Classic Liberal Blog

We're expecting a vote on whether or not the Federal Reserve will be audited any day now. The Senate was supposed to vote on the audit May 4, but didn't. Rumor now, is they will vote on the Fed audit tomorrow.

As to be expected from our omnipotent Congress though, they significantly watered down the bill, providing more cover for Federal Reserve secrecy. Here's Rep. Ron Paul on the Sanders Amendment to the financial reform bill.

Fed Audit Under Fire

It doesn’t come as too much of a surprise that the measure to audit the Fed is coming under continuous fire from the central bank and its cronies.

For the first time since the Federal Reserve was created nearly a century ago they have hired an actual lobbyist to pound the pavement on Capitol Hill. This is a desperate effort to hang on to the privilege of secrecy and lack of accountability they have enjoyed for so long.

Last week showed they are getting their money’s worth in the Senate. At the very last minute, on the floor of the Senate, supposed compromise language was agreed to and substituted in the Sanders Amendment to the financial reform bill. This language was acceptable to the administration, committee leadership and to the Fed. The trouble is, while it is better than no audit at all, it guts the spirit of a meaningful audit of the most crucial transactions of the Fed.

In fact, rather than still calling the Sanders amendment an audit, maybe it should instead be called more of a disclosure at this point. The new language of the Sanders amendment requires a one-time disclosure from the Fed of 13(3) facilities, foreign currency swaps and mortgage-backed securities. Basically, their sins of the past would be revealed and Americans would know more about who got bailed out by the Fed and under what terms. This would be good, but it’s not nearly enough.

Taxpayers are sick and tired of bailing out privileged dysfunctional institution that should be allowed to fail in order to stop their ability to wreak havok on our economy. Perpetuating these corporations at taxpayer expenses is not just wasteful, it is actively harmful. It would be good to know what went on in the past, but what about accountability in the future? A one-time disclosure now will not do us a lot of good down the road when the cycle repeats itself and friends of the Fed find themselves in trouble again. More importantly, agreements with foreign central banks are not touched by the new Sanders amendment language.

Protecting the secret Federal Reserve counterfeiting machine ...

Amendment Lacks Bite

Perhaps no other force had as much to do with stabilizing the financial system during the crisis as the Federal Reserve. And no other influence is shrouded in so much mystery. Although its tactics were hugely successful, the Fed has become incredibly controversial due to its secrecy. It has some politicians on both sides of the aisle calling for an audit to enhance transparency. But the Senate amendment -- sponsored by Sen. Bernard Sanders (I-VT) -- changed significantly on Thursday and lost much of its bite.

Initially, both would have allowed periodic audits of all of the Fed's policy actions. They each would have also permitted the Government Accountability Office to determine what scopes the audits would encompass.

No more. In order to appeal to a broader audience, the revised Senate amendment (.pdf) has been watered down significantly. Now, the action would be reduced to a one-time audit, specifically targeted at the Fed's new programs created during the financial crisis. It also specifies the scope of work that the GAO should consider.

This shouldn't be a surprise to anyone, especially considering the close ties Washington has with the banking industry, highlighted by Goldman's super-cozy relationship with the U.S. Treasury.

Goldman Sachs' ties with the Obama administration

The ties between Goldman Sachs (GS) and the U.S. Federal Government aren't really a new thing, as the relationship goes back several administrations. The ties between Goldman Sachs and the Obama administration isn't a one way one either. Former Government officials can also work for Goldman Sachs. One such example being Gregory Craig, former Obama White House Council according to Greg Gordon of McLatchy newspapers. This lawyer has allegedly been hired by Goldman Sachs to assist with the charges held against it by the Securities and Exchange Commission (SEC).

Of previous administrations' links to Goldman Sachs is Henry Paulson, who has not been linked to the hedge fund the SEC claims is fraudulent, and is the former U.S. Secretary of the Treasury as well as former executive of Goldman Sachs.

Goldman Sachs also has ties to the debt crisis in Greece, where they arranged swaps that allowed Greece to borrow $1 billion euros without it showing in their official public debt numbers. Goldman also bought insurance to hedge against potential (or should we say, inevitable) default.

Hedging against loss however, certainly isn't a "scandal" of any kind.

Goldman Sachs Shorted Greek Debt After It Arranged Those Shady Swaps

Goldman Sachs arranged swaps that effectively allowed Greece to borrow 1 billion Euros without adding to its official public debt. While it arranged the swaps, Goldman also sought to buy insurance on Greek debt and engage in other trades to protect itself against the risk of a default on those swaps. Eventually, Goldman sold the swaps to the national bank of Greece.

Despite its role in creating swaps that may have allowed the Greek government to mask its growing debts, Goldman has no net exposure to a default on Greek debt, a person familiar with the matter says.

Goldman is “flat” when it comes to Greece, the person said. Which is to say, its long and short exposure to a potential Greek default are in balance.

The real scandal involving Greece has to do with the Federal Reserve and YOU!

As Ron Paul warned back in February:

Is it possible that our Federal Reserve has had some hand in bailing out Greece? The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.

Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels. Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent. Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.

Yeah, I know, I know, I've heard it all before ... Ron Paul is "crazy" ...

Or maybe not.

We're bailing out Greece!

US taxpayers will be helping to foot the bill for the Greek bailout, via the Interna tional Monetary Fund. And if the Obama administration doesn't draw a clear line, Uncle Sam may soon be on the line for even more and larger European "rescues."

The Greek government, with its high taxes and profligate spending to support large bureaucracies and social programs, is bankrupt. Its bonds have been downgraded to junk status.

As economist Milton Friedman once said, "If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand." Greece has run out of sand.

Concerned that the fiscal damage could spread throughout the EU and the world, other European Union members and the IMF have pledged $145 billion to bail out Greece. And since the United States is the largest contributor to the IMF budget, our government will be funneling billions of American tax dollars to Greece.

No one wants to see Greece fail -- the economic stability of Europe is important. But US taxpayers have funded bailout after bailout, and our country faces a debt crisis of its own.

The United States pays 17 percent of total member contributions to the IMF; No. 2 Japan provides just 6 percent. That entitles us to a claim on the overall IMF balance sheet, not a share of any specific loan -- but it still means that our "share" of the $40 billion IMF package for Greece is equivalent to $6.8 billion.

Last year, Congress passed another $100 billion line of credit to the IMF -- funds the IMF said will go "to forestall or cope with an impairment of the international monetary system or to deal with an exceptional situation that poses a threat to the stability of that system."

In other words, the "too big to fail" doctrine is being expanded to an international level -- with the United States as the primary stakeholder.

Particularly when it comes to economics, money and banking, Ron Paul always gets it right! So in truth, the only "crazy people," are the one's who refuse to listen.

Bailing out Greece

Well, why not?  We have bailed out almost everyone else.  The federal government now owns two carmakers (Chrysler and GM), an insurance agency (AIG), and just about every mortgage in America through Fannie Mae, Freddie Mac, and FHA.  Frankly, at this point, another few billions for the Greeks seems like chump change ...

In essence, we will borrow money to give to Greece in order to fix the problems they created … by borrowing too much money.  Only in the public sectors does that kind of idea make any sense at all.  On top of that, the US and the EU want Greece to impose badly-needed austerity measures and downsize its public sector as a condition of receiving the money, when in fact the US and the EU need to adopt those measures themselves before giving the money.

We’re sending fantasy dollars to rescue fantasy euros.  It’s a big Ponzi scheme.  And it seems very likely that we’ll be the suckers left holding the bag at the end of this one.

The Greek Debt Crisis On The Verge Of 'Going Global', coupled with the Federal Reserve's policy of "too big to fail" ... It's no wonder the powers that be don't want the Fed to be audited.

Because if it were, "we the people" would quickly shut 'em down!