Georgia Senators, Saxby Chambliss and Johnny Isakson, have signed on as co-sponsors to S.604, the Senate version of the Audit the Fed legislation.
In case you don’t know, both H.R.1207 (currently has 275 co-sponsors) and S.604 would require the Federal Reserve to open up it’s books to the Government Accountability Office (GAO) for certain reports currently excluded from audits in subsection (b) of 31 USC 714, including transactions with foreign central banks, decisions on monetary policy, transactions made via the Federal Open Market Committee and communications by members of the Fed’s Board of Governors.
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Kudos to both Senators. While they’re focused on doing the right thing someone should go explain the intent of Article I Section 8 of the Constitution to them and see if they’ll sign on to abiding by that.
Baby steps, RW. Baby steps.
It’s about time.
Way overdue.
Everyone should send a thank you note to the Paultards who tirelessly lobbied those two at every GOP event they’ve been to in this state for the past 3 months.
thank you John Blanks, Joe Anderson, Sean Mangieri, Dr. Bob Frady, Ike Hall, Jon Hodges (the hottest guy in the bunch), Kathy Pate, and all the others who gave those guys hell for attempting to ignore this important legislation.
Proof that if you take legislators to the wood shed, they will do the right thing. And for all of you who were mad at me for booing those guys at the state convention, pretending to approve isn’t worth jack squat when our liberty is on the line. We better watch these guys closely though, and make sure they follow through on their signatures. I’ve seen all too often at the Georgia Capitol just how worthless a signature is, unless your pawning it off to your constituents as proof of your “integrity.”
who tirelessly lobbied those two at every GOP event they’ve been to in this state for the past 3 months.
Careful, Jenny…someone might take it upon themselves to file an ethics complaint against these folks for “lobbying” without being properly registered with proper authority.
Good point.
Tirelessly harrassed those two….
Better?
Let me start by saying I have nothing against transparency in government operations. (Although I have seen sausage getting made and you really don’t want to know.)
That said: what’s the point of releasing this information? The Fed is supposed to be “independent” in the way it operates. Will this create an atmosphere of political pressure for them to do something different? Can congress-critters really grasp what the Fed does? And once they understand it, will they all try to pull a “Barney Frank” on it and is that really what you want?
I’m just thinking about what comes next. I don’t have answers, just questions.
The Fed’s control over the economy needs to have some sort of check, and this bill provides transparency where there has previously been a void.
The Fed doesn’t “control” the economy, but they do have influence over interest rates and money supply (in conjunction with Treasury).
That said, who exactly do you think will have the brains to “check” the Fed’s work? Other economists? You want three answers to a question, get two economists in a room. Politicians? These guys can’t see past their next election. Who exactly do you envision checking the Fed’s work and getting them to change course?
Again, I’m not saying transparency is a bad thing. I just want to know “to what end” and get people to really think about what it is that they think will happen next and what that might do to the Fed’s operation as a body that’s quasi-independent of political control.
The Fed doesn’t just have influence. Its “easy money” policy is more of a problem than any action taken by Congress.
Truth be told, I don’t know…we need to know what damage has been done first before we can take another step and that’s what these two bills do.
You say you don’t know what damage has been done, but you also don’t really know how much damage was avoided either, do you?
Ok, let’s say that over the past nearly 12 months, in response to the credit markets locking up, they’ve increased the money supply M2 by $2 trillion (printed by the treasury dept) and made nearly $500 billion available as “secured” loans to banks and other financial institutions. Just for the sake of argument, but those might be close to correct from what I remember.
Now what? You have this information and so do the politicians. Now what?? Force the Fed to do something else? How does that make them independent?
[BTW, I'm pretty sure the Dems in Congress are already aware of the real numbers and are not talking about it, just because the numbers are staggering for the average person's brain.]
Knowledge is only power if you really want the power to do something with the knowledge. Otherwise, it’s just trivia. And maybe something that will get people angry because it will seem like a huge amount of money for something that they really won’t understand well enough to make a clear judgement.
$23 trillion is what we’re on the hook for, combination of spending by Congress and actions taken by the Fed and this extends far passed the recession. The Fed has been a monetary abortion.
We won’t know the extent of the damage until we know the thought processes, etc. Then you take the next step.
We won’t know the extent of the damage until we know the thought processes, etc. Then you take the next step.
Well, a lot of the damages are known. Bernanke is the mortal enemy of frugal, responsible people who saved. Every emergency Fed facility has been cobbled together to rescue borrowers when the market correctly identified risk and took interest rates PAID TO SAVERS and bond investors up. This happened in the bond market, the ARS market and the Commercial paper market.
Fed interventions have caused prices to be much higher than they would have been without these $trillions.
Just yesterday, when questioned about an exit strategy to remove money from the system, Bernanke talked of paying banks interest on deposits with the Fed. What this means is that banks will continue paying depositors nearly nothing, then earning money risk-free off of depositors funds.
The damage to pensions has been quite shocking. Because of lower interest rates around 2%, it now takes $3,000,000 in pension funds to generate a single $60,000 annual pension. Plans cannot earn this, so they are eating into principle at breathtaking pace. If this continues much longer, pensions will be wiped out.
The Fed also was responsible for the $10′s of trillions in now-and-forever toxic assets, more that a little of which is in folk’s 401k’s.
When this becomes evident, the people will be beside themselves with rage.
No, it’s not $23 trillion, Jason. That’s the headline number. If you read past the headline and figure out what the article is really saying, it’s saying they have absolutely no real idea yet and they’re just making up a number that’s really big so that the IG can get more answers than he’s getting.
Relax.
As for the rest of your assertions, I’m betting you really don’t know what went on the weekend that Bear Stearns went under. If you don’t do the hard learning, you’ll always be suspicious.
I’m suspicious of many things, but what the Fed has done since August last year has been about the best solution that could be done with the information that was available. And that’s not a “party line” comment; that’s one based on understanding what was really happening and what the possible options and outcomes could have been.
All the Fed has done is to make matters worse.
The toxic assets remain toxic. Not one thing has been done to repair the damage, which BTW contaminates many, if not most 401(k) “guaranteed” investments.
Commercial real estate is about to tumble. Pensions are buckling and 401(k)s have been diminished by the fraud.
The Fed has rescued the felons at the victim’s expense.
Actually, you’re completely wrong. Which doesn’t surprise me, because this is not a simplistic topic and lots of disinformation by uninformed “pundits”, so people really don’t grasp everything that has gone on and why we aren’t worse off than a normal (albeit deep) recession. A housing/asset bubble deflating at the same time as a credit/deleveraging crisis is a monster problem to try to unwind in an orderly fashion and research shows the median time to unwind the problem is about 39 months and goes a bit faster if you throw money at the problem with confidence. Seriously. That’s really the conclusion from studies of other countries who have had similar problems. I’ll let you do some homework to find out who did the study, what the data specifically showed, and where the author works now.
My recommendation is people read Bailout Nation before they get too vested in assigning blame or getting worked up over what the Fed has done. The guy who wrote it was one of the ones who really did “see this coming” back in 2005 and one of the reasons I got out of lots of stocks and into cash in 2006 (although the timing wasn’t perfect, what he saw coming with the credit and housing markets is pretty much what happened).
Or… you can stay uninformed and pissed off at the government. Your choice.
ByteMe – Heres my philosophy. Considering that only students of Mises, Rothbard, Hayek, and the rest of the Austrian scholars predicted the recession, why would I listen to mainstream Keynesian Economists about the solution to a crisis they never saw coming?
Tocallaghan,
The Mises folks have correctly predicted about 50 of the last 2 recessions.
They are prophets of doom, and are right about as often as a broken clock.
The Fed being independent is part of the problem. The people have no influence over the private bank.
The Fed needs to be independent from a decision making standpoint. The last thing we need is Congress critters who can’t figure out fiscal policy trying to dictate monetary policy.
But increased transparency is a good thing. I don’t see any issues with supporting the bill. “Audit the Fed” is not the same as “Abolish the Fed”.
“Audit the Fed” is not the same as “Abolish the Fed”.
But as Sarah Brady once said of the Brady Bill: “It’s a start.”
And no mention of The Ox’s comments.
Predictable and sad really.
You are correct, Dash.
Did I just say that?
Whether we like it or not, Rothschild probably has more influence over the Fed than anyone in the world.
http://www.rothschild.com/
Once we audit the Fed, the country will begin to see the brilliancy in putting Benjamin Bernanke on trial for treason.
Meant brilliance.
Jenny, when this entire house of cards comes crashing down Bernanke will need to find another planet to live on.
Georgia’s senators read the TARP Inspector General’s damning report and prudently decided that they need the cover of sponsoring of the Fed Audit Bill given their votes – against the overwhelming opposition of their constituents – FOR TARP.
$24 TRILLION?
May the Good Lord have mercy on us all for what they have wrought.
Heh, you’re probably right. I’m still waiting for a better replacement for the two senators. However, this has certainly exceeded my very low expections.
Byteme – You are totally wrong. You completely skip over the fact that securitization makes this crisis fundamentally different and that toxic assets are indeed toxic.
Here we are two years into the first Bear Stearns revelations about the nature of these ‘assets’ and there has been de minimis correction to these rotting time bombs on the balance sheets of banks and in 401k accounts. In fact, the suspension of mark-to-market was suspension of reality that these things are indeed only worth 5 to 15 cents on the dollar.
The few studies that have been done on CDO’s and CLO’s have shown the average “bond” to contain hundreds of other bonds, each one of which contains scores of more bonds, and so on. Fitch ratings looked at these things and found massive fraud. Some mortgages were packaged into more than one bond. Some mortgages and CDO’s don’t even exist. On top of this there were CDO’s squared which compounds the diminution of value.
There literally is not enough legal and accounting horsepower on earth to unravel the mess.
Diminution of value through divided ownership and control is a well-established principle that even the IRS recognizes with family partnerships and LLC’s. These discounts can be as great as 60 to 80%. How much greater is the diminution when the whole is cracked up like Humptey Dumptey and cannot be made whole again?
Congrats on getting out. My own revelation was one way in 2006 when I began to wonder HOW mortgages got to be a cornucopia of wealth, given that the spread was the only profit, read that Georgia was a hotbed of exotic loans, and queried my bank branch managers.
The Fed created an alphabet soup of facilities overnight in the $trillions, but did not have time to ramp up employment, systems, or CONTROLS over these mammoth bail-outs. For them to claim immunity from audit is preposterous.
For heavens sakes, their own Inspector General doesn’t know where the money went. Google ‘Fed Inspector General and Grayson’ to watch.
Just this week Bernanke could not explain $500 billion in swaps.
The Fed is an agency that totally missed this mess. Its Chairman has made a string of totally wrong pronouncements about the mess over the last 2 years, and Tens of billions from TARP went to bonuses.
For your education – which you are in dire need of – I recommend Empire of Debt by Bonner and Wiggin.
You again fail to understand, Indy, and that’s ok. Like I said: this is NOT simple.
How do you have “mark to market” when there is no market for something? You don’t. Same as in the S&L crisis back in the ’80′s, what you do is you buy time. With money, of course, but time is your ally. Eventually, buyers come back into the market and set a reasonable price for things and the market starts to function again.
But forcing these firms not only to deleverage all at the same time — after the SEC let them get leveraged up to 30-to-1, thank you Cox! — but then having to price their assets when there was no market because everyone was deleveraging at the same time… that made things worse. So suspending mark-to-market was the second step to buying time. And time is what they need. A foreclosed house is still worth SOMETHING (excluding fraud, which was bad, but not really a large part of it), but until there’s a market for the house, you can’t set a price on it. So you hold onto it. But that’s not cash and banks need a certain amount of cash.
Basically, this is a liquidity crisis and the Fed is doing absolutely the right thing by pumping in liquidity as fast as it can and giving everyone time to unravel the mess they — the banks — created.
[Feel better that some bigger German banks are leveraged out to 50+-to-1 and that time bomb is going to blow any day now.]
My only complaint in the way this was all handled was AIG.
As for the IG not knowing where the money went, I already addressed that in my earlier posting about the article. That’s where the “$23 trillion” number came from, so that’s why I discount the number as being one made up from frustration.
It’s not going to be a real surprise which banks got the money when Treasury eventually tell us. What’s going to be a surprise to some people is how much of that money went overseas.
What I think will surprise all the anti-Fed people is how much of the money comes back with interest. Some of it is definitely gone (AIG, GM), but many of the banks have very valuable assets that they just need time to dispose (e.g., Citi selling off Smith Barney). And money to keep going until they can dispose of those assets.
Relax. There’s a reason it’s not worse than it could have been.
It is indeed complex – many tiers of complexity.
If it were home loans that were the bank assets, I would agree with you. Then it would be one of many debt binges ended badly that time could heal.
What are on the balance sheet of the banks, the Fed, and all too many 401 funds, are “securities” that are hardly homogeneous as to holdings.
What about all the pay-option-ARMS, where the banks anticipated and booked in the current period income that will NEVER materialize?
Another aspect of the complexity is the diversity in loans and when loans of a given type peak. We are getting crests of loan defaults – the next up will be commercial real estate. Bernanke yesterday alluded to as much.
How long can pensions stand ZIRP, under which it takes a nearly infinite asset balance to throw off sufficient earnings to pay a single pension.
The Fed is sitting on a bomb that is going to take them out and we with them.
Read the farewell address of Andrew Jackson and you will marvel at how well he predicted the calamity of another USA central bank.
I’ve been expecting the commercial side to blow for several months now. Not sure what’s still propping it up, but the commercial side is more about the typical boom-bust cycle, since there really wasn’t a bubble in commercial real estate. The economy contracting always affects commercial developers badly. That one will be bad, but we’ll likely ride it out over time… again, the biggest problem is time and liquidity. The assets are mostly real.
As for what’s coming next: probably another 1 million foreclosures above what’s already happened and these will be Alt-A and Prime mortgages that go bad just because of the economy and high unemployment. BAC will likely be the biggest loser from its Countrywide buy. I’m surprised it’s still open.
It’s been fun, but we’ve banged on this long enough. Let other people figure out what the hell we’re talking about.
Whatever happened to Donkey Kong? He and I sparred over this at length, as he was in denial about how badly Wall Street and US finance had screwed up.
DK, be a man and come back for your punishment.
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