May 25, 2009
For some reason, the Boston College School of Law invited Federal Reserve Chairman, B.S. Bernanke, to deliver the commencement address to the class of 2009 on May 22. While reading the text of that oration, I found the candor of this remark at the beginning of his speech, to be quite refreshing:
Along those lines, last spring I was nearby in Cambridge, speaking at Harvard University’s Class Day. The speaker at the main event, the Harvard graduation the next day, was J. K. Rowling, author of the Harry Potter books. Before my remarks, the student who introduced me took note of the fact that the senior class had chosen as their speakers Ben Bernanke and J. K. Rowling, or, as he put it, “two of the great masters of children’s fantasy fiction.” I will say that I am perfectly happy to be associated, even in such a tenuous way, with Ms. Rowling, who has done more for children’s literacy than any government program I know of.
Meanwhile, that great master of children’s fantasy fiction (and money printing) is now faced with the possibility that someday, someone might actually start looking over his shoulder in attempt to get some vague idea of just what the hell is going on over at the Federal Reserve.
The Federal Reserve’s resistance to transparency has been a favorite topic of many commentators. For example, once Ben Bernanke took over the Fed Chairmanship from Alan Greenspan in 2006, Ralph Nader expressed his high hopes that Bernanke might adopt Nader’s suggested “seven policies of openness”. Dream on, Ralph!
Speaking of children’s fantasy fiction, one expert on that subject is Congressman Alan Grayson. As the Representative of Florida’s Eighth Congressional District, his territory includes Disney World. Thus, it should come as no surprise that back in January of 2009, as a new member of the House Financial Services Committee, he immediately set about cross-examining Federal Reserve Vice-Chairman Donald Kohn about what had been done with the 1.2 trillion dollars in bank bailout money squandered by the Fed after September 1, 2008. Glenn Greenwald of Salon.com provided a five-minute video clip of that testimony along with an audio recording of his 20-minute interview with Congressman Grayson, focusing on the complete lack of transparency at the Federal Reserve.
Better yet was Congressman Grayson’s questioning of Federal Reserve Board Inspector General Elizabeth Coleman on May 7. In one of the classic “WTF Moments” of all time, Ms. Coleman admitted that she had no clue about the “off balance sheet transactions” by the Federal Reserve, reported by Bloomberg News as amounting to over nine trillion dollars in the previous eight months. If you haven’t seen this yet, you can watch it here. After reviewing this video clip, Yves Smith of Naked Capitalism was of the opinion that Coleman was not stonewalling, but instead was “clearly completely clueless”. Ms. Smith pointed out how opacity at the Federal Reserve may be by design, with the apparent motive being obfuscation:
But there is a possibly more important issue at stake. The interview is with the Inspector General of the Federal Reserve Board of Governors. The programs are actually at the Federal Reserve Bank of New York. For reasons I cannot fathom, the Board of Governors is subject to Freedom of Information Act requests, while the Fed of New York has been able to rebuff them.
So I take Coleman’s inability to answer key questions to be a feature, not a bug. The Fed of New York probably can answer Congressional questions, is taking care to limit what it conveys to the Board so as to keep the information from Congress and the public. Note in the questioning the emphasis on “high level reviews”.
In order to shine a bright light on the Federal Reserve, Republican Congressman Ron Paul of Texas has introduced the Federal Reserve Transparency Act, (H.R. 1207) which would give the Government Accountability Office the authority to audit the Federal Reserve and its member components, and require a report to Congress by the end of 2010. On May 21, Congressman Alan Grayson wrote to his Democratic colleagues in the House, asking them to co-sponsor the bill. Among the many interesting points made in his letter were the following:
Furthermore, the Federal Reserve has refused multiple inquiries from both the House and the Senate to disclose who is receiving trillions of dollars from the central banking system. The Federal Reserve has redacted the central terms of the no-bid contracts it has issued to Wall Street firms like Blackrock and PIMCO, without disclosure required of the Treasury, and is participating in new and exotic programs like the trillion-dollar TALF to leverage the Treasury’s balance sheet. With discussions of allocating even more power to the Federal Reserve as the “systemic risk regulator” of the credit markets, more oversight over the central bank’s operations is clearly necessary.
The net effect of recent actions has been to isolate financial policy-making entirely from democratic input, and allow the Treasury Department to leverage the Federal Reserve’s balance sheet to spend money it cannot get appropriated from Congress. The public does not know where trillions of its dollars are going, and so has no meaningful control over the currency or this unappropriated “budget”. The extraordinary size of these lending facilities combined, the extreme secrecy, and the private influence is a dangerous seizure of Congress’s constitutional prerogative to appropriate public monies and control the currency.
You can do your part for this cause by signing the on-line petition. Let Congress know that we will no longer tolerate “children’s fantasy fiction” from the Federal Reserve. Demand an audit of the Federal Reserve as well as a report to the public of what that audit reveals.
Much Ado About Nothing
May 28, 2009
The media feeding frenzy over President Obama’s nomination of Judge Sonia Sotomayor to the United States Supreme Court provides us with yet another reason why so many newspapers and news magazines are going broke: They beat stories to death. There has been quite a bit of hype in the run-up to Obama’s announcement of his choice. News outlets have been salivating in anticipation of a protracted, partisan brawl with visions of the Clarence Thomas confirmation hearings, dancing in their heads. A visit to the RealClearPolitics website for May 27 provides the reader with an assaultive profusion of articles concerning the Sotomayor nomination.
There are a couple of simple dynamics at work here. With his nomination of Judge Sotomayor, President Obama has set out a trap for partisan Republicans, hell-bent on opposing any nominee selected by the Democrat for the high court. Once these “attack dogs” pounce on Sotomayor, they reinforce the public perception of the GOP as the Party of White Men. They would not only alienate female voters but they would also antagonize Hispanic voters. This is exactly why you won’t really see that much of a fight over her nomination. On the other hand, a political “has been” such as Newt Gingrich, sees the Sotomayor nomination as the perfect opportunity to keep his fat face in front of the cameras, without any apparent regard as to whether his remarks could exacerbate the GOP’s image problem. The “hard right” media outlets and other authoritarian activist groups have instinctively responded by filling in the blanks on their pre-written scripts to include Sotomayor’s name as well as the necessary touch-ups to relate their remarks to this particular target. One smear fits all.
In case you haven’t figured it out yet . . . It’s all a waste of your time. You need only read one story about the Sotomayor nomination and it was written by Mike Allen of Politico. Relying on confidential Republican sources, Mr. Allen reports that “the GOP plans no scorched-earth opposition to her confirmation”. At this point, I should advise you that the hissing sound you are hearing is all the air coming out of the tires for those pundits, hoping to expand this story into an epic drama and an eventual book deal. It’s not happening. As Mike Allen reported:
The news media shouldn’t try to create one, either . . . but they will anyway. What else are they going to discuss? You’re already sick of the American Idol stories. So what they’re left with is the economy. They hate that subject because the public and their own reporters are too dumb to understand it. Besides … it’s boring and it involves math! Never mind the fact that you’re going broke. Just smoke your “green shoots” and believe in a “hope rally” for the stock market.
It’s always refreshing when someone such as Mike Allen undermines the mainstream media hype machine by sticking to the simple truth of a story. In this case the simple truth is that the story itself is quite simple.