Classic Liberal Blog

It's popular today to claim you don't believe in conspiracies, particularly government conspiracies. But is that a logical position to take?

Are politicians and nameless government bureaucrats pure? Are they incapable of sin? Was Lord Acton wrong when he said: “All power tends to corrupt; absolute power corrupts absolutely?”

Have not the Democrats been conspiring to pass an unpopular socialized health care scheme? Do politicians and nameless government bureaucrats have something special in their DNA that forces them to do the right thing?

The Federal Reserve was conspired by private bankers and power-hungry politicians during the Progressive Era. Gasp! C'mon now, the secretive, central planner known as the Federal Reserve, has only our best intentions at heart!

Really? Can you say that with a straight face?

Secret Banking Cabal Emerges From AIG Shadows: David Reilly

Jan. 29 (Bloomberg) -- The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.

The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks ... That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.

Saving the System

Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained during Wednesday’s hearing that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system.

The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed’s subsequent attempt to cover up buyout details and who benefited.

By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.

This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.

Geithner’s Bosses

The New York Fed is one of 12 Federal Reserve Banks that operate under the supervision of the Federal Reserve’s board of governors, chaired by Ben Bernanke. Member-bank presidents are appointed by nine-member boards, who themselves are appointed largely by other bankers.

As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”

And yet the New York Fed played an integral role in the government’s bailout of banks, often receiving surprisingly free rein to act as it saw fit.

Consider AIG. Let’s take Geithner at his word that a failure to resolve the insurer’s default swaps would have led to financial Armageddon. Given the stakes, you might think Geithner would have coordinated actions with then-Treasury Secretary Henry Paulson. Yet Paulson testified that he wasn’t in the loop.

Bernanke’s Denials

Fed Chairman Bernanke also wasn’t involved. In a written response to questions from Representative Darrell Issa, Bernanke said he “was not directly involved in the negotiations” with AIG’s counterparty banks.

You have to wonder then who really was in charge of our nation’s financial future if AIG posed as grave a threat as Geithner claimed.

New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa.

That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.

Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals -- too many counterparties, too many lawyers and advisors, too many people from AIG -- to keep a determined Congress from the information.”

Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark.

This belies the culture of secrecy obviously pervasive within the New York Fed ...

Good. Wholesome. Honest. Omnipotent Overlords.

Then there's this weird statement by Jim Cramer on CNBC: "The Bavarian Illuminati, Trilateral Commission, Goldman Sachs and the Queen of England are not all bad!"

"Wow" is right! I like also how he says Bernanke was clueless about the bubble, but yet he's still a brilliant central planner. Anyways ... back to the story.

A Brief Piece of History

Remember Bill Clinton’s Georgetown University professor and mentor Carroll Quigley's book Tragedy and Hope? In Chapter 65, Quigley writes:

The Right’s Fairy Tale Does Have a Modicum of Truth

This myth, like all fables, does in fact have a modicum of truth. There does exist, and has existed for a generation, an international Anglophile network which operates, to some extent, in the way the ... Right believes the Communists act. In fact, this network, which we may identify as the Round Table Groups, has no aversion to cooperating with the Communists, or any other groups, and frequently does so. I know of the operations of this network because I have studied it for twenty years and was permitted for two years, in the early 1960's, to examine its papers and secret records. I have no aversion to it or to most of its aims and have, for much of my life, been close to it and to many of its instruments. I have objected, both in the past and recently, to a few of its policies (notably to its belief that England was an Atlantic rather than a European Power and must be allied, or even federated, with the United States and must remain isolated from Europe), but in general my chief difference of opinion is that it wishes to remain unknown, and I believe its role in history is significant enough to be known.

You can read the entire chapter here.

Should we just ignore the writings of a president's mentor? Yes, mentor. That means that Bill Clinton didn't think his writings were crazy.

Would somebody like to give me a logical reason not to believe some sort of conspiracy is not taking place? The Federal Reserve and many other parts of our government sure seem to be about as honest as ACORN. Or are they pure, honest brokers too?

"They wouldn't do that," "I trust my government," or any other sort of nonsense along those lines isn't logic, it's just emotion. You don't have to agree lock, stock and barrel with guys like Alex Jones either, in order to see there's something going on ... that just ain't right.

Stop. Think about it ... How much money do you, your children, grandchildren and generations to come, owe [1] these bankers? Is that honest?

"Too big to fail" is as real as unicorns, the tooth fairy and Santa Claus.

Corruption, conspiracy ... What's the difference?

[1] Repudiate the National Debt!