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Federal Reserve
#21
Peter Lemkin Wrote:
Myra Bronstein Wrote:Kucinich is getting even bolder. This latest statement of his just blows me away: http://www.youtube.com/watch?v=-r_-QRKyu6g
"Dennis Kucinich States His Intention To Put The Federal Reserve Under Government Control"
IMO bypassing the Federal Reserve is what got Lincoln assassinated.

Right, Myra. It has been tried and proposed a number of times - in each case I can think of it was 'handled' by the elimination of the proposer - by political destruction or death. I also don't think the 'Best Congress Money Can Buy' is 'up' for it. The Public not demanding it and unaware of the problem, generally. I don't yet see anything along the lines of a 'no business as usual - but something COMPLETELY different' mentality. The people who caused the problems with their corrupt, opaque, trickle(pour?)-up voodoo economics are still at the helm. :captain: steering the ship of state right into the rocks.

It's trickle on economics.
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#22
A piece of good news.

There is another great history-of-money/monetary-reform book out that I am about two thirds of the way through entitled The Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free by Ellen Hodgson Brown. (2005, latest Edition Dec 2008).

http://www.webofdebt.com

This is a very special book. It is built using L. Frank Baum’s book The Wonderful Wizard of Oz (1900) as a framework. It is also very complementary to Stephen Zarlenga’s book The Lost Science of Money. In fact the author quotes extensively from it.

I hope many others have or will read it.

Some flaws too.

The author puts maybe too much trust in some very questionable sources.

There are some great reviews on Amazon if anyone wants to check on it, including a post by the author herself.

Ron Williams
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#23
Thanks Ron, I'll check it out.

David
The shadow is a moral problem that challenges the whole ego-personality, for no one can become conscious of the shadow without considerable moral effort. To become conscious of it involves recognizing the dark aspects of the personality as present and real. This act is the essential condition for any kind of self-knowledge.
Carl Jung - Aion (1951). CW 9, Part II: P.14
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#24
The Secrets of the Federal Reserve

by Bob Chapman
http://www.globalresearch.ca/index.php?c...&aid=13612
The Federal Reserve Act was legislated in 1913 to end recessions, panics and depression. Over that almost 100-year period they have been eminently no more successful then their predecessors. The Fed is a private corporation, which guides US monetary policy. Its staff is from Wall Street, banking, and transnational conglomerates and occasionally from academia. Of the 12 Federal Reserve banks the New York bank is the most powerful. The staffing of the Fed at the least is incestuous, because the member banks take part in the staffing, as they filter to the Fed what actions they should take. That is done by the FOMC, The Federal Open Market Committee. As a further example the recent stress test done by the Fed was done on many of their owners. Sadly the public is unaware of this and even business majors and those with business masters degrees do not know that the Fed is privately owned or what they actually do. For those of you who would like to get a better understanding read G. Edward Griffith’s, “Creature from Jekyll Island” and the secrets of the Federal Reserve” by Eustace Mullins.

Recently we discovered that $101.4 billion was originally secretly funneled through AIG to AIG counterparties - parties that were owed these sums by AIG, which had not collateralized derivative contracts. That is like writing insurance and having no collateral reserves set aside for losing events. The Federal Reserve in their wisdom paid off AIG’s debt with what eventually will be taxpayer debt. This is wrong and it should not have been done secretly. When demanded by a Federal Judge to reveal to whom these monies were paid and under what circumstances, the Fed said it would harm their reputations and it was a “state secret.”

The biggest gun in the Fed arsenal is the New York Fed. The recently appointed Secretary of the Treasury Timothy Geithner was the NY Fed’s previous governor. Mr. Geithner had worked in government previously and was in part responsible for the Asian financial disaster in 1997-1998. He is also a Goldman Sachs alumnus. He is part of a never-ending exchange of the denizens of Wall Street and banking being appointed to government positions. In fact Wall Street and banking have been running our government for a long time. Many say for too long.

This kind of relationship makes government a tool of major financial interests and it breeds corruption, as we just witnessed in the case of Stephen Friedman, formerly of Goldman Sachs, and until he resigned last week, for having purchased some Goldman Sachs stock, was Chairman of the NY federal Reserve, the position Mr. Geithner had held before him. This raises the fundamental question of appointment and corruption. Never mind the other issues the Fed is involved in. this is America’s most powerful financial institution and it is run by corrupt and perhaps incompetent people. The NY fed has a very special position, because it is actively running markets every day via the 21 dealers it uses to manipulate and uses these markets. This is part of the program never spoken of that exists to assist the “Working Group on Financial Markets, which manipulates markets 24/7, under an Executive Order signed in August 1988 by then President Ronald Reagan. This was executed to protect against market failures such that had taken place the previous October. The order was for emergencies. The Treasury, the Fed, Wall Street and banking have distorted its original intent. The Fed also sets interest rates and regulates the issuance of money and credit. Thus the Fed holds a pivotal role in our financial well-being. They also are to insure the soundness and stability of the banking system. If our banking system breaks down it is the fault of the Fed. When that happens it should not be the province of the Fed to commit trillions of dollars of taxpayer money to bail out its own owners.

You can get an idea of the incestuous nature of the Fed and Wall Street in looking at the select committee that not that long ago picked Timothy Geithner to head the NY Fed. Hank Greenberg defrocked former Chairman of AIG, who for some reason was never criminally prosecuted in the scandal; John Whitehead a former Chairman of Goldman Sachs; Peter Peterson, a former Chairman of Lehman Bros.; and Walter Shipley, a former Chairman of Chase Manhattan, now with JP Morgan Chase. We wonder why the media never questions these kinds of connections all of which are tied together by the Council on Foreign Relations.

Then there is the composition of the NY Fed board on which six board members are public representatives. We do not see any common business people on this board. They are all very wealthy New Yorkers, who are all connected to one another. There have been occasionally members of labor and academia, but they can only be considered tokens. It is very definitely an insiders club.

This means the Fed’s real consideration is the maximizing of profits for banking, Wall Street, insurance and real estate. This goal of almost 100 years has made these individuals and their families’ mega-rich. Competent or incompetent they always win. They have information and intelligence no one else has and you can be sure their inner circle has the same privileged information. As usual they are essentially unregulated, which gives the Fed an additional advantage. The lack of banking oversight of recent years has brought our entire financial system into insolvency. We do not know how you could call it anything else when most major banks, brokerage houses, some insurance companies and other lenders are simply broke. The Fed, and particularly the NY Fed, has been complicit in banks and brokerage houses using leverage of more than 50 times assets. In some cases such as JP Morgan Chase the figures are much higher. In fractional banking 8 to 10 times is considered appropriate. This is the biggest bailout of poorly managed corrupt banks in history. This failure is far greater than the failure of the Lombard System in Venice in 1348, the year of the great bubonic plague that swept Europe and killed 50% of its inhabitants. These elitists have brought the world economy to its knees. It is ironic, but true to insider dealing, that not one CEO or senior executive has been fired, as trillions of dollars have been lost.

That said this is the perfect segway to bring to your attention a bill calling for the Comptroller General of the US to audit the private Federal Reserve. At last report 124 members of the House have joined Rep. Ron Paul’s bill HR 1207, as co-sponsors, to his Federal Reserve Transparency Act of 2009. Both the Fed’s Board of Governors and the Federal Reserve Banks would be required to report to Congress before the end of 2010. This could be the most important bill in modern American history and could lead to our financial and economic recovery. When the Congress sees what the Fed has done they might just abolish it, which is really the solution. As Rep. Paul says, “Congress should reassert its constitutional authority over monetary policy.” The Constitution gives Congress, not the private Federal Reserve, “the Authority to coin money and regulate the value of the currency.” “The Fed has presided over the near-complete destruction of the US dollar,” says Rep. Paul. “Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve’s loose money policy.” “How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation?” Only big-spending politicians and politically favored bankers benefit from inflation,” he said. “Since its inception, the Fed has always operated in the shadows, without sufficient scrutiny or oversight of its operations.”

The Fed can enter into agreements with foreign central banks and foreign governments, and the GAO’s prohibited from auditing or even seeing these agreements. There are no enforcement powers over the Fed. The Fed’s funding facilities including the Dealer Credit Facility, Term Securities Lending Facility, and the Term Asset-Backed Securities Lending Facility should be subject to congressional oversight.

Every problem we have had in our economy from the Fed’s conception and passage can be directly traced to Federal Reserve policy.

Legislation should be passed to abolish the Fed and that the OMB, the Office of Management and Budget liquidate Fed assets to insure a quick transfer of their functions to the Treasury.


HR 1207 is now in the House Committee of Financial Reserves and has been there for 3 months.


This could be the most important legislation ever submitted due to the financial conditions in America at this time.


In the Senate, Sen. Bernard Sanders (I-VT) has submitted a similar bill, which has been in the Senate Banking, Housing, and Urban Affairs Committee for 2 months.


As Rep. Paul says, “auditing the Fed is only the first step towards exposing this antiquated insider-run creature to the powerful forces of free-market competition. Once there are viable alternatives to the monopolistic fiat dollar, the Federal Reserve will have to become honest and transparent if it wants to remain in business.


Contact everyone in Congress and let him or her know how you feel about this issue as soon as possible.


As Joseph Schummpeter argues that monetary measures do not allow policymakers to eliminate economic depression, only to delay it under penalty of more severity in the future. In a market economy, economic depressions are painful but unavoidably recurring. Counter cyclical monetary measures to provide more money and credit to keep ill-timed investment on a high level in a depression are not creative destruction, but positive destruction, and such measures will ultimately be detrimental to the general welfare. This is what we’ve been preaching for some time.


Unemployment is a natural extension for stabilizing production and consumption, and its solution cannot be implemented by holding up asset prices in a depressed market economy. Unemployment is usually reduced by deficit-financing and high wages. Today that is not easy with a $2 trillion deficit, rising interest rates, monetization and the insane creation of money and credit. Plus, how can you maintain wages, or raise them, with an army of illegal aliens working for next to nothing and offshoring and outsourcing still going at full tilt? Monetarist measures cannot hold up asset prices with today’s problems, which are the worst since the early 1870s.


Looking back Herbert Hoover was wrong in starting off the Socialist-Fascist era that began the 1930’s Great Depression. Franklin Delano Roosevelt carried out that program and it was a failure. America was saved by war at a terrible price. Andrew Mellon was right in advocating that government must keep its hands off and let the slump liquidate itself. Purge the rottenness out of the system. Mr. Mellon said liquidate labor, stocks, farmers and real estate. No more high living, people will work harder and lead a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.


The economics of monetarism are nothing more than a formula promulgated to save the financial sector and not the country, by using an elitist trickle down theory, which as recent as the 1980s had been proven unworkable. Bail out the rich on Wall Street, the bankers and insurance companies and let the poor and working poor fend for themselves. This is class economics and this is what turns the masses toward socialism. Bankers, who caused the problem, are bailed out by the masses, and the public is left to drown on their own. We are told the bankers and Wall Street must be saved or we’ll have no economy. We call this the myth of saving the criminals.


Under a Federal Reserve System the Fed has in private hands unlimited state power to create money and credit backed by the full faith and credit of the American people, which denies those people the rights of sovereignty.


Via the Fed and via Executive Order and the “Working Group on Financial Markets” we allow the Fed and the Treasury to manipulate our markets. Thus our financial elite grow richer and richer, and worse yet even professionals do not know what is going on, never mind the public. The creation of money and credit is effected in such a way that the financial sector is protected and the burden of loss of purchasing power is cast upon American workers. The capitalists do business as usual. Such pursuits have often ended in revolution. The fruits of low wages in America, a result of free trade, globalization, offshoring and outsourcing, have taken their toll. The result is more than two years of recession and now more than three months of depression. The working poor cannot afford to buy what they produce and they cannot pay the debt cast upon them by Wall Street and the banking establishment. There are no free markets. The markets are what these people want them to be. Today they feed their own debt bubble hoping, hope against hope they can bail out the system again.


These miscreatants, in what is called a shadow banking system securitized mortgages and other debt by fraud via a corrupt rating system worldwide monetizing their liabilities and buried thousands of professionals worldwide. This unpayable debt, now lost, along with derivatives present problems that are really just beginning to be addressed. All this is done with little transparency in order for these institutions, guided by the Fed, to dump their financial risks.


There you have it. A manmade disaster created by the Federal Reserve, banking and Wall Street, and these are the same corrupt group who our government has chosen to rectify the problem. Their answer is to take the funds from the public to cover their losses, be it by inflation or taxes. The answer is get rid of the Fed and purge the system once and for all.
"Let me issue and control a nation's money and I care not who writes the laws. - Mayer Rothschild
"Civil disobedience is not our problem. Our problem is civil obedience! People are obedient in the face of poverty, starvation, stupidity, war, and cruelty. Our problem is that grand thieves are running the country. That's our problem!" - Howard Zinn
"If there is no struggle there is no progress. Power concedes nothing without a demand. It never did and never will" - Frederick Douglass
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#25
Legislation should be made to abolish the Fed. I have no doubt about this.

But I also have no doubt that it won't happen. Things have gone to far to be pulled back now, and is hindered further by a complacent snake-tongued President.

I was in contact with Bob Chapman years ago, back in the Nineties, when GATA first got going. Back then he openly admitted he was former CIA and was asked by Oliver North to work on the Iran-Contra, but declined, that he personally knew many of the ultra right wing personalities including many top Nazis after the war. It was Bob who first told me that Opus Dei was the nexus of the European far right.

However, I now note that Bob doesn't include any of this information in his biography (see HERE) and I wonder why that is. I was told these facts in a private email and never thought to make them public. But some years later Bob did make the same information public. But this now seems to have disappeared (at least I can't find it). I always thought it added to his credentials rather than detracted from them. An insider's perspective is often more acute than others.
The shadow is a moral problem that challenges the whole ego-personality, for no one can become conscious of the shadow without considerable moral effort. To become conscious of it involves recognizing the dark aspects of the personality as present and real. This act is the essential condition for any kind of self-knowledge.
Carl Jung - Aion (1951). CW 9, Part II: P.14
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#26
ECONOMY-US: Congress Pushing for Federal Reserve Audit
By Matthew Cardinale

ATLANTA, Jun 30 (IPS) - A majority of the U.S. House of Representatives is now in support of a historic bill by Republican lawmaker Ron Paul to audit the Federal Reserve (the Fed), the privately run central bank that sets monetary policy for the United States.

A similar bill in the U.S. Senate was proposed by Democratic Socialist Sen. Bernie Sanders, and has three right-wing Republican co-sponsors.

Meanwhile, a House committee recently approved an amendment offered by left-leaning Democrat Dennis Kucinich to a bill granting more oversight to the Government Accountability Office, which would audit the Fed's response to the economic crisis specifically.

Notably, the amendment passed committee unanimously, with broad bipartisan support, and now heads to the full House for action.

"The Fed has taken a number of extraordinary and unprecedented steps to address the financial crisis," Kucinich told IPS in an email. "In so doing, it has committed over one trillion dollars to the purchase and financing of many different kinds of assets. It has selectively intervened in certain economic sectors, while it has ignored others."

"All of these interventions mark a departure from traditional monetary policy, raise significant public policy questions, and impact taxpayers considerably," Kucinich said.

Fed Chairman Ben Bernanke is "not revealing what they did with the two trillion dollars they created on their books. It was loans to banks for sure. There have been several actions under the Freedom of Information Act to get them to say who they were to and what the terms were, but they won't do it," Ellen Brown, author of 'Web of Debt', told IPS.

Most people in the United States do not understand what the Federal Reserve is or what it does, except some know the Fed sets a federal interest rate, which in turn affects interest rates on some variable private loans.

However, the Fed's impact is much greater than this. Essentially, the Fed, which is made up of private bank representatives, can determine how much money is in the nation's money supply.

"The money supply helps determine the general level of interest rates paid for the use of money, employment, prices, and economic growth. Many economists believe the money supply is the most important determinant of these variables," according to a 1964 Congressional report, "Money Facts," by the Committee on Banking and Currency.

One way the Fed impacts the money supply is by taking actions that open or restrict credit.

The vast majority of money in the U.S. economy was created through the issuance of loans by private banks. "Created" might seem like a strong word, but in fact, banks typically create money as a bookkeeping entry that did not exist before. Because of what is called "fractional reserve lending", banks can create up to 10 times more money than they have on deposit with the central bank.

"How does the Federal Reserve change the money supply?" the Congressional report notes. "By regulations which tell the member banks the maximum amount of bank deposits they may create per dollar of reserves."

It may seem obscure, but author Ellen Brown argues that "reserve ratio" decisions by the Fed may have preceded several economic crises in U.S. history, including the Great Depression in the 1930s.

"When the Federal Reserve raised the reserve requirements [from 10 percent] to 20 percent right before the Depression, that's what brought on the Depression," she argued.

"Let's say you have a reserve requirement of 10 percent, and for every 10 dollars of reserves, you've got 100 dollars on loans. If they suddenly change the reserve requirement, they have to call in 50 dollars of loans. That caused the Depression. They have the power to shrink the money supply," Brown explained.

Meanwhile, in the last year, the Fed has taken on incredible new powers, including managing the Troubled Asset Relief Programme (TARP); purchasing parts of new federal debt; and issuing funds to unknown parties.

"There is a large number of members of Congress and Americans in general who believe that such an extraordinary and unprecedented commitment of taxpayer money demands Congressional oversight. That is why my amendment was adopted unanimously in committee when I introduced it in the committee of jurisdiction of the GAO," Kucinich said.

"Reforms may be necessary, but first it is critical to shine a light in the shadows. The Fed’s actions have ballooned their balance sheet from 874 billion dollars to more than two trillion dollars. This is more than double the cost of TARP and we still do not really know where the money went. That’s unacceptable," Kucinich said.

"The Constitution provides 'the Congress shall have power to coin money, regulate the value thereof,'" the Congressional report notes. "The Supreme Court interpreted this clause, again and again over a period of 150 years, to mean that 'whatever power there is over the currency is vested in the Congress.'"

Congress delegated its authority to create and regulate money to the Federal Reserve, an independent agency it created in 1913. The "independence" of the Fed creates two problems, according to the report.

"Since the Federal Reserve is independent it is not accountable to anyone for the economic policies it chooses to pursue. But this runs counter to normally accepted democratic principles," it says.

"The President and Congress are responsible to the people on election day for their past economic decisions. But the Federal Reserve is responsible, neither to the people directly nor indirectly through the people’s elected representatives. Yet the Federal Reserve exercises great power in controlling the money-creating activities of the commercial banks," the report notes.

"With an 'independent' Federal Reserve, Congress and the President can be moving in one direction while the Federal Reserve is moving in the other," it says.

Prior to 1913, the U.S. went through several different phases of monetary policy, including President Abraham Lincoln's decision to print whatever funds he needed to win the U.S. Civil War, rather than relying on private banks.

Some believe it is appropriate, even inevitable, that the Federal Reserve be nationalised again.

"Nationalising the Fed would be a great idea that would solve a lot of problems," Brown said.

"What they really should do is buy out the shareholders, which are private banks. So if you bought them out at what they paid years ago, it wouldn't cost much money," she said.

It is remarkable that the Fed has purchased part of the federal debt in the last year, Brown says, although the public is mostly unaware of this development.

The U.S. government pays three to four percent interest to bondholders of the federal debt, but it could borrow the money from the Fed at less than half a percent, she said.

Brown believes a publicly-run Fed should eventually purchase the entire U.S. debt from foreign countries.

"That's what we'll have to go to. Our banks will end up public banks. You can have private lenders, but the fractional reserve system should be a public system. Creating credit on the books should be a public function because nothing backs the dollar but the full faith and credit of the United States," Brown said.

"Private banks pretend to have money they don't have. Public banks, they're not pretending anything, because we are the public. We are pledging our full faith and credit of 100 dollars for you to pay it back."
"The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Karl Marx

"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.

“I think it would be a good idea” Ghandi, when asked about Western Civilisation.
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#27
What a stunning story it will be if Congress passes both Kucinich'a and Ron Paul's Bills and annuls the authority it granted to the Fed to be run independent of Congressional oversight.

Will it happen though? Will Obama support the moves or impede them?

Interesting times ahead.
The shadow is a moral problem that challenges the whole ego-personality, for no one can become conscious of the shadow without considerable moral effort. To become conscious of it involves recognizing the dark aspects of the personality as present and real. This act is the essential condition for any kind of self-knowledge.
Carl Jung - Aion (1951). CW 9, Part II: P.14
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#28
David Guyatt Wrote:What a stunning story it will be if Congress passes both Kucinich'a and Ron Paul's Bills and annuls the authority it granted to the Fed to be run independent of Congressional oversight.

Will it happen though? Will Obama support the moves or impede them?

Interesting times ahead.

It would be stunning.

Cataclysmic.

Which is why I cannot see this ever happening.

The Congressmen & women will be ushered into a dimly lit, oak panelled, room and shown - in secrecy - some apocalyptic version of the Fed's books.

:deal:

Their special Powerpoint show will be akin to the real torture and abuse photos from Abu Ghraib and other "prisons". The type of information so darkly potent that it destroys the moral authority of governments. Of the powerful.

:eviltongue:

Combine this with the blackmail files They hold on Congressmen & women - "rembember Spitzer, mutherfooker" - and the idea of publicly auditing the Fed won't seem like such a good idea to Congress...
"It means this War was never political at all, the politics was all theatre, all just to keep the people distracted...."
"Proverbs for Paranoids 4: You hide, They seek."
"They are in Love. Fuck the War."

Gravity's Rainbow, Thomas Pynchon

"Ccollanan Pachacamac ricuy auccacunac yahuarniy hichascancuta."
The last words of the last Inka, Tupac Amaru, led to the gallows by men of god & dogs of war
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#29
From the Huffington post; they regularly surprise me with their independent voices. Though even this article stops short of pointing out that the mere existence of the Fed is a massive fraud, or mentioning the year 1913.

http://www.huffingtonpost.com/2009/09/07...78805.html

[Image: headshot.jpg]
Ryan Grim
ryan@huffingtonpost.com

Priceless: How The Federal Reserve Bought The Economics Profession

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."


One critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past.

The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect strong economic fundamentals."

The Fed also failed to sufficiently regulate major financial institutions, with Greenspan -- and the dominant economists -- believing that the banks would regulate themselves in their own self-interest.
Despite all this, Bernanke has been nominated for a second term by President Obama.

In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.

Paul Krugman, in Sunday's New York Times magazine, did his own autopsy of economics, asking "How Did Economists Get It So Wrong?" Krugman concludes that "[e]conomics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system."

So who seduced them?
The Fed did it.

Three Decades of Domination

The Fed has been dominating the profession for about three decades. "For the economics profession that came out of the [second world] war, the Federal Reserve was not a very important place as far as they were concerned, and their views on monetary policy were not framed by a working relationship with the Federal Reserve. So I would date it to maybe the mid-1970s," says University of Texas economics professor -- and Fed critic -- James Galbraith. "The generation that I grew up under, which included both Milton Friedman on the right and Jim Tobin on the left, were independent of the Fed. They sent students to the Fed and they influenced the Fed, but there wasn't a culture of consulting, and it wasn't the same vast network of professional economists working there."

But by 1993, when former Fed Chairman Greenspan provided the House banking committee with a breakdown of the number of economists on contract or employed by the Fed, he reported that 189 worked for the board itself and another 171 for the various regional banks. Adding in statisticians, support staff and "officers" -- who are generally also economists -- the total number came to 730. And then there were the contracts. Over a three-year period ending in October 1994, the Fed awarded 305 contracts to 209 professors worth a total of $3 million.
Just how dominant is the Fed today?

The Federal Reserve's Board of Governors employs 220 PhD economists and a host of researchers and support staff, according to a Fed spokeswoman. The 12 regional banks employ scores more. (HuffPost placed calls to them but was unable to get exact numbers.) The Fed also doles out millions of dollars in contracts to economists for consulting assignments, papers, presentations, workshops, and that plum gig known as a "visiting scholarship." A Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.

That's a lot of money for a relatively small number of economists. According to the American Economic Association, a total of only 487 economists list "monetary policy, central banking, and the supply of money and credit," as either their primary or secondary specialty; 310 list "money and interest rates"; and 244 list "macroeconomic policy formation [and] aspects of public finance and general policy." The National Association of Business Economists tells HuffPost that 611 of its roughly 2,400 members are part of their "Financial Roundtable," the closest way they can approximate a focus on monetary policy and central banking.

Robert Auerbach, a former investigator with the House banking committee, spent years looking into the workings of the Fed and published much of what he found in the 2008 book, "Deception and Abuse at the Fed". A chapter in that book, excerpted here, provided the impetus for this investigation.

Auerbach found that in 1992, roughly 968 members of the AEA designated "domestic monetary and financial theory and institutions" as their primary field, and 717 designated it as their secondary field. Combining his numbers with the current ones from the AEA and NABE, it's fair to conclude that there are something like 1,000 to 1,500 monetary economists working across the country. Add up the 220 economist jobs at the Board of Governors along with regional bank hires and contracted economists, and the Fed employs or contracts with easily 500 economists at any given time. Add in those who have previously worked for the Fed -- or who hope to one day soon -- and you've accounted for a very significant majority of the field.

Auerbach concludes that the "problems associated with the Fed's employing or contracting with large numbers of economists" arise "when these economists testify as witnesses at legislative hearings or as experts at judicial proceedings, and when they publish their research and views on Fed policies, including in Fed publications."

Gatekeepers On The Payroll

The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank's money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.

"Try to publish an article critical of the Fed with an editor who works for the Fed," says Galbraith.
And the journals, in turn, determine which economists get tenure and what ideas are considered respectable. The pharmaceutical industry has similarly worked to control key medical journals, but that involves several companies. In the field of economics, it's just the Fed.

Being on the Fed payroll isn't just about the money, either. A relationship with the Fed carries prestige; invitations to Fed conferences and offers of visiting scholarships with the bank signal a rising star or an economist who has arrived.

Affiliations with the Fed have become the oxygen of academic life for monetary economists. "It's very important, if you are tenure track and don't have tenure, to show that you are valued by the Federal Reserve," says Jane D'Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.

Robert King, editor in chief of the Journal of Monetary Economics and a visiting scholar at the Richmond Federal Reserve Bank, dismisses the notion that his journal was influenced by its Fed connections. "I think that the suggestion is a silly one, based on my own experience at least," he wrote in an e-mail. (His full response is at the bottom.)

Galbraith, a Fed critic, has seen the Fed's influence on academia first hand. He and co-authors Olivier Giovannoni and Ann Russo found that in the year before a presidential election, there is a significantly tighter monetary policy coming from the Fed if a Democrat is in office and a significantly looser policy if a Republican is in office. The effects are both statistically significant, allowing for controls, and economically important.

They submitted a paper with their findings to the Review of Economics and Statistics in 2008, but the paper was rejected. "The editor assigned to it turned out to be a fellow at the Fed and that was after I requested that it not be assigned to someone affiliated with the Fed," Galbraith says.
Publishing in top journals is, like in any discipline, the key to getting tenure. Indeed, pursuing tenure ironically requires a kind of fealty to the dominant economic ideology that is the precise opposite of the purpose of tenure, which is to protect academics who present oppositional perspectives.
And while most academic disciplines and top-tier journals are controlled by some defining paradigm, in an academic field like poetry, that situation can do no harm other than to, perhaps, a forest of trees. Economics, unfortunately, collides with reality -- as it did with the Fed's incorrect reading of the housing bubble and failure to regulate financial institutions. Neither was a matter of incompetence, but both resulted from the Fed's unchallenged assumptions about the way the market worked.

Even the late Milton Friedman, whose monetary economic theories heavily influenced Greenspan, was concerned about the stifled nature of the debate. Friedman, in a 1993 letter to Auerbach that the author quotes in his book, argued that the Fed practice was harming objectivity: "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results," Friedman wrote.

Greenspan told Congress in October 2008 that he was in a state of "shocked disbelief" and that the "whole intellectual edifice" had "collapsed." House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) followed up: "In other words, you found that your view of the world, your ideology, was not right, it was not working."

"Absolutely, precisely," Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."
But, if the intellectual edifice has collapsed, the intellectual infrastructure remains in place. The same economists who provided Greenspan his "very considerable evidence" are still running the journals and still analyzing the world using the same models that were incapable of seeing the credit boom and the coming collapse.

Rosner, the Wall Street analyst who foresaw the crash, says that the Fed's ideological dominance of the journals hampered his attempt to warn his colleagues about what was to come. Rosner wrote a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound.

He expanded on those ideas over the next few years, connecting the dots and concluding that the coming housing collapse would wreak havoc on the collateralized debt obligation (CDO) and mortgage backed securities (MBS) markets, which would have a ripple effect on the rest of the economy. That, of course, is exactly what happened and it took the Fed and the economics field completely by surprise.

"What you're doing is, actually, in order to get published, having to whittle down or narrow what might otherwise be oppositional or expansionary views," says Rosner. "The only way you can actually get in a journal is by subscribing to the views of one of the journals."

When Rosner was casting his paper on CDOs and MBSs about, he knew he needed an academic economist to co-author the paper for a journal to consider it. Seven economists turned him down.
"You don't believe that markets are efficient?" he says they asked, telling him the paper was "outside the bounds" of what could be published. "I would say 'Markets are efficient when there's equal access to information, but that doesn't exist,'" he recalls.

The CDO and MBS markets froze because, as the housing market crashed, buyers didn't trust that they had reliable information about them -- precisely the case Rosner had been making.

He eventually found a co-author, Joseph Mason, an associate Professor of Finance at Drexel University LeBow College of Business, a senior fellow at the Wharton School, and a visiting scholar at the Federal Deposit Insurance Corporation. But the pair could only land their papers with the conservative Hudson Institute. In February 2007, they published a paper called "How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?" and in May posted another, "How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions."

Together, the two papers offer a better analysis of what led to the crash than the economic journals have managed to put together - and they were published by a non-PhD before the crisis.

Not As Simple As A Pay-Off

Economist Rob Johnson serves on the UN Commission of Experts on Finance and International Monetary Reform and was a top economist on the Senate banking committee under both a Democratic and Republican chairman. He says that the consulting gigs shouldn't be looked at "like it's a payoff, like money. I think it's more being one of, part of, a club -- being respected, invited to the conferences, have a hearing with the chairman, having all the prestige dimensions, as much as a paycheck."

The Fed's hiring of so many economists can be looked at in several ways, Johnson says, because the institution does, of course, need talented analysts. "You can look at it from a telescope, either direction. One, you can say well they're reaching out, they've got a big budget and what they're doing, I'd say, is canvassing as broad a range of talent," he says. "You might call that the 'healthy hypothesis.'"

The other hypothesis, he says, "is that they're essentially using taxpayer money to wrap their arms around everybody that's a critic and therefore muffle or silence the debate. And I would say that probably both dimensions are operative, in reality."

To get a mainstream take, HuffPost called monetary economists at random from the list as members of the AEA. "I think there is a pretty good number of professors of economics who want a very limited use of monetary policy and I don't think that that necessarily has a negative impact on their careers," said Ahmed Ehsan, reached at the economics department at James Madison University. "It's quite possible that if they have some new ideas, that might be attractive to the Federal Reserve."
Ehsan, reflecting on his own career and those of his students, allowed that there is, in fact, something to what the Fed critics are saying. "I don't think [the Fed has too much influence], but then my area is monetary economics and I know my own professors, who were really well known when I was at Michigan State, my adviser, he ended up at the St. Louis Fed," he recalls. "He did lots of work. He was a product of the time...so there is some evidence, but it's not an overwhelming thing."

There's definitely prestige in spending a few years at the Fed that can give a boost to an academic career, he added. "It's one of the better career moves for lots of undergraduate students. It's very competitive."
Press officers for the Federal Reserve's board of governors provided some background information for this article, but declined to make anyone available to comment on its substance.

The Fed's Intolerance For Dissent

When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.

Take the case of Alan Blinder. Though he's squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.

Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. "Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant," says Johnson.

In closed-door meetings, Blinder did what so few do: challenged assumptions. "The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. [Just like the FBI telling the Warren Commission what to conclude as the commission was being assembled. MB] And Blinder treated it more like an open academic debate when he first got there and he'd come out and say, 'Well, that's not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.' And it just created a stir inside--it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was disrupted."

It didn't sit well with Greenspan or his staff. "A lot of senior staff...were pissed off about Blinder -- how should we say? -- not playing by the customs that they were accustomed to," Johnson says.

And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. "I've been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him," Krugman said of Greenspan in a 2007 interview with Pacifica Radio's Democracy Now! "Nobody really wants to cross him."

An invitation to the annual conference, or some other blessing from the Fed, is a signal to the economic profession that you're a certified member of the club. Even Krugman seems a bit burned by the slight. "And two years ago," he said in 2007, "the conference was devoted to a field, new economic geography, that I invented, and I wasn't invited."

Three years after the conference, Krugman won a Nobel Prize in 2008 for his work in economic geography.


One Journal, In Detail

The Huffington Post reviewed the mastheads of the American Journal of Economics, the Journal of Economic Perspectives, Journal of Economic Literature, the American Economic Journal: Applied Economics, American Economic Journal: Economic Policy, the Journal of Political Economy and the Journal of Monetary Economics.

HuffPost interns Googled around looking for resumes and otherwise searched for Fed connections for the 190 people on those mastheads. Of the 84 that were affiliated with the Federal Reserve at one point in their careers, 21 were on the Fed payroll even as they served as gatekeepers at prominent journals.

At the Journal of Monetary Economics, every single member of the editorial board is or has been affiliated with the Fed and 14 of the 26 board members are presently on the Fed payroll.

After the top editor, King, comes senior associate editor Marianne Baxter, who has written papers for the Chicago and Minneapolis banks and was a visiting scholar at the Minneapolis bank in '84, '85, at the Richmond bank in '97, and at the board itself in '87. She was an advisor to the president of the New York bank from '02-'05. Tim Geithner, now the Treasury Secretary, became president of the New York bank in '03.

The senior associate editors: Janice C Eberly was a Fed visiting-scholar at Philadelphia ('94), Minneapolis ('97) and the board ('97). Martin Eichenbaum has written several papers for the Fed and is a consultant to the Chicago and Atlanta banks. Sergio Rebelo has written for and was previously a consultant to the board. Stephen Williamson has written for the Cleveland, Minneapolis and Richmond banks, he worked in the Minneapolis bank's research department from '85-'87, he's on the editorial board of the Federal Reserve Bank of St. Louis Review, is the co-organizer of the '09 St. Louis Federal Reserve Bank annual economic policy conference and the co-organizer of the same bank's '08 conference on Money, Credit, and Policy, and has been a visiting scholar at the Richmond bank ever since '98.

And then there are the associate editors. Klaus Adam is a visiting scholar at the San Francisco bank. Yongsung Chang is a research associate at the Cleveland bank and has been working with the Fed in one position or another since '01. Mario Crucini was a visiting scholar at the Federal Reserve Bank of New York in '08 and has been a senior fellow at the Dallas bank since that year. Huberto Ennis is a senior economist at the Federal Reserve Bank of Richmond, a position he's held since '00. Jonathan Heathcote is a senior economist at the Minneapolis bank and has been a visiting scholar three times dating back to '01.

Ricardo Lagos is a visiting scholar at the New York bank, a former senior economist for the Minneapolis bank and a visiting scholar at that bank and Cleveland's. In fact, he was a visiting scholar at both the Cleveland and New York banks in '07 and '08. Edward Nelson was the assistant vice president of the St Louis bank from '03-'09.

Esteban Rossi-Hansberg was a visiting scholar at the Philadelphia bank from '05-'09 and similarly served at the Richmond, Minneapolis and New York banks.

Pierre-Daniel Sarte is a senior economist at the Richmond bank, a position he's held since '96. Frank Schorfheide has been a visiting scholar at the Philadelphia bank since '03 and at the New York bank since '07. He's done four such stints at the Atlanta bank and scholared for the board in '03. Alexander Wolman has been a senior economist at the Richmond bank since 1989.

Here is the complete response from King, the journal's editor in chief: "I think that the suggestion is a silly one, based on my own experience at least. In a 1988 article for AEI later republished in the Federal Reserve Bank of Richmond Review, Marvin Goodfriend (then at FRB Richmond and now at Carnegie Mellon) and I argued that it was very important for the Fed to separate monetary policy decisions (setting of interest rates) and banking policy decisions (loans to banks, via the discount window and otherwise). We argued further that there was little positive case for the Fed to be involved in the latter: broadbased liquidity could always be provided by the former. We also argued that moral hazard was a cost of banking intervention.

"Ben Bernanke understands this distinction well: he and other members of the FOMC have read my perspective and sometimes use exactly this distinction between monetary and banking policies. In difficult times, Bernanke and his fellow FOMC members have chosen to involve the Fed in major financial market interventions, well beyond the traditional banking area, a position that attracts plenty of criticism and support. JME and other economics major journals would certainly publish exciting articles that fell between these two distinct perspectives: no intervention and extensive intervention. An upcoming Carnegie-Rochester conference, with its proceeding published in JME, will host a debate on 'The Future of Central Banking'.

"You may use only the entire quotation above or no quotation at all."
Auerbach, shown King's e-mail, says it's just this simple: "If you're on the Fed payroll there's a conflict of interest."

Elyse Goldberg, Julian Hattem, Jeff Muskus and Jenna Staul contributed to this report

Ryan Grim is the author of This Is Your Country On Drugs: The Secret History of Getting High in America
Reply
#30
Myra Bronstein Wrote:The Fed also failed to sufficiently regulate major financial institutions, with Greenspan -- and the dominant economists -- believing that the banks would regulate themselves in their own self-interest.

I keep repeating this, I know, but the biggest crock ever sold to the public in the long history of the world, was self regulation of banking (and business in general) "in their own self interest".

It's rather like the authorities saying that they will no longer police crime because criminals will regulate themselves in their own self interest.
The shadow is a moral problem that challenges the whole ego-personality, for no one can become conscious of the shadow without considerable moral effort. To become conscious of it involves recognizing the dark aspects of the personality as present and real. This act is the essential condition for any kind of self-knowledge.
Carl Jung - Aion (1951). CW 9, Part II: P.14
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