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.
The Conspiracy Against Conspiracy Theories
January 18, 2010
Cass Sunstein is a Harvard-educated legal scholar who began his career in the Justice Department’s Office of Legal Counsel and moved on to become a Professor at the University of Chicago Law School. President Obama appointed Mr. Sunstein to the position of Administrator of the Office of Information and Regulatory Affairs. In case you’re wondering what that bureaucracy does, a visit to its website will reveal this:
On January 12, Daniel Tencer of The Raw Story website, pointed out that Mr. Sunstein co-authored a paper with Adrian Vermule, published in the Journal of Political Philosophy in 2008 entitled, “Conspiracy Theories: Causes and Cures”. Here is some of what Mr. Tencer had to say about that paper, while quoting fellow critic, Marc Estrin:
At Salon.com, Glenn Greenwald (an attorney who has litigated cases based on Constitutional law issues) expressed outrage that President Obama would be so closely tied to someone with such views:
Sunstein also advocated the use of “credible independent experts” to be hired and paid by the government to add a veneer of credibility to government positions. The relevance of this point to the controversy over Jonathan Gruber (the MIT professor who received undisclosed payments to promote the President’s healthcare plan) resulted in a situation where that issue became the most widely-discussed aspect of Greenwald’s piece. By taking issue with Greenwald, Paul Krugman took advantage of the opportunity to get a little egg on his own face with a blog posting at his New York Times-based site. Greenwald had no difficulty exposing the flawed rationale of Krugman’s retort on January 16.
I would like to see the debate refocus on the original point: the idea that the government should get involved in debunking “conspiracy theories”. That term is used by all types of pundits to invalidate any point of view contrary to their own. As Daniel Tencer explained in his Raw Story piece, Sunstein used the term “crippled epistemology” to support the contention that people who believe in conspiracy theories have a limited number of sources of information that they trust. I believe that Sunstein and his ilk have it backwards. By their constant attempts to tar “the Internet” as the wellspring of so many “conspiracy theories” – they are acting to limit the number of trustworthy sources of information with their own counterintelligence tactics.
The greater question concerns why it would be so important for the government to get involved in this type of activity. In the case of the 9/11 conspiracy theories, there is the obvious concern that Al Queda or some similarly-inclined group would want to cultivate an online network of kindred spirits who might potentially be of service to such an organization. Does that mean that anyone who suspects some degree of cover-up concerning some aspect of that tragedy should be treated as a potential “enemy combatant”? What other “conspiracy groups” would be targeted by such operations? Who would determine whether a particular conspiracy theory becomes the focus of such an effort and what would be the criteria for making such a determination? As Glenn Greenwald’s January 15 essay demonstrates, once the government embarks on such a course, there is unlimited potential for abuse. Worse yet, the government’s use of such tactics should cause any such government “information control” efforts to self-destruct. Greenwald put it this way:
In other words, this is a battle the government has already lost. A program to conspire against conspiracy groups could serve no other purpose but to validate the claims made by those groups.
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