A friend who teaches finance at a college near New York City (he doesn't want me to divulge his name because his college has threatened to fire any professor who reads my blog) has forwarded a telling Bloomberg report in response to my blog supporting the reappointment of Ben Bernanke.
Bloomberg reports that the Federal Reserve Bank required AIG to file a report four times, insisting that AIG delete more than 1,000 pieces of information concerning the bank bailouts. According to Bloomberg:
"AIG was asked to limit what the public knew about the Maiden Lane transactions. The payments have been called a “backdoor bailout” by lawmakers because banks, including Goldman Sachs Group Inc. and Societe Generale SA, were reimbursed at 100 cents on the dollar for mortgage-linked securities that had declined in value."
The Fed, for instance, redacted the information that the price AIG paid for default swaps was nearly 100 percent of market value. The aggregate cost of the transaction, according to the article, was over $15 billion. That's alot of poor people's tax money going down the tube of Wall Street's incompetence.
Moreover, a schedule A that included sensitive information was omitted from AIG's filing with the SEC. The article states:
"the SEC said in a Dec. 30, 2008, letter that AIG was 'required to file the entire agreement, including all exhibits, schedules, appendices.' After consultation with the New York Fed, AIG requested confidential treatment for the Schedule A, and on Jan. 14, 2009, AIG amended a filing saying that the 'confidential portion of this Schedule A has been omitted' and provided to the SEC."
AIG says that they were not the ones who wanted the confidentiality. The schedule would have showed the large subsidies being paid to Wall Street. The Fed, acting on behalf of Wall Street, encouraged the SEC to cover up the identities of the bankers.
It is not news that the Fed acts on behalf of Wall Street and the money center banks. It is been providing these welfare moms on Wall and Broad with welfare slips for more than 75 years.
The question to be asked now is whether an appointee of the Democratic Party-dominated Senate would be an improvement over Chairman Bernanke. It is tempting to say that if Harry Reid and his fellow extremists appointed an even more aggressive Fed chairman, with a policy even more expansive than Bernanke's, all hell might break loose, and this could be the death knell of the Fed. But I cannot hope for ill to come to this nation. As bad as Bernanke is, the Democrats seem likely to appoint someone worse unless the group that opposes Bernanke makes their aim clear.
Saturday, January 23, 2010
Ulster County Young Republicans Club
Robin Yess and I met this morning with three extraordinary young people, two recent graduates and one a current high school student. The three are eager to start a Young Republicans' Club in Ulster County. There were many, many creative ideas discussed, and I think that they are off to a good start.
Reason Blogs My Interview with Gov. Gary Johnson
Reason Magazine's Jesse Walker just e-mailed that Reason has blogged my interview with Gov. Gary Johnson that appeared on the RLC site. Reason's blog is entitled "Johnson makes some sweet, sweet sounds."
Bernanke and the Deep Blue Sea
The Hill.com says that a number of senators like Inhofe (R-Okla.), Sessions (R-Ala.), Feingold (D-Wis.), Sanders (I-Vt.), Dorgan (D-N.D.) and Boxer (D-Calif) oppose Ben Bernanke's renomination to head the Fed, while Harry Reid supports his reappointment. Bernanke did what Milton Friedman said the Fed should do in the face of a banking collpase: re-inflate by creating reserves. Right before he died, Friedman wrote an article in the Wall Street Journal applauding the post 2001 re-inflation for eliminating a recession. Seven years later the banking system collapsed because of that re-inflation, and Bernanke followed the same prescription, arguing that the real problem was lack of regulation. There have been banking collapses 50 thousand times and in 50 thousand different circumstances in world history, and to claim that regulating derivatives will in the future eliminate them is a lame joke.
The choice between Bernanke and an appointment by the left-wing extremists in the Senate is a choice between the devil and the deep blue sea. I prefer Bernanke to whatever oceanic corruption the Democrats have on offer. But we need to be thinking of alternatives to the Fed, the source of the current economic problems.
The Federal Reserve Bank was established in 1913 in circumstances that are properly called veiled. Its purpose was expanded in 1932, when the gold standard was abolished, again without public discussion. Since 1913 there has been less innovation, slower growth and, since the ultimate elimination of the gold standard in 1971, a stagnant real hourly wage. The past 42 years of almost no growth in the real hourly wage, the best indicator of the welfare of American workers, contrasts with significant growth between 1800 and 1970. The economy was globalized in the 19th century, labor unions came and went (union density is at the same level now as it was early in the 20th century) but innovation proceeded apace and workers flocked here from all over the world, enjoying generations of upward mobility.
The upward mobility ended in 1970, following the final elimination of restrictions on the Fed's power to print money, the Vietnam War and the explosion of regulation in the 1960s and 1970s, LBJ's "great society". Since 1970, Wall Street's activities have considerably expanded, driving almost all other major corporations out of New York City. Hedge funds have flourished. Income inequality has grown. The S&P 500 has grown from 85.02 in 1970 to 1092 today, nearly 13-fold, while consumer prices have grown 5.5 fold. The difference is a wealth transfer from consumers to stock holders that the Fed and the banking system have facilitated. At the same time, the federal and state governments combined have tripled relative to national income. The Fed has facilitated expansion of non-value-producing sectors, banking, Wall Street, real estate speculation and government, at the expense of the value-producing private sector.
The extreme left politicians who would replace Bernanke would accelerate the Fed's destructive subsidies to the wealthy. Bernie Sanders and Barbara Boxer would like to increase the Fed's rate of monetary expansion, subsidizing destructive government programs along with the bankers they claim to detest. The average American would see their pensions, savings and wages decimated while wealthy politicians, real estate investors, corrupt political cronies and "limousine liberals" wallow in the hot loot, the savings of widows and workers' blood.
Recently, former New Mexico Governor Gary Johnson told me that he favors competition between monetary regimes. This would be a major improvement as those who prefer to save and receive pensions in modes other than the dollar could do so. As well, insurance companies could begin to provide the option of retirement annuities in gold if they began to lend at interest with repayment in gold.
The choice between Bernanke and an appointment by the left-wing extremists in the Senate is a choice between the devil and the deep blue sea. I prefer Bernanke to whatever oceanic corruption the Democrats have on offer. But we need to be thinking of alternatives to the Fed, the source of the current economic problems.
The Federal Reserve Bank was established in 1913 in circumstances that are properly called veiled. Its purpose was expanded in 1932, when the gold standard was abolished, again without public discussion. Since 1913 there has been less innovation, slower growth and, since the ultimate elimination of the gold standard in 1971, a stagnant real hourly wage. The past 42 years of almost no growth in the real hourly wage, the best indicator of the welfare of American workers, contrasts with significant growth between 1800 and 1970. The economy was globalized in the 19th century, labor unions came and went (union density is at the same level now as it was early in the 20th century) but innovation proceeded apace and workers flocked here from all over the world, enjoying generations of upward mobility.
The upward mobility ended in 1970, following the final elimination of restrictions on the Fed's power to print money, the Vietnam War and the explosion of regulation in the 1960s and 1970s, LBJ's "great society". Since 1970, Wall Street's activities have considerably expanded, driving almost all other major corporations out of New York City. Hedge funds have flourished. Income inequality has grown. The S&P 500 has grown from 85.02 in 1970 to 1092 today, nearly 13-fold, while consumer prices have grown 5.5 fold. The difference is a wealth transfer from consumers to stock holders that the Fed and the banking system have facilitated. At the same time, the federal and state governments combined have tripled relative to national income. The Fed has facilitated expansion of non-value-producing sectors, banking, Wall Street, real estate speculation and government, at the expense of the value-producing private sector.
The extreme left politicians who would replace Bernanke would accelerate the Fed's destructive subsidies to the wealthy. Bernie Sanders and Barbara Boxer would like to increase the Fed's rate of monetary expansion, subsidizing destructive government programs along with the bankers they claim to detest. The average American would see their pensions, savings and wages decimated while wealthy politicians, real estate investors, corrupt political cronies and "limousine liberals" wallow in the hot loot, the savings of widows and workers' blood.
Recently, former New Mexico Governor Gary Johnson told me that he favors competition between monetary regimes. This would be a major improvement as those who prefer to save and receive pensions in modes other than the dollar could do so. As well, insurance companies could begin to provide the option of retirement annuities in gold if they began to lend at interest with repayment in gold.
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