Weekend at Bernanke’s

Posted: March 25, 2011 in Commentary, Economics, Politics
Tags: , , , , , , ,

This week the Fed lost its appeal to protect it from having to disclose who it gave emergency loans under the pretense of saving the global financial system during the 2008 banking crisis. As he faces the fact that he is consistently wrong about the economy, lying about inflation, printing money at a pace never seen before, bailing out and subsidizing banks and Wall Street, and watching governments borrow and spend their nations into bankruptcy he will have to figure out how to not become a victim of the economic hitmen.  Might be a rough weekend at Bernanke’s.    

It turns out that Morgan Stanley was one of the firms that was saved from insolvency by the Fed.  What they did was ask the Fed to allow them to become a bank holding company so that they could borrow from the discount window like banks do.  Three days after the approval Morgan borrowed $3.5 billion through that facility saving their bacon from the fire.  The Fed actively resisted divulging the information claiming disclosing discount-window borrowers’ names

“can quickly place an institution in a weakened condition vis-a-vis its competitors by causing a loss of public confidence in the institution, a sudden outflow of deposits (a ‘run’), a loss of confidence by market analysts, a drop in the institution’s stock price, and a withdrawal of market sources of liquidity.”

U.S. District Judge Loretta Preska rejected that argument as the self-serving manure that it was:

“The risk of looking weak to competitors and shareholders is an inherent risk of market participation,” she wrote in her August 2009 decision ordering the Fed to release the documents.  “Information tending to increase that risk does not make the information privileged or confidential.” The Second Circuit Court of Appeals in New York upheld her ruling.

The banking industry kept fighting however.  Naming banks that used the discount window during the financial crisis would be harmful even years after the fact, the Clearing House Association, representing the largest U.S. commercial banks, wrote in an October 2010 petition asking the Supreme Court to intervene.  Disclosure would let the public “observe their borrowing patterns during the recent financial crisis and draw inferences – whether justified or not – about their current financial conditions,” it said.  The SCOTUS refused to hear the case letting the decision stand.

Just to be clear, the Fed and the banking cartel don’t think that you should have information about the strength and solvency of banks because you might choose to move your money to another institution where it would be safer.  The Federal Reserve is the organization that Americans everywhere are supposed to trust to protect their finances, lower unemployment, and successfully manipulate the economy to keep it from tanking.  Caveat emptor, baby!

What continues to happen is the Fed and other central banks are taking more control of the economy.  The risk of economic management becomes more and more concentrated making the fallout from decisions grow exponentially.  Right now the Fed is faced with the choice of recession in the United States or hunger in the developing world, where two billion people live on less than $2 per day.  The choice will be political and domestic since that is where their power is bestowed.  Hunger it is!

The reality is that the financial crisis wouldn’t have happened if voluntary economics were being practiced and there was no Fed.  Interest rates would have floated at market rates so the speculative investment that created the dot-com bubble wouldn’t have occurred, the real estate crash wouldn’t have occurred, and the financial crisis wouldn’t have occurred.

What’s amazing is that the Fed is right now funding a speculative bubble with below market interest rates again that is already showing up in the stock market, and commodity prices.  All because the government and large bankers created this Frankenstein monster to PREVENT these type of problems – or so they told us.  What they actually created was a way for us to pay for their business mistakes.

Just think, in the last 40 years the value of a dollar has fallen to 25 percent of what it was in 1971.  It’s currently falling at 10 percent per year so it will take less than ten years for it to lose 75 percent of its value, if inflation doesn’t spike because of all of the money-printing.  How do you handle something like that, Ben?

Look for the media to downplay the data being released, except for Bloomberg and Fox who made the FOIA requests.  Better to ignore the problem than take the medicine that is desperately needed – market interest rates, massive government spending cuts, a return to commodity-backed money, and the destruction of the fourth central bank of the United States that has created all of the misery.

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