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PRESIDENT BARACK HUSSEIN OBAMAVIDEO: Hilarious Song of Protest: FUCK THE FED -- Written and Produced by Neal Fox (Source: The Daily Bail.) FEDERAL RESERVE BANK AS SUPERCOP -- OR GET RID OF IT???May 2009124 congressman demand audit of Federal Reserve -- Support multiplying for scrutiny of nation's money controllers (May 2009) A bill calling for the comptroller general of the United States to audit the private Federal Reserve is gaining widespread support in Congress, as 124 representatives have added their names to its growing list of co-sponsors. (SITE NOTE: Update: On 8 Jun it was reported that there were 207 co-sponsors for the bill.)As WND reported, U.S. Rep. Ron Paul, R-Texas, introduced in February H.R. 1207, the Federal Reserve Transparency Act of 2009, a bill requiring that an audit of both the Fed's Board of Governors and the Federal Reserve Banks be completed and reported to Congress before the end of 2010. Paul was joined at the time of introduction by 11 other Republican and Democratic co-sponsors – but now that number has multiplied. Since its introduction, 113 additional U.S. representatives have added their names. Rep. Paul has been a harsh critic of the Federal Reserve, even seeking to abolish the private money-control system, arguing that Congress should "reassert its constitutional authority over monetary policy." The Constitution, Paul said, gives Congress, not the private Federal Reserve, "the authority to coin money and regulate the value of the currency." Paul explained his advocacy for the H.R. 1207 audit in the U.S. House: "Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar," the Texas Republican said. "Since 1913 the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy. "How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation," he said. Paul called oversight of the Fed "long overdue." "Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations," he continued. "The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government – established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight?" Paul's bill would also make the Federal Reserve's funding facilities, including the Primary Dealer Credit Facility, Term Securities Lending Facility, and Term Asset-Backed Securities Lending Facility subject to congressional oversight. Paul said every problem in the economy, "from the Great Depression, to the stagflation of the '70s, to the current economic crisis caused by the housing bubble," can be traced to Federal Reserve policy. Paul's abolition plan calls for the director of the Office of Management and Budget to "liquidate" Fed assets "in an orderly manner so as to achieve as expeditious a liquidation as may be practical while maximizing the return to the Treasury." H.R. 1207 was referred to the House Committee of Financial Services on Feb. 26 and remains there today. "This piece of legislation is perhaps the most important of my career," Paul wrote in an April 30 letter to supporters. "Americans from all over the political spectrum are demanding an audit of the Federal Reserve. And with good reason!" A companion Senate bill known as the Federal Reserve Sunshine Act, or S. 604, is sponsored by Sen. Bernard Sanders, I-Vt. It currently has no co-sponsors and was referred to the Senate Banking, Housing, and Urban Affairs committee on March 16. Paul is urging people to contact representatives or stop by their offices – especially members of the Financial Services Committee – to demand that they support the legislation. He suggests citizens begin by contacting Financial Services Committee Chairman Barney Frank, D-Mass. "Auditing the Fed is only the first step towards exposing this antiquated insider-run creature to the powerful forces of free-market competition," Paul wrote. "Once there are viable alternatives to the monopolistic fiat dollar, the Federal Reserve will have to become honest and transparent if it wants to remain in business." Paul has introduced legislation regarding the Fed, often suggesting its abolition, repeatedly over the last decade, but the measures seldom have attracted additional support. (Source: Hot Air.) AP Sources: Obama wants Fed to be finance supercop (May 2009) The White House told industry officials on Friday that it is leaning toward recommending that the Federal Reserve become the supercop for "too big to fail" companies capable of causing another financial meltdown. According to officials who attended a private one-hour meeting between President Barack Obama's economic advisers and representatives from about a dozen banks, hedge funds and other financial groups, the administration made it clear it was not inclined to divide the job among various regulators as has been suggested by industry and some federal regulators. "The idea of having a council of regulators was pretty much vetoed," said one participant. Treasury Secretary Timothy Geithner, who briefly attended the meeting but did not identify the Fed specifically as his top choice, told the group that one organization needs to be held responsible for monitoring systemwide risk. He said such a regulator should be given better visibility into all institutions that pose a risk to the financial system, regardless of what business they are in. "Committees don't make decisions," Geithner told the group, according to another participant. Officials from the Treasury Department and National Economic Council, which hosted the meeting, told participants that the Fed was considered the most likely candidate for the job, according to several officials who attended or were briefed on the discussions. The administration officials said a legislative proposal would likely be sent to Capitol Hill in June with the expectation that the House Financial Services Committee, led by Rep. Barney Frank, D-Mass., would consider the measure before the July 4th recess. The officials requested anonymity because the meeting had not been publicly announced and they were not authorized to discuss it. A Treasury Department statement provided to The Associated Press on Friday confirmed Geithner's position that he wants a "single independent regulator with responsibility for systemically important firms and critical payment and settlement systems." A spokesman said Geithner also is open to creating a council to "coordinate among the various regulators, including the systemic risk regulator." Industry officials say such a council would likely serve as advisers and would not be given the authority that a "systemic risk regulator" would. The Fed itself hasn't taken a position on whether it should have the job, although Chairman Ben Bernanke has said the Fed would have to be involved in any effort to identify and resolve systemwide risk. Geithner said Friday the administration plans an "aggressive" package of reforms for the financial system including proposals to fundamentally overhaul how financial institutions pay their senior executives. Critics have charged that the bonus system used at many major institutions encouraged excessive risk taking. "We had a financial system that did a terrible job of protecting consumers, of building a strong, stable financial system less prone to crisis and we are going to have to fix that," Geithner said in an interview on PBS' "Newshour." "You will see this president, this administration bringing sweeping reforms to our financial system." In a speech Thursday, Bernanke said that huge, globally interconnected financial firms whose failure could endanger the U.S. economy should be subject to "a robust framework for consolidated supervision." Naming the Fed as a kind of super regulator is likely to run into at least some resistance by other federal regulators and in Congress. Mary Schapiro, the head of the Securities and Exchange Commission, said Friday that she was inclined to support the idea floated this week by the head of the Federal Deposit Insurance Corp. for a new "systemic risk council" to monitor large institutions against financial threats. The council would include the Treasury Department, Federal Reserve, FDIC and SEC, according to the proposal by FDIC Chairman Sheila Bair. Speaking to the Investment Company Institute, the mutual fund industry's biggest trade group, Schapiro said she is concerned about an "excessive concentration of power" over financial risk in a single agency. Lawmakers are divided on whether the Fed alone should assume the role of systemic regulator. Some say the Fed failed to prevent the current economic crisis and shouldn't be trusted with such a big responsibility. Others say the Fed should stay focused on its primary duty of setting monetary policy. Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, said this week he is "more attracted to the council idea" than having a single regulator play that role. Unlike other regulatory agencies, the Fed does not rely on appropriations from Congress for its operating funds. It finances itself through its investments. Fed Gov. Daniel Tarullo told Congress in March that the extent to which the new responsibility for systemic risk should fall to the central bank "depends a great deal on precisely how the Congress defines the role and responsibilities of the authority." "Any systemic risk authority would need a sophisticated, comprehensive and multidisciplinary approach to systemic risk," he testified. "Such an authority likely would require knowledge and experience across a wide range of financial institutions and markets." (Source: AP.) Plan to audit Fed steamrolls ahead (May 2009) House co-sponsors now total 179, companion bill begins Senate trek U.S. Rep. Ron Paul, R-Texas, long has opposed the power held by the Federal Reserve and its ability to manipulate the nation's economy and over the years has launched proposals to get rid of the quasi-governmental agency, without significant support. But his current plan, H.R. 1207, the Federal Reserve Transparency Act of 2009 to demand an audit of the organization, is quickly gaining steam. As of today, the proposal had collected a bipartisan coalition of 179 members of Congress who have signed on as co-sponsors. Not that Paul's ultimate goals have changed significantly. "To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have," he wrote in a new Straight Talk commentary. "They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability." He's even said Congress should "reassert its constitutional authority over monetary policy." Besides the support in the U.S. House, a companion bill, S. 604, also now has been introduced in the U.S. Senate by Sen. Bernard Sanders of Vermont. It has been referred to the Senate Committee on Banking, Housing and Urban Affairs. Paul said that should help the effort "begin to gain momentum." A spokeswoman in Paul's congressional office also told WND that Rep. Barney Frank, the chief of the financial services committee in the House, already has expressed a willingness to hold hearings on the issue. When Paul introduced his latest proposal to audit the organization there were 11 co-sponsors, which grew quickly to 124 just a few weeks ago. The bill calls for the comptroller general of the United States to audit the private Federal Reserve and report to Congress before the end of 2010. The Constitution, Paul said, gives Congress, not the private Federal Reserve, "the authority to coin money and regulate the value of the currency." Paul explained his advocacy for the H.R. 1207 audit in the U.S. House: "Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar," the Texas Republican said. "Since 1913 the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy. "How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation," he said. Paul called oversight of the Fed "long overdue." "Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations," he continued. "The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government – established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight?" Paul's bill would also make the Federal Reserve's funding facilities, including the Primary Dealer Credit Facility, Term Securities Lending Facility, and Term Asset-Backed Securities Lending Facility subject to congressional oversight. His new commentary was titled, "Audit the Fed, Then End It!" It cited some "pushback" from individuals in Congress. "The main argument seems to be that Congressional oversight over the Fed is government interference in the free market," he wrote. "This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. "The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters," he said. What has actually happened is the U.S. is that Congress "has abdicated this responsibility to a cabal of elite, quasi-governmental banks who, instead of stabilizing the economy, have destabilized it," he wrote. Paul said it took "less than two decades for the Federal Reserve to bring on the Great Depression of the 1930s." He also said some have been worried about bringing the Fed into the "political process." "The Federal Reserve is already heavily entrenched in the political process, as the Fed chairman is a political appointee. High level officials routinely make the rounds between positions at the Fed, member banks, Treasury and back again, taking care of friends and each other along the way," he said. (Source: WND.) VIDEO: He is former prosecutor, House Democrat Alan Grayson; she is Elizabeth Coleman, Inspector General of the Federal Reserve. The issue is oversight at the Federal Reserve. Watch it and weep. Congressional questioning of the Inspector General of the Fed revealing that NOBODY has investigated the NINE TRILLION DOLLAR off-sheet losses of the Federal Reserve Bank (Source: The Daily Bail.) CHANGE Daily Bail Provides Coverage of the Federal Reserve Fiasco (May 2009) (Source: The Daily Bail.) David Walker is the Comptroller General of the Government Accounting Office (GAO) who took his message on the road in 2009. David Walker's message was that at the current rate of spending America was digging a hole that it could NEVER get out of. WALKER SAID THE GOVERNMENT WAS OUT OF MONEY -- AMERICA CANNOT "GROW OUT OF" THE DEBT. Walker was appointed by Bill Clinton for a 15 year term as GAO Comptroller General (confirmed by Congress). This was the same message that Ron Paul was saying. No one listened and elected Obama. He foisted the Stimulus Package and 2010 Porker Omnibus package on America -- and finally in 2009, he admitted that AMERICA WAS OUT OF MONEY. June 2009Bernanke: Curb record-high budget deficits (Jun 2009) Federal Reserve Chairman Ben Bernanke on Wednesday urged Congress and the administration to cut record-high budget deficits, warning that they could erode investor confidence and endanger the economy’s long-term health. Bernanke’s comments came as concerns grow at home and overseas about the United States’ mounting red ink. “Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance,” Bernanke told the House Budget Committee.The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year’s all-time high. The recession has taken a bite out of tax revenues paid by people and companies. At the same time, the government’s spending has risen, paying billions to shore up banks, help the unemployed and others hurt by the downturn, the longest since World War II. Such forceful government intervention to fight the worst financial crisis since the 1930s and lift the U.S. out of recession was “necessary and appropriate” even though it worsened the nation’s budget deficit, he said. Bernanke acknowledged that Congress and the administration face “formidable near-term challenges” that must be addressed as they take steps to stabilize the financial system, reduce home foreclosures and spur banks to lend more freely. The success of these efforts will be crucial to turning the economy around. However, he cautioned: “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth.” Rep. Paul Ryan of Wisconsin, the panel’s ranking Republican, raised concerns about the budget deficits and the Fed’s own actions to stimulate the economy, including buying government debt. “This can be a dangerous policy mix,” Ryan warned, adding it could lead to “runaway inflation.” With the recovery likely to be subdued, inflation will remain low, Bernanke predicted. German Chancellor Angela Merkel, in rare public criticism, took a swipe at actions by the Fed and central banks in Europe to fight the global recession. She fears that the moves could lead to problems in the future. “I respectfully disagree with her views,” Bernanke said. “The U.S. and global economies, including Germany, have faced an extraordinary combination of a financial crisis ... plus a very serious downturn,” the Fed chief explained. “And in that context, I think strong action on both the fiscal and monetary sides is justified to try to avoid an even more severe outcome.” Bernanke said he was “comfortable” with the Fed’s actions. Just days earlier, Treasury Secretary Timothy Geithner assured leaders of China — the single-biggest holder of U.S. debt — that President Barack Obama was committed to tackling soaring budget deficits. In March, China’s Premier Wen Jiabao roiled financial markets when he expressed concern about the safety of China’s holding of U.S. government debt. Observing the recent rise in rates on mortgages and longer-term Treasury securities, Bernanke said the increases appear to reflect concerns about large federal deficits as well as greater optimism about the economic outlook. It also reflects a slow movement by investors away from the safe haven of U.S. bonds, reversing a pattern seen in the depths of the recession. Bernanke cited improvements in credit markets, but again warned that a relapse could hurt the economy’s recovery prospects. He also said that banks are meeting with some success in raising capital in private markets, suggesting greater investor confidence in the banking system. Bernanke told lawmakers he hoped that within four or five years the government will have removed itself from the financial bailout business. Polling data suggest Americans are increasingly worried about mounting deficit and debt. An AP-GfK poll in April gave Obama relatively poor grades on the deficit, with just 49 percent of respondents approving of the president’s handling of the issue and 41 percent disapproving. By contrast, Obama’s overall approval rating was 64 percent, with just 30 percent disapproving. The danger of prolonged and persistently high budget deficits is that they can cause investors to lose their appetite for U.S. debt, which would drive up interest rates. Higher interest rates could discourage spending and investment, hurting the economy. “We cannot add infinitely to the national debt without facing the consequences in global credit markets, or on our future capacity to borrow,” said the committee’s chairman John Spratt, D-S.C. Getting the budget deficits under control is especially important given the huge wave of baby boomers hitting retirement that will be tapping Social Security and Medicare, Bernanke said. The financial health of those two programs already are fading faster under the weight of the recession. They are headed for insolvency years sooner than previously expected, the government warned last month. Unless changes in Social Security are enacted, the retirement fund will be depleted in 2037, four years sooner than projected last year. The Medicare trust fund is in even worse shape. It is projected to become insolvent in 2017, two years earlier than expected. The U.S. has lost a net total of 5.7 million jobs since the recession began, meaning fewer payroll taxes are flowing into the funds. Bernanke repeated his belief that the recession will end this year, and that the economy will start growing again later this year. But he again warned that the pace of the recovery will be slow and that unemployment — now at a quarter-century peak of 8.9 percent — will rise even after the recession ends. Merkel expressed concerns central banks may have gone too far in trying to fight the global financial crisis. “I view with great skepticism the powers that the Fed has, for example, and how, in the European area, the Bank of England has developed its own little lines,” she said. The ECB “also bowed somewhat to international pressure” with its decision to buy bonds, she added. “We must together return to an independent central bank policy and to a policy of good sense,” Merkel said. “Otherwise, in 10 years we will again be standing at exactly this point.” (Source: MSNBC.) House Panel Subpoenas the Fed (Jun 2009) Well, this should be fun! A Congressional panel wants to get to the bottom of what the hell happened when Bank of America (BAC) bought Merrill Lynch. Recall that according to Ken Lewis' testimony, he wanted to get out of the deal when he discovered Merrill's December losses, but was pursuaded/bullied not to by Hank Paulson and Tim Geithner, who said it was a matter of systemic risk to the system, and that he and his board could be canned if he actually backed out. Right now they're just going for emails and notes and various documents, says CNBC, which the Fed has refused to hand over voluntarily. Not clear if there will be hearings, but that's what we really want to see. The request is being made ahead of a Thursday hearing in which Mr. Lewis is scheduled to appear before House lawmakers. Congressional investigators have been investigating the details of Bank of America's acquisition of Merrill Lynch, as well as the government's decision to give the company $20 billion in additional government aid in January. (Source: Business Insider.) Update: From WSJ: The House Committee on Oversight and Government Reform, chaired by Rep. Edolphus Towns (D., N.Y.), has asked the Fed to turn over documents requested by the panel last week. The documents requested include emails to and from Chairman Ben Bernanke, as well as handwritten notes from meetings and conversations involving Bernanke, then Treasury Secretary Henry Paulson and Bank of America CEO Kenneth Lewis. Fed lost $5.3B on Bear Stearns, AIG holdings in 1Q; $16.5B so far (Jun 2009) The Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group Inc., according to a report issued Wednesday. The loss on the holdings, which include mortgage-backed securities, reflected a decline in their value as the recession stretched into the first three months of this year. The cumulative loss on the Bear and AIG holdings comes to $16.46 billion since they were taken over last year. Of that total, a loss of $9.18 billion went to the New York Fed. The Fed is hoping that if it holds onto the securities long enough, they will eventually rise in value once the economy returns to full health again, the housing market heals and the financial and credit crises are past. The Fed's new report, which will be issued monthly, comes as lawmakers have demanded more information about the bailouts, and a slew of other programs intended to spur lending and stabilize the banking system. Critics worry the Fed's actions have put billions of taxpayers' dollars at risk. The monthly report provides some details beyond the Fed's weekly snapshot of loan and debt-buying programs on its balance sheet. Those details include collateral pledged by borrowers, ratings on collateral, and the number of borrowers for some programs. However, the Fed did not budge on lawmakers' requests that it identify borrowers for emergency and other loans. Fed Chairman Ben Bernanke has repeatedly argued that doing so would risk a run on a bank or other financial institution, undermining the purpose of the program. As lender of last resort, the Fed's programs are intended to bolster the financial system, a key ingredient to lifting the country out of recession. Democratic Senate Banking Committee Chairman Chris Dodd which has pushed the Fed to be more open, welcomed the new monthly report. Dodd called it "an important step in our ongoing efforts to bring greater transparency to the Fed's efforts to stabilize the economy." But Sen. Bernie Sanders blasted the new report as "completely insufficient," and said "it is time for the Fed to name names." The monthly report showed that the Fed's commercial paper program reported net income of $2.14 billion in the first quarter. Commercial paper is the crucial short-term debt that companies use to pay everyday expenses. The Fed began buying commercial paper last year when that market virtually came to a halt after credit problems intensified last fall. It also reported net earnings of $1.2 billion in the first quarter on other loan programs, including emergency borrowing to banks and investment firms. The Fed reported $4.57 billion in earnings under its regular transactions involving Treasury securities. The report also said that 378 banks are putting up collateral well in excess of the amount of loans being drawn. It said that borrowing banks have put up $965 billion in collateral to back emergency and other Fed loans that averaged $448 billion in daily borrowing as of late May. As of late May, the report said that trusts affiliated with Sallie Mae, GE Capital Credit, CarMax, Ford Credit, Harley-Davidson Motorcycle, Honda and Nissan were among the issuers of securities participating in a Fed program intended to spark lending to consumers and small businesses. Investors in the Term Asset-Backed Securities Loan Facility, or TALF, get loans from the Fed to buy newly issued securities backed by, among other things, auto and student loans, credit cards and business equipment. (Source: Yahoo.)  Ed Morrissey: Chart of the Day: The Laffer Spike (Jun 2009) Arthur Laffer, who brought us the Laffer Curve in the 1980s, has another kind of geometric shape for us today in the Wall Street Journal. Let's call it the Laffer Spike, and unfortunately this one isn't hypothetical. It demonstrates the massive boost in monetary supply pushed by the Fed and the government, and its historical singularity (via QandO):  With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs — such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid — are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.Laffer says we don't have a historical model for this kind of action, and cannot accurately predict its effects. That's not entirely true. While the US has never done this before, we do have at least one historical parallel from the 20th century: the Weimar Republic government of Germany that preceded the Nazis. In fact, they deliberately printed money and devalued their currency in order to pay off (in worthless currency, but at face value) the crushing national debt imposed on them by the Treaty of Versailles. Some have suggested that the US will have to follow the same model to rid itself of the massive debt we're incurring now, which makes investors much less enthusiastic about Treasuries. We've already begun to see the effects of this policy on the bond markets, with investors demanding higher yields as a hedge against the runaway inflation of this model. The Financial Times reports that the US had to push yields up to 4% to get buyers this week, and they expect more trouble in today's auction: US long-term interest rates rose to the highest level of the year on Wednesday, threatening the "green shoots" of recovery, after the latest sale of 10-year government debt met with a tepid response from inflation-wary investors.If we have to keep paying higher interest rates for the Treasuries, we're going to see much bigger deficits in the coming years than either the White House or the CBO projected earlier, as our debt service will skyrocket:  Unless we cut spending now, we'll be setting up an inflationary ride like nothing we've seen before. (Source: Hot Air: Ed Morrissey.) Federal Reserve Cannot Account for $9 Trillion (Jun 2009) Momentum is building with 179 co-sponsors for Congressman Ron Paul’s bill in the U.S. House of Representatives to audit the Federal Reserve System (Federal Reserve Transparency Act of 2009) not just because of the growing unrest over the Fed’s gigantic and reckless expansion of trillions of dollars in credit during the past eight months but because of the increasing awareness that the Fed itself is unable to account for where this money has gone. According to a report from Bloomberg News on February 9th: The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages. The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged up to $5.7 trillion more. . . . Only the stimulus bill to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. Recipients’ names have not been disclosed. . . . Bloomberg requested details of Fed lending under the Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral.At a hearing in early May, Federal Reserve Inspector General Elizabeth Coleman was asked by Congressman Alan Grayson (D-FL) to account for the $9 trillion in off-balance sheet transactions ($30,000 for each man, woman and child in the U.S.) plus a $1 trillion expansion of the Fed’s balance sheet since last September. Her answer is that no one at the Fed knows or is keeping track of where the money has gone. (Source: The Independent Institute: David Theroux.) Ron Paul’s ‘Audit the Fed’ Bill Gathers Steam (Jun 2009) He may have faded from the national political scene a year ago, after his dark-horse presidential run came to naught, but Rep. Ron Paul ’s influence is still being felt in campaigns and policy debates across the country. Indeed, the latest legislative priority of the libertarian Texas Republican — auditing the Federal Reserve — has gained support in unlikely quarters. Paul’s legislation, popularly known as the “Audit the Fed” bill, has drawn 244 cosponsors, ranging from Ohio’s John A. Boehner , the conservative Republican floor leader, to Michigan’s John Conyers Jr. , the liberal Democratic chairman of the Judiciary Committee. Some Democrats have even picked up on Paul’s rhetoric. “It’s time to yank the shroud off the Fed and shine some light on these events,” New York Democrat Edolphus Towns , chairman of the Oversight and Government Reform Committee, said at a hearing last week about the shotgun marriage between Bank of America and Merrill Lynch last fall to stave off the latter’s collapse. Paul’s efforts have only gained in political significance since the Obama administration unveiled its proposal to give the Fed new powers over the financial regulatory system. At the heart of Paul’s anti-Fed crusade, as well as his other ventures, is the grass-roots lobbying organization Campaign for Liberty, a home base for his fervent band of presidential supporters. The organization was launched just over a year ago with cash left over from his bid for the GOP nomination. The 501(c)4 non-profit group claims a quarter-million members and says it has 20 full-time employees and coordinators in all 50 states. According to spokesman Jesse Benton, Campaign for Liberty has raised approximately $3 million so far this year and plans “to spend millions of dollars educating as many Americans as possible on monetary policy.” Paul is the organization’s honorary chairman, and though he has no official day-to-day duties, “we consult with him on every major move that we make,” Benton said. >br?>br? Paul’s imprint is also seen on the 2010 campaign: At least five prospective candidates for the House and Senate are being dubbed the next generation of the Ron Paul movement, including his son and fellow physician Rand Paul. The younger Paul is considering a run for the Senate in Kentucky if incumbent Republican Jim Bunning decides not to run again. But the potential candidate generating the most interest among Paul’s followers is Peter Schiff, who might join the increasingly crowded filed of Republicans wanting to take on Democratic Sen. Christopher J. Dodd in Connecticut. (Source: CQ Politics.) No Longer Alone, Ron Paul Fights the Fed (Jul 2009) Rep. Ron Paul usually stands far outside the mainstream in Congress, particularly in his campaign to kill the Federal Reserve. But the Texas Republican now has the bulk of his colleagues standing alongside him in a fight against the central bank’s autonomy. His bill to audit the Fed, just three pages long, has 274 co-sponsors — every House Republican and almost 100 Democrats — and counting. “People are upset,” he says. “People are demanding more transparency of the Fed, and they’re supporting me on this.” The longtime Fed critic would prefer an economy without a central bank, where the market sets interest rates and troubled firms are left to sink. He blames the Fed for the past century’s financial bubbles and worries about its ability to monetize debt to finance government spending, even though Fed officials insist they’d never allow it. Mr. Paul sees transparency as a first step in making the public more aware of the Fed’s ability to electronically print money to support the banking system. The revelations from an audit will “expose to the American people exactly how the Federal Reserve operates,” he says. “Because when they fully understand how they operate, what they do, how they manipulate monetary policy and interest rates, they will finally figure out that it’s the Fed that has caused all the mischief.” Most of the lawmakers who have signed on as co-sponsors of the legislation don’t share Mr. Paul’s anti-Fed stance. They say Congress has an oversight role and needs a full accounting of how much money the Fed has lent — and to whom. Some lawmakers signed up as an expression of disapproval after learning more about the Fed’s decisions to lend money to firms such as AIG. Many others say greater scrutiny is critical before any discussion of expanding the Fed’s authority in other areas, as the Obama administration proposes. “Bringing transparency and accountability to the Federal Reserve through an audit will help ensure that tax dollars are not wasted,” said Rep. John Boehner of Ohio, the House’s top Republican. Rep. Brad Sherman, a California Democrat, says none of the Depression-era lawmakers who gave the Fed its power to lend to nonfinancial institutions “ever thought it would involve trillions of dollars.” He said the Fed system’s unique structure, with private officials leading the regional Fed banks, also needs a review by congressional auditors. “Anyone exercising governmental power should be subjected to governmental oversight.” Even lawmakers who are less eager to sign on acknowledge the momentum. If the Fed gets added responsibilities, “there wouldn’t be any question in my mind that a bill would be passed,” said Rep. Paul Kanjorski, a senior Democrat who has not taken a position on the legislation. “They would have to buy into much more regular audit control of the Fed.” Mr. Paul recognizes that his movement to audit the central bank ultimately may help the Obama administration expand the Fed’s oversight role in the economy. “I think what they’ll do is they’ll give in to some of the transparency at the same time they’ll give them more power,” Mr. Paul said. “We’re going to be bugging you a lot more. We’re going to be keeping eyes on you. That might be the way. Maybe inadvertently I’ll help them get more power at the Fed.” (Source: WSJ.) July 2009 Bernanke Bernanke Fights House Bill To Audit The Fed (Jul 2009) Federal Reserve Chairman Ben Bernanke is strongly opposing a proposal in Congress, which enjoys the support of over half of the U.S. House of Representatives, to audit the Fed. During an appearance on PBS's NewsHour, which will be aired this week on local PBS stations, Bernanke said the proposed legislation would interfere with the central bank's independence. "I don't think the American people want Congress running monetary policy," he said. "And I think that's very very critical for people to understand." (See transcript below.) This is an odd claim. If you read the bill (H.R.1207), it simply amends existing law to say "under regulations of the Comptroller General, the Comptroller General shall audit" the Federal Reserve Board and its member banks. The Comptroller General is a Senate-confirmed official who's also the head of the Government Accountability Office (GAO), a legislative branch agency organized under the U.S. Congress. In other words, we're not talking about a political bomb-thrower, but a veteran civil servant tasked with important oversight responsibilities. The argument for an audit has become stronger in the wake of the extraordinary and unprecedented steps the Federal Reserve has taken in response to the market turmoil that began two years ago. Among them: the Fed has printed hundreds of billions of dollars to purchase what are delicately called "troubled assets"; it has created mammoth Wall Street bailout funds with acronyms like CPFF and TALF; and it has done all of this without prior approval by the U.S. Congress. As far back as 1977, the GAO was saying it needed the authority to conduct a full audit of the Fed. "We do not see how we can satisfactorily audit the Federal Reserve System without authority to examine the largest single category of financial transactions and assets (foreign currency purchases) that it has," its report to Congress said at the time. If the Fed had stuck to its traditional role of setting interest rate targets and employing other monetary policy tools, it's unlikely this measure -- the Federal Reserve Transparency Act of 2009 -- would have drawn more than a modicum of public and congressional support today. But because Bernanke and other Fed officials have been bailing out financial institutions, such as providing up to $30 billion to let JPMorgan buy Bear Stearns last year, and because the national monetary base has recently doubled, public interest in the topic has spiked. Bernanke can thank (or blame) Rep. Ron Paul, the libertarian-leaning Texas Republican and longtime Fed critic, for focusing so much attention on this topic. Paul was the original author of the Audit-The-Fed bill, which can now claim 277 sponsors, up from 170 two months ago. It's been spurred along by concerns about the way the government is responding to what has become an unusually severe recession -- and public opinion turning against the Federal Reserve. "Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations," Paul said in a February 2009 speech announcing the bill. "While the conventional excuse is that this is intended to reduce the Fed's susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests." Paul points out that although Federal Reserve has the authority to enter into agreements with foreign central banks and foreign governments, the GAO is prohibited from auditing or even reviewing any of those agreements. (Current law says the GAO may not audit "transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization.") The 2008 presidential candidate has been a longtime Fed critic, and even an advocate of its abolishment, saying for years that if the central bank keeps interest rates too low, bubbles are likely to form. In 2002, for instance, Paul correctly predicted that government policies would create "a short-term boom in housing" while increasing "the likelihood of a painful crash in the housing market." This represents a minority view among economists -- see a CBSNews.com review of a recent book on the financial crisis with a foreword by Rep. Paul -- but one that has found more adherents recently. Here's an excerpt from the transcript of the PBS exchange: PBS' Jim Lehrer: There's an effort in Congress, and in the House in particular, to audit what the Federal Reserve does, particiularly in monetary policy. How do you feel about that?Perhaps. Then again, the text of this proposal is not chiseled into granite. If the auditing authority granted to the GAO becomes too intrusive, Congress can always amend it. While Rep. Paul's bill enjoys strong bipartisan support in the House of Representatives, the Senate version (S.604) has only 20 sponsors and was blocked from coming to a vote by the Democratic leadership earlier this month. Now we'll see if public concern about the Federal Reserve's recent activities is sufficient to overcome this last political hurdle. (Source: CBS: AP.) August 2009Federal Reserve loses suit demanding transparency (Aug 2009) A federal judge on Monday ruled against an effort by the U.S. Federal Reserve to block disclosure of companies that participated in and securities covered by a series of emergency funding programs as the global credit crisis began to intensify.In a 47-page opinion, Chief District Judge Loretta Preska of the federal court in Manhattan said the central bank failed to show that disclosure would cause borrowers in the Federal Reserve System to suffer "imminent competitive harm," by stigmatizing them for using Fed lending programs."The board 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," she wrote. "Conjecture, without evidence of imminent harm, simply fails to meet the board's burden." Monday's ruling comes as lawmakers and investors demand greater disclosure in how the government manages a series of programs designed to lift the economy out of its deepest recession in decades. The case arose when two Bloomberg News reporters submitted requests under the federal Freedom of Information Act (FOIA) about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan Chase & Co (JPM.N). After the Fed resisted the request, Bloomberg sued to compel disclosure. Preska concluded the Fed "improperly withheld agency records in response to a FOIA request by conducting an inadequate search," she wrote. FOIA obliges federal agencies to make government documents available to the public, subject to various exemptions. Bloomberg News and the Fed did not immediately return requests for comment. The case is: Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595. (Source: Reuters.) Obama to reappoint Bernanke at Fed (Aug 2009) President Obama on Tuesday morning (25 Aug) will nominate Federal Reserve Chairman Ben S. Bernanke to a second term as the head of the world's most powerful central bank, a White House aide said. The president will make a statement at 9 a.m. in Martha's Vineyard, where his family is on vacation, announcing his decision to keep Mr. Bernanke, whose term expires in January. A Republican who was chairman of President George W. Bush's Council of Economic Advisers, Mr. Bernanke was first appointed to the job by Mr. Bush in 2006. The White House aide told The Washington Times that "continuity is crucial" and that Mr. Obama wanted his current economic team to "rescue this economy together." "The president wants and needs his whole economic team together," the aide said. The aide, speaking on the condition of anonymity because the president has not formally announced his choice, said Mr. Obama consulted with economic adviser Lawrence H. Summers, Treasury Secretary Timothy F. Geithner and Chief of Staff Rahm Emanuel, and they all recommended that Mr. Bernanke "be retained to ensure this continuity." The aide said Mr. Obama views Mr. Summers as his "right-hand" adviser. Continuity is considered important to reassure financial markets that no major changes in Fed policy are in the offing. Financial markets remain fragile, and sentiment on Wall Street strongly favors retaining Mr. Bernanke. The move is perhaps the most significant display of bipartisanship to date by the president. Moreover, the White House's ringing endorsement of Mr. Bernanke's handling of the severe financial crisis that broke out nearly a year ago comes at a time when criticism of Mr. Bernanke has been growing in Congress. Most of the criticism has been aimed at Mr. Bernanke's role in doling out trillions of dollars of aid to rescue failing financial institutions and revive collapsed credit markets. Mr. Bernanke, who is a renowned scholar of the Great Depression, has contended that his actions were necessary to prevent the economy from sinking into another depression. He thinks that the Great Depression was largely caused by the Fed's failure to act and top White House officials largely agree. The Fed's actions have been closely coordinated with the Treasury, and many of the Fed's rescue operations were spearheaded by Mr. Geithner when he was president of the Federal Reserve Bank of New York before joining the administration in February. The odds had been growing that Mr. Bernanke would be reappointed. Mr. Obama has not sought to hide his admiration of the Fed chairman, congratulating him from time to time for doing what he called a good job. The only criticism he has directed against Mr. Bernanke was that he and his predecessor, Alan Greenspan, moved too slowly in responding to the housing and mortgage credit bubbles that led to the crisis. Mr. Bernanke's main competition for the job was Mr. Summers, who was Treasury secretary during the Clinton administration. But Mr. Summers also has been a booster of Mr. Bernanke behind the scenes and publicly, saying that the administration would not agree to any move in Congress to seriously limit his powers or undermine the Fed's independence. The Fed chairmanship is the most important economic appointment made by the president. The Fed controls short-term interest rates and husbands the supply of money in the United States, making it the federal agency with the most direct and broad-reaching power over the economy. The Fed's powers have grown enormously in the past year as it frequently tapped into Depression-era emergency authorities to mount massive rescues of financial firms, starting with Bear Stearns in March 2008 and culminating with the record $170 billion bailout of insurance giant American International Group in September. In addition to these rescues, which have spawned a public outcry and extensive hearings in Congress, the Fed has put in place an unprecedented string of programs aimed at flooding banks and credit markets with money and trying to revive collapsed markets for mortgages and other loans. All of the programs were experimental, with some proving more popular and successful than others. The biggest task facing Mr. Bernanke as he continues in his job is the massive cleanupoperations that the Fed must pursue as closes its experimental programs. Mr. Bernanke began withdrawal operations earlier this month when the Fed announced that it will close down a particularly controversial program of purchasing long-term Treasury bonds. (Source: Washington Times.) Fed urges secrecy on banks in bailout programs (Aug 2009) The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy. The central bank filed its request on Wednesday, two days after Chief Judge Loretta Preska of the U.S. District Court in Manhattan ruled in favor of Bloomberg News, which had sought information under the federal Freedom of Information Act. Preska said the Fed failed to show that revealing the names would stigmatize the banks and result in "imminent competitive harm." The Fed asked the judge not to require disclosure while it readies an appeal. "Immediate release of these documents will cause irreparable harm to these institutions and to the board's ability to effectively manage the current, and any future, financial crisis," the central bank argued. It added that the public interest favors a delay, citing a potential for "significant harms that could befall not only private companies, but the economy as a whole" if the information were disclosed. Underlying this case and a similar one involving News Corp's (NWSA.O) Fox News Network LLC is a question of how much the public has a right to know about how the government is bailing out a financial system in a crisis. The Clearing House Association LLC, which represents banks, in a separate filing supported the Fed's call for a delay. It said speculation that banks' liquidity is drying up could cause runs on deposits, and trading partners to demand collateral. "Survival can depend on the ephemeral nature of public confidence," Clearing House general counsel Norman Nelson wrote. "Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences inevitably flow." The Clearing House said its members include ABN Amro Holding NV, Bank of America Corp (BAC.N), Bank of New York Mellon Corp (BK.N), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), HSBC Holdings Plc (HSBA.L), JPMorgan Chase & Co (JPM.N), UBS AG (UBSN.VX), U.S. Bancorp (USB.N) and Wells Fargo & Co (WFC.N). The case arose when two Bloomberg reporters submitted FOIA requests about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan. The case is: Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595. (Additional reporting by Patrick Rucker, editing by Leslie Gevirtz) (Source: Reuters.) (SITE NOTE: There is indignation at the idea that banks can borrow money, but can't be scrutinized because of the "ephemeral nature" of the market. There is further rumors that the foreclosures are even worse than publicly recognized due to the loans to those who couldn't afford them. These foreclosures are still on the banks books and the housing market is drying up. This is why some claim that these banks do not want to be revealed.) Obama wants to appoint his own 'whistleblowers' (IGs) -- Democrats push to give prez power over Federal Reserve (Aug 2009) A bill sponsored by Democrats in Congress would make several U.S. inspectors general currently appointed by federal agency heads presidential appointees instead, including the inspector general keeping an eye on the Federal Reserve. The inspectors general, or IGs, are independent investigators charged with rooting out government waste and fraud in their respective federal agencies. Roughly half of the watchdogs are already appointed by the president upon Senate confirmation, while the other half are appointed by agency chiefs. An editorial published in the Washington Times over the weekend blasted the plan to convert five more IGs to presidential picks: "Such a move would undermine independent oversight of large parts of the federal bureaucracy," the editorial stated. "These changes would only serve to further politicize these positions." The editorial added, "Now is not a wise time to remove independent review of the government leviathan." H.R. 885, known as the Improved Financial and Commodity Markets Oversight and Accountability Act, would make five inspectors general – those overseeing the Federal Reserve, the Commodity Futures Trading Commission, the National Credit Union Administration, the Securities and Exchange Commission and the Pension Benefit Guaranty Corporation – presidential appointees. Rep. John Larson, D-Conn., sponsored H.R. 885 earlier this year and was joined by 37 other representatives, most of whom are also Democrats. The bill has passed the House and now awaits its companion legislation, S. 1354, sponsored by Sen. Robert Menendez, D-N.J., to be passed through the Senate Committee on Homeland Security and Governmental Affairs. The five people currently serving as the inspectors general in question fired off a letter last month Connecticut's Sen. Joe Lieberman, who chairs the Senate committee considering the bill, arguing the move would "seriously disrupt the continuity of operations and risk undermining our effectiveness." The Times reports Sen. Charles Grassley, R-Iowa, who also sits on the Senate committee and is a long-time ardent supporter of the role of the independent investigators, is backing the concerned IGs and has placed a hold on the legislation. Obama's controversial connection to IGs Supporters of H.R. 885 have argued that IGs appointed by the president, rather than the agency heads, will enable the IGs to be more independent and capable of investigating the agencies. Furthermore, they've argued, there's no need to fear that presidential appointment will lead to undue politicization, since the watchdogs won't be investigating the White House. The Times editorial, however, argues too many people in powerful positions beholden to the president undermines the independent spirit of the IG role: "As appointees, IGs serve at the will of the president and investigate operations directed by other presidential appointees," the Times states. "Surely, at a time when the president and Congress are planning massive expansions in government power, some political leverage would be gained by further politicizing these jobs." And as WND has reported, President Obama has already come under fire for allegedly canning an IG who crossed him politically. Former Inspector General Gerald Walpin filed two reports exposing gross misappropriation of federal AmeriCorps funds by former basketball star Kevin Johnson, a prominent Barack Obama supporter, and was shortly thereafter fired by the White House, circumstances Walpin told WND are likely linked and others have called an outright illegal action by the administration. "I will tell you that [my firing] came only after we had issued those two reports to Congress, and I don't think that's a coincidence," Walpin said. "I am convinced that I and my office are not guilty of any impropriety. In essence, I was fired for doing my job." The Times editorial also picked up on the controversial firing of Walpin and its connection to granting the president even more power over the inspectors general: "Mr. Obama's June firing of Corporation for National and Community Service Inspector General Gerald Walpin alone calls the plan into question," the Times said. "Full investigations of any problems related to ongoing efforts to increase financial-sector regulation and the spending of hundreds of billions of dollars to prop up the industry must be assured. Keeping the positions away from the assuredly political confirmation process can help ensure that this remains the case." (Source: WND.) September 2009Ron Paul: The Fed's Interesting Week (Sep 2009) It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible economist, and scare any American concerned about the value of the dollar. However, these highly sensitive decisions about our money are not made by economists, they are made by politicians. Bernanke, like most of his predecessors, is the politician’s best friend. However, there is no reason to believe any other central planner would behave any differently, considering the immense political pressure on the Fed.Fed policies have been as bad for the economy as they are good for politicians and bankers, as the recently released numbers on the debt and deficit demonstrate. For the first time since World War II the annual budget deficit is projected to be over 11 percent of the nation’s gross domestic product. It is also projected that by 2019 the national debt will be 68f GDP. Our path, if unchanged, is completely untenable. The administration claims that it inherited a dire situation from the last administration, which is absolutely true. However, that hasn’t stopped them from accepting all the policies and premises that got us here, and accelerating those policies to rapidly make a bad situation much worse. The bailouts started with the last administration. They have gotten bigger with this one. The last administration gave us expanded government involvement in healthcare with a new prescription drug benefit. This administration gave us a renewal and expansion of SCHIP, and now the current healthcare takeover attempts. In reality, we can afford none of this, but shady monetary policy allows Washington to continue along its merry way, aggravating all our economic problems. Not everyone in government finds it acceptable that the Fed wields so much power and privilege in secrecy. Last week, a federal judge ruled against Fed secrecy, compelling them to release under the Freedom of Information Act information regarding which banks received emergency loans, and under what terms. The Fed will, of course do everything in its power to fight this ruling and it is certainly not the last word on the issue. Still, it is encouraging to see that the interests of the taxpayers were defended victoriously in court, while the Fed only sees the plight of its big banker friends. Meanwhile HR 1207 and S604, legislation to open up the Fed’s books to a complete audit, continue to gain momentum in Congress as the people continue to insist on real transparency of the Federal Reserve. One way or another, the days of Fed autonomy are coming to an end, as well they should. No one should have the power to debauch the currency and gut the economy as they do. It is time they answered for their actions, so the people can understand that we truly are better off with freedom instead of Fed tyranny. (Source: Ron Paul.) China alarmed by US money printing (Sep 2009) The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy. == Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing". "We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como. "If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said. China's reserves are more than – $2 trillion, the world's largest. "Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added. The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction. Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise. "Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down." Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets. "This is where Greenspan went wrong from 2000 to 2004," he said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity." Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery. China's task is to switch from export dependency to internal consumption, but that requires a "change in the ideology of the Chinese people" to discourage excess saving. "This is very difficult". Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China. "The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis." Yet the consequences are not symmetric. "He who goes borrowing, goes sorrowing," said Mr Cheng. It was a quote from US founding father Benjamin Franklin. (Source: Telegraph UK.) Ron Paul Has the Council on Foreign Relations Worried (Sep 2009) Near the start of this year Ron Paul (R-Texas) introduced H.R. 1207, the Federal Reserve Transparency Act of 2009. The bill was referred to the House Committee on Financial Services. As of this writing, H.R. 1207 has 282 cosponsors. A Senate equivalent, S.604, the Federal Reserve Sunshine Act of 2009, has been introduced by Bernie Sanders (I-Vt.). It has 23 cosponsors. Both bills have received a tremendous groundswell of grass-roots support. Much of the support is coming from ordinary people who have become aware of the fact that the Federal Reserve has created trillions of dollars literally out of nothing during the past calendar year in its effort to micromanage its way out of the worst economic crisis since the Great Depression. If such a measure were passed by both houses of Congress and signed into law by President Obama, the resulting bill would allow the Government Accounting Office to conduct audits of Federal Reserve System monetary policy. The bill proposes to scrutinize the Fed’s dealings not just on domestic monetary policy but on dealings with foreign central banks and foreign governments. The power elite is worried. Evidence for this can be found in a short article "The Fed's Political Problem" appearing on the website of Foreign Affairs, flagship journal for the Council on Foreign Relations (CFR). The article's author, Alan S. Blinder, is a senior-level economics professor at Princeton University who also directs Princeton’s Center for Economic Policy Studies. From 1994 to 1996 he served as vice chairman of the Board of Governors of the Federal Reserve System. Blinder first argues a thesis he proposed back in 1997, that some areas of government are properly political and others are properly technocratic. He places monetary policy in the latter, where it can operate independently of political oversight. The drawback of Ron Paul’s bill is that it would transfer Fed oversight to the political realm and end its independence. Blinder describes Dr. Paul as “an extreme libertarian and longtime foe of the Fed. He has, incredibly, persuaded almost two-thirds of the House of Representatives to co-sponsor a bill that would jeopardize the Fed’s independence.” According to Blinder, the Fed “gets plenty of critical evaluations” of its policies and decisions. He maintains that Dr. Paul’s bill “could easily develop into something quite dangerous.” He imagines this scenario: Sometime in 2010, the Fed, wanting to avoid inflation, will likely begin to abandon the hyper-expansionary monetary policy it adopted during the recent crisis as a way to stave off a depression. As it does so, interest rates will start rising even as unemployment remains high. Predictably, Congress, being more closely attuned to public opinion, will be unhappy with this situation. Until now, the Fed’s independence has ensured that it can afford to ignore public opinion and take such necessary but unpopular economic measures. That is precisely why we want an independent monetary policy. But if the Paul bill passes, angry members of Congress could ask for a GAO audit. And, if the report is critical, they could use it to browbeat members of the Federal Open Market Committee, the Fed’s interest-rate-setting body, for killing the country’s economic recovery.This misses the key argument Ron Paul has been making, which follows those of members of the Austrian school of economics (e.g., Ludwig von Mises). What Blinder euphemistically calls hyper-expansionary monetary policy actually is inflationary, if we understand inflation to be not merely rising prices but an increase in the amount of fiat currency in circulation. Mainstream economics has long preferred the public to see inflation almost exclusively in terms of visibly rising prices. If prices aren't rising, economists can maintain that inflation is low even though the money creation spigot is going full blast — as it has been since the economic crisis began a year ago. If we understand inflation as an increase in the money supply, however, we see immediately that the Fed, far from being a controller of inflation, is actually an engine of inflation. Rising prices in this case are just one possible effect of monetary inflation. The Fed is responsible for the long-term decline in purchasing power of our dollars, which have been backed literally by nothing except legal tender laws and the willingness of the public to accept them since 1971, the year President Richard Nixon severed the last ties between the dollar and gold. Fed monetary policy is the reason a hamburger costs you several dollars when your grandfather could buy one for thirty-five cents. The dollar has lost slightly over 96 percent of its value since the Federal Reserve System was created in 1913. The national debt has soared during the period since 1971 from a few hundred million to its present $11.8 trillion. Millions will be added to the debt during the brief time it takes to read this article! The dollar’s value will drop considerably more should it lose its status as the world’s reserve currency. The Chinese are getting very nervous about the money-creation spigot in Washington, D.C. Perhaps these are the kinds of developments that elites such as Blinder don’t want the public to know about. Clearly the elites are uncomfortable with the amount of attention the Fed has received — the public being aware of the trillions having been created literally out of thin air during the past year. “What will this do to the long-term purchasing power of my money?” is a perfectly valid question many ordinary Americans are asking. What are the prospects for H.R. 1207 and S. 604? Even if these bills pass and a compromise bill reaches President Barack Obama’s desk, it is difficult to imagine him even considering signing it. The effort to bring more of the Fed’s activities into the light of day may receive a new ally in the Senate late next year, however, as Ron Paul’s son Rand Paul has announced his candidacy for one of Kentucky’s two slots and raised $815,000 as of this writing. Like father, like son: Rand Paul is also highly critical of the lack of transparency that characterizes crucial decisions made by the Federal Reserve and has vowed, if elected to the Senate, to work to “shed light on this secretive organization." He reminds us of the trillions the Fed has created out of thin air and adds, “The American people have a right to know to whom this money was given. For all its talk of transparency the current administration has done nothing to tear the shroud off the Fed.” (Source: The New American.) Ron Paul gets his hearing on Fed Audit , 25 Sep (Sep 2009) On Friday, September 25th the House Financial Services Committee has scheduled a full committee hearing on Ron Paul’s HR.1207 to audit the Federal Reserve. The hearing is slated to begin at 9am eastern time. For details and a link to the (eventual) live streaming video of the hearing check out the committee website. As with many of these committee hearings the schedule is tentative and right now there are no witnesses listed. By now we know what the opponents of the bill will argue, but it doesn’t change the fact that the bill has over 290 bipartisan cosponsors and 75% of the American people want a Fed audit. The conditions are ripe for passing some form of Federal Reserve audit. Rahm Emanuel has been criticized for not wanting to allow our economic “crisis to go to waste”. In turn, Obama has largely been capitalizing on his honeymoon in popularity coupled with the economic crisis to push his agenda through Congress. The health care debate has stifled that strategy for now. Without the economic crisis I doubt Ron Paul’s Fed audit bill would have more than 290 cosponsors. So, in a way, Ron Paul is not letting this crisis go to waste either. It is a perfect bill for the America we live in today. It is Ron Paul’s job to convince others that his bill would not allow Congress to interfere with monetary policy. This is the lone argument against his bill and it’s quite a weak argument. Friday’s hearings mark a major battle in the long term effort to “End the Fed“. (Source: Liberty Maven.) (SITE NOTE: Title: To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes. Sponsor: Rep Paul, Ron [TX-14] (introduced 2/26/2009) Co-sponsors (290) Latest Major Action: 2/26/2009 Referred to House committee. Status: Referred to the House Committee on Financial Services.)  Federal Reserve Scandal Bigger than ACORN (Sep 2009) While the ACORN scandal involves tens of millions of taxpayer dollars…some other videos that examine what has happened to trillions of dollars involving the Federal Reserve have become increasingly popular. On "The O'Reilly Factor" on Wednesday night, Democratic Rep. Barney Frank dropped a bombshell about the ACORN scandal that has not been disputed by Congressional Republicans-the group received $14.2 million in funding from the Bush administration. But the question of what the Federal Reserve is doing with trillions of taxpayer dollars makes the ACORN scandal look like peanuts. For the first time, a hearing is being held on Rep. Ron Paul's Federal Reserve Transparency Act of 2009 (H.R. 1207) by the House Committee on Financial Services. Grass-roots pressure has been credited with forcing the hearing into what has happened to trillions of dollars supposedly spent by the Federal Reserve on the stabilization of the financial system. In prepared testimony, Thomas E. Woods, Jr. of the Ludwig von Mises Institute offers his strong support for the bill and declares, "...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?" As the unprecedented hearing was taking shape, however, Rep. Frank put a statement on the website of the House Committee on Financial Services, which he chairs, going into detail about Republican funding of ACORN. He declared, "ACORN was the recipient of funding throughout the Bush administration, with $14.2 million going from the Bush administration to ACORN through HUD. And I can attest that this was an entirely Executive Branch decision: No congressional action in any way, shape or form required that any of these funds go to ACORN as opposed to other organization [sic]. And I do not remember, during the period from 2001 to 2006 when the Republicans controlled the White House, HUD, the House and the Senate, and ACORN was receiving millions of dollars, any Republican objection to this." The ACORN scandal was exposed by the BigGovernment.com website, which is now urging donations to a legal defense fund for the filmmakers, who are being sued by ACORN. Meanwhile, some conservative Catholic groups have been putting pressure on the Catholic Campaign for Human Development (CCHD), which gave ACORN $7.3 million over the last ten years, to de-fund other groups that engage in activities inconsistent with Catholic teaching. Rob Gasper, the founder of Bellarmine Veritas Ministry, launched an investigation which found that the CCHD had funded groups advocating abortion or prostitution, or both. As a result, on the insidecatholic.com website, prominent Catholic writer and thinker Deal W. Hudson has called for the elimination of the Catholic Campaign for Human Development, saying, "No amount of house-cleaning is going to make this arm of the USCCB [United States Conference of Catholic Bishops] worthy of our donations." While the ACORN scandal involves tens of millions of taxpayer dollars and became a national scandal because of the BigGovernment.com videos, some other videos that examine what has happened to trillions of dollars involving the Federal Reserve have become increasingly popular. These videos, however, don't involve undercover footage. Rather, they show Rep. Alan Grayson trying to pin down government officials at congressional hearings on what has happened to the missing money. In an exchange captured in a YouTube video Grayson questioned Fed Vice Chair Donald Kohn about Federal Reserve officials distributing $1.2 trillion dollars since September 2008, without reporting where they lent the money. In another video, Grayson questioned Inspector General of the Federal Reserve Elizabeth Coleman about where the money has gone and whether anyone is overseeing the activities of the Federal Reserve. While Grayson is a liberal Democrat, he decided to co-sponsor the bill sponsored by Republican Rep. Ron Paul, the Federal Reserve Transparency Act of 2009, which requires an audit of the Federal Reserve System, including its Board of Governors, and the Federal Reserve banks. Paul had announced on July 15 that all 178 Republican members of the House had signed on as co-sponsors of his Federal Reserve Transparency Act. The House Committee on Financial Services' hearing on the bill on September 25 also features testimony from Scott Alvarez, General Counsel, Board of Governors of the Federal Reserve System, and comes seven months after the bill was introduced and referred to the committee. The bill currently has 295 co-sponsors, meaning that 117 Democrats have also endorsed the measure. On the Senate side, a similar bill, S. 604, sponsored by Sen. Bernie Sanders, has 28 co-sponsors. It was referred to the Senate Committee on Banking, Housing, and Urban Affairs on March 16 but no hearings have been held on the Senate side. Though introduced by a self-declared socialist, most of the Senate co-sponsors are Republicans, demonstrating that concern about the activities of the Federal Reserve crosses ideological lines. (Source: AIM.org.)  Douglas Holtz-Eakin: Audit the Fed? Fine - So Long as Audit is Secret (Sep 2009) I’ve always been a staunch advocate for the independence of the Federal Reserve. After all, the most important job the Fed has is to take the proverbial punch bowl away before the party gets too out of hand. Politicians, in contrast, are usually all for ordering more punch (and putting the tab on our national credit card!). The Fed’s track record on doing its job is mixed at best. I can’t believe it would be improved if subjected to the micromanagement of the Congress. Congress is now contemplating two bills (HR 1207 and S 604) entitled the “Federal Reserve Transparency Act” which would eliminate prohibitions on having the Government Accountability Office (GAO) audit the Fed. Despite my admitted biases, I surprised myself by not dismissing these initiatives out of hand. Specifically, under current law (the Federal Banking Agency Audit Act of 1978) the GAO cannot audit Fed monetary policy functions: (a) transactions with other central banks or governments; (b) “deliberations, decisions, or actions on monetary matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;” and (c) “transactions made under the direction of the Federal Open Market Committee.” The bills would eliminate these restrictions. The primary objection that is raised about these bills is that they will impede Fed independence. Certainly, permitting the GAO to audit the monetary deliberations of the Fed (point (b), above) would impair that independence. So I think that is going too far. But independence is not the same thing as unaccountable. The Fed makes (and loses) profits on its regular trading, and has put a tremendous amount of resource at risk in response to the financial crisis. It seems to me that there should be no objection to a clear, audited accounting of its transactions. Having the GAO perform such an audit strikes me as simply good governance. One potential objection is that these audits might inadvertently disclose the data of private financial firms in ways that are harmful. For example, the Fed has traditionally not disclosed who is borrowing from its discount window so as not to start a “run” on these institutions. In the course of audits, the GAO would necessarily come across the information on these kinds of transactions. But doing the audit does not mean that there must be public disclosure of these data. GAO could conduct its audit and brief Congressional overseers in closed session. It may be that the idea of a Fed audit is being driven solely by frustration over the financial crisis and the extraordinary range of government intervention. It may require fine-tuning so as not to harm the conduct of monetary policy. But is should not be dismissed out of hand. (Source: New Majority.) Did the Testimony of Tom Woods Come Too Close to Home for Barney Frank? (Sep 2009) During the testimony by Tom Woods on Friday, in favor of H.R. 1207, Congressman Barney Frank stepped up to the plate with some hostile questioning. I'll let Woods give the play by play: In my opening remarks I added to my written statement, which I wasn’t strictly reading, a phrase for which Barney Frank (D-MA) would take me to task. In my written statement, I noted that the Fed is indeed independent in the sense that it can make trillions of dollars available to unknown friends on unknown terms. I then wrote that I couldn’t imagine any self-respecting American hesitating for a moment to challenge that kind of independence. In my oral remarks, after "self-respecting American" I added the words "who isn’t bought and paid for."Of course, maybe the problem that Frank had with Woods' testimony is that it hit a little too close to home. Many of Frank's donors are clear beneficiaries of Fed money printing activities. The top donor to Frank, so far, in 2009/10 is FMR Corp (the parent name for Fidelity). Others in the top 20 donors for Frank include the American Bankers Association, the American Financial Services Assn, the Independent Community Bankers of America and, one of the greatest beneficiaries of past easy money policy, the National Assn of Home Builders. Did Frank have a guilty conscience and mistakenly think that Woods was referring to him? (Source: Economic Policy Journal.) October 2009The Coming "Council of Regulators" (Oct 2009) The Federal Reserve could order a financial institution to sell a risky division or stop dangerous trading activity if the central bank determined there was a threat to the US financial system, under a draft law released on Tuesday. The bill drawn up by the Treasury and the House financial services committee sets up a "Council of Regulators" charged with snuffing out systemic risks and gives the government and the Fed sweeping powers over financial companies at home and overseas.The bill does not address how this "Council of Regulators" will attain supreme wisdom to rule on markets. Nor does it mention that the Federal Reserve denied, in the middle of the housing bubble, that there was a housing bubble. And it comes nowhere near identifying the Federal Reserve's money manipulations as at the core of the business cycle. Thus, what we have in the proposed "Council of Regulators" is one further step in the direction of total political control of the financial system. This is not your granfather's America. (Source: Economic Policy Journal.) Ron Paul: Audit Fed 'gutted' in committee -- Bank-connected congressman blamed for undermining bill (Oct 2009) Rep. Ron Paul, R-Texas, has complained that the bill he sponsored calling for an audit of the Federal Reserve has been "gutted" by congressional committee, pointing specifically to a legislator whose campaign coffers have been boosted by the banking industry. As WND reported, Paul sponsored H.R. 1207, a bill requiring the Federal Reserve – an organization that's independent from the U.S. government but nonetheless oversees U.S. monetary policy – be opened to oversight by Congress. The plan compiled over 300 co-sponsors in the House before being sent to committee. But in a telephone interview with a Bloomberg reporter, Paul said the teeth have been ripped out of the bill. "There's nothing left; it's been gutted," Paul said. "This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that." Paul told Bloomberg the bill has been stripped of provisions that closed loopholes protecting the Fed, including exemption from audits of transactions with foreign central banks and protected communications between the Board, reserve banks and staff. Paul blamed the chairman of the House Financial Service Committee's panel on domestic monetary policy, Rep. Mel Watt, D-N.C., for eliminating "just about everything" in preparation for the bill's consideration on the floor of the House. Watt, is has also been revealed, has significant connections to the banking industry. It its report, Bloomberg mentioned that Watt's congressional district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender. Further investigation through OpenSecrets.org reveals that the largest share of Watt's campaign contributions in the 2008 election cycle came from the finance, insurance and real estate industries. Breakdown of industries supporting Rep. Mel Watt's 2008 campaign (graph from OpenSecrets.org)  In fact, of $609,072 given to Watt, $217,109 – or 35.6 percent – came from the money sector, including over $187,000 – or nearly 31 percent of his total contributions – from political action committees within the finance, insurance and real estate industry. The next highest industry supporting Watt was labor, which contributed only 14 percent of his total war chest. Furthermore, the four largest contributors to Watt's cause were Bank of America, Wachovia Corp., American Express and the American Bankers Association. Keith Kelly, a spokesman for Watt, declined to comment and told Bloomberg Watt wasn't immediately available for an interview. Paul, however, told Bloomberg he intends to introduce an amendment that would restore the bill's legislation to its original language when it comes to the House floor for a vote. Paul long has been a critic of the secrecy of the Federal Reserve. "Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar," he said earlier. "Since 1913, the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy." "Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations," Paul said when the plan to audit the Fed was introduced. "While the conventional excuse is that this is intended to reduce the Fed's susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests." Paul has warned, "The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight? Particularly when hundreds of billions of dollars of currency swaps have been announced and implemented, the Fed's negotiations with the European Central Bank, the Bank of International Settlements, and other institutions should face increased scrutiny, most especially because of their significant effect on foreign policy. If the State Department were able to do this, it would be characterized as a rogue agency and brought to heel, and if a private individual did this he might face prosecution under the Logan Act, yet the Fed avoids both fates." WND previously reported that the Fed, despite being ordered to disclose to whom it awarded some $2 trillion in discount "stimulus" loans, continues its fight for secrecy. (Source: WND.) November 2009Federal Reserve Loses Expanded Powers (Council of Regulators) Proposed By Obama Administration (Nov 2009) The pushback against an omnipotent Federal Reserve keeps growing.A top Congressional leader said Thursday that the Fed will not have the power to override other federal regulators when it comes to policing firms whose size or activities pose a threat to the entire financial system. This is a sharp break from the proposal first put forward by the Obama administration.In the Obama proposal, which was released in the House last week in the form of a draft bill, the Federal Reserve would have the authority to ignore the recommendations by a firm's primary regulator (be it a bank or securities regulator) and simply impose its own standards on the firm. The Fed would also have the power to examine the firm, and force the firm to comply with those standards if necessary. In essence, if the other regulators didn't play ball the Fed's way, the Fed could shove them aside. Not only did the affected agencies complain, but members of Congress did, too. Comptroller of the Currency John Dugan, who heads the agency overseeing national banks, expressed reservations about the proposal last week, saying that the approach "has the twin risks of producing less effective standards and undermining the effectiveness of the primary banking supervisors." Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, told the Washington, D.C. newspaper The Hill that, "You really can't be a check on the Fed if the Fed has the power to enforce whatever the council decides." So on Thursday, House Financial Services Committee Chairman Barney Frank (D-Mass.) said he was changing that provision. "There will not be a Federal Reserve power to overrule other entities," he said. It seems to be another sign that dissatisfaction with the Fed as a regulator is starting to impact how legislators and policymakers attempt to fix what is largely seen as a broken and fractured regulatory regime. (Source: Huffington Post.) CHANGE Ron Paul's Amendment To Audit The Federal Reserve Approved (Nov 2009) A key House panel approved the Paul-Grayson Amendment by an overwhelming 43-26 Thursday afternoon, which will give watchdogs new authority to audit the Federal Reserve. Here is a summary of the Paul-Grayson Amendment: Dear Financial Services Committee Colleague:(Source: Street Insider.)  House Attacks Fed, Treasury -- Panel Votes for Tighter Political Rein on Central Bank; Some Call for Geithner to Quit (Nov 2009) Political frustration over the rescue of Wall Street and high unemployment erupted in the House Thursday, with one committee threatening to impose tighter scrutiny on the Federal Reserve and another trading verbal insults with Treasury Secretary Timothy Geithner. The House Financial Services Committee voted, 43-26, to approve a measure sponsored by Texas Republican Ron Paul, vociferously opposed by the Fed, that would direct the congressional Government Accountability Office to expand its audits of the Fed to include decisions about interest rates and lending to individual banks. The Fed says the provision threatens its ability to make monetary policy without political interference. Treasury chief Geithner faced a House Republican who told him, 'The public has lost all confidence in your ability to do the job.' He shot back: 'What I can't take responsibility is for the legacy of crises you've bequeathed this country.' The vote was the latest blow to the central bank, which has been become a lightning rod for politicians responding to popular anger that Wall Street was bailed out while the public wasn't. The Fed faces a stinging backlash from legislators from both parties who argue that has too much power and too little oversight. On Thursday, the Senate Banking Committee began debating legislation that would largely remove the Fed from bank supervision over the objections of the Fed and the Obama administration. The Fed audit provision was added to pending legislation on financial regulation that the committee's chairman, Barney Frank, a Massachusetts Democrat, had planned to put to a vote Thursday. But he abruptly announced late in the afternoon that the bill wouldn't move ahead until after Thanksgiving. The reason: Ten members of the Congressional Black Caucus on the committee said they would oppose the bill to protest a lack of action to address the economic pain borne by their constituents. Although the economy appears to be growing again, lawmakers face increasing pressure in their districts to do more to boost growth and address an unemployment rate now at 10.2% and expected to rise. Glum views on the economy sparked a retreat from stocks and some commodities, as investors moved to the safety of government debt. The Dow Jones Industrial Average fell 93.87 points to 10332.44. At the Joint Economic Committee, a couple of House Republicans called for the resignation of Mr. Geithner, who, as president of the Federal Reserve Bank of New York, played a major role in last fall's moves to prevent the collapse of the financial system. "The public has lost all confidence in your ability to do the job," said Rep. Kevin Brady, Republican of Texas. Treasury Secretary Timothy Geithner comes under fire from Republicans. Dow Jones's Michael Crittenden and Barron's Bob O'Brien discuss the fallout from today's hearings. Plus, a look at AOL's future as it tries to shed non-core assets, and a controversy over a World-Cup qualifier, in the News Hub. Mr. Geithner, in an unusual public display of pique, fired back. "What I can't take responsibility is for the legacy of crises you've bequeathed this country," he told Mr. Brady. (SITE NOTE: But he can certainly take credit for the problems generated while he was head of the New York World Bank that led up to much of the problems.) Although several Democrats defended Mr. Geithner at the hearing, some liberal Democrats have been complaining that the Obama administration isn't doing enough to combat unemployment. Rep. Peter DeFazio (D., Ore.) called on Mr. Geithner to resign this week, and said in an interview that Mr. Geithner is too close to Wall Street. "Quite frankly, all the gambling on Wall Street is doing nothing to put people back to work in America and rebuild our economy," the Oregon Democrat said. One issue that has dogged Mr. Geithner is the rescue of American International Group Inc. last fall. A government oversight report this week charged that the New York Fed caved into demands from Goldman Sachs Group Inc. and other big banks and paid them in full for deals they had made with the insurer. Mr. Geithner said Thursday that the government lacked powers it needed to handle the collapse of a financial company that wasn't legally organized as a bank. "Coming into AIG we had, basically, duct tape and string," he said. The legislation pending in Congress would give the government new powers to manage such a situation. Mr. Geithner's job status doesn't appear to be in jeopardy and several Democrats leapt to his defense. "He was handed an awful deck of cards when he walked into the job, and he's doing the best he can," said Sen. Charles Schumer (D., N.Y.) in an interview. "I think many Democrats share my views." Mr. Paul, author of a new best-seller "End the Fed," long has been a critic of the Fed. His economic views make him an outlier in Congress, but his attacks on the Fed have resonated in Congress and with the public. The Paul provision, and the legislation to which it is attached, would have to clear the full House and Senate before becoming law. Though many lawmakers insist they won't do anything to compromise the Fed's independence on monetary policy, the provision's momentum is substantial. It could be diluted before any bill reaches the president. "Everybody would like to beat up on the Fed and make them the bad guy," said Rep. Melvin Watt (D., N.C.), who opposed Mr. Paul's measure. He said audits would "substantially castrate the Fed so it cannot do what it was set up to do." Fed Chairman Ben Bernanke has crisscrossed the Capitol in recent weeks, attempting to fend off legislation that would curtail the Fed's power or independence. Lawmakers with whom he has met said he has reminded them how close the U.S. came to economic catastrophe last year and maintained that the Fed's actions were critical to bringing the economy back to growth. But Mr. Bernanke faced a skeptical audience. Some lawmakers told him Americans are angry and want more oversight; others said the crisis demanded a rethinking of the U.S. approach to financial regulation. "What he says is that at that point in time, with our economy literally ready to tip over the edge, he did a series of things he thought were absolutely necessary," said Sen. Mike Johanns, a Nebraska Republican. "He was trying to convey that this point in time was enormously serious, and the country was about ready to lock up from an economic standpoint. He just says, 'Look, I did what I thought I had to to keep the country going,'" he said. In an interview, former Fed Chairman Alan Greenspan said it would be "a major loss to the country if the Fed were incapable of running an independent monetary policy. If you have the GAO, after the fact, offering its opinions on whether a certain monetary policy action is correct or incorrect, the active deliberations that are so critical to building a meaningful consensus at the FOMC will begin to become unhelpfully cautious." Mr. Paul maintained that his amendment wouldn't hinder monetary policy, but instead remove a veil of secrecy at the central bank that's unique within U.S. government. At the Fed, "there's plenty of political influence going on now -- presidential politics, influence by Goldman Sachs and the banking industry," he said. "It's all done in secret." Congressional auditors have been blocked from reviewing the Fed's monetary policy operations, its loans to foreign governments and direct lending to banks since 1978, when a law was passed to shield the central bank from politics. Auditors already have access to the Fed's operations outside of monetary policy, including bank supervision and the special loan facilities created to rescue specific institutions, such as AIG and Bear Stearns Cos. GAO audits could publicly reveal reams of information that now remain private, sometimes indefinitely. The Fed doesn't identify banks to whom it lends directly for fear of sparking a disruptive run on the bank. It has suggested that it might be willing to release that information after a lag. The Fed in the past has resisted calls to release information, only to relent. In the 1990s, for instance, after pressure from Congress, the Fed began releasing transcripts of its interest-rate deliberations after a five year lag. Mr. Paul's proposal would delay GAO access to Fed decisions for six months. A companion Senate measure has drawn support from about a third of that chamber. "If there's anything worse than a secret Federal Reserve, it's Congress controlling it," said Sen. Jim DeMint, Republican of South Carolina. "But I do think that there's a wide majority of Americans who want to know what the Federal Reserve is doing and to make sure that it's achieving its primary purpose, which is to protect the value of our dollar." (Source: WSJ.)
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