Federal Reserve

[Magda Hassan]

Fed Beaten: Bill to Audit Federal Reserve Passes Key Hurdle

by Ryan Grim
In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank (D-Mass.), who had previously been a supporter.
The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed's opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.
The amendment expressly blocks Congress from interfering with the independence of monetary policy decision-making, but opponents of the measure said that the political pressure would inevitably follow.
A desperate, last-minute attempt to thwart the move came in the form of an amendment championed by Rep. Mel Watt (D-N.C.) and described by its supporters as more reasonable. On Tuesday, however, the Huffington Post reported that, on a close reading, his amendment would in fact decrease transparency at the Fed by adding additional restrictions.
Backers of the Watt amendment pressed their case on Wednesday by sending a letter from a "political cross section of prominent economists" backing a measure like Watt's. HuffPost reported, however, that those economists might well have be prominent, but they certainly aren't a "political cross section." Seven of the eight economists in question have extensive connections to the Fed -- and half of them are currently on the Fed payroll. Those affiliations were not noted in the letter.
The playbook in Washington often goes like this: When a measure that threatens the establishment builds enough momentum that it must be dealt with, it is labeled as "unserious." The Washington Post editorial board, true to the script, called Paul's measure "an unserious answer to a serious question."
And it particularly rankles the center that a pair of "wingnuts" are behind a successful effort to challenge the prevailing order.
Step Two is for a "serious" compromise to be offered. In this case, it was Watt's amendment. But by the time the vote was called Thursday afternoon, committee members had seen through his measure, recognizing that it was not a compromise effort to bring real transparency to the Fed but an attempt to further shut the the doors.
"The Watt amendment will fully obliterate everything 1207" -- Paul's measure -- "is intended to do," said Paul during Thursday's debate.
For anyone remaining confused, the debate was further clarified by the central bank itself: Federal Reserve Vice Chair Don Cohn and General Counsel Scott Alvarez spent much of the day calling committee members, urging them to oppose the Paul-Grayson amendment in favor of Watt's, a member of Congress who asked for confidentiality told HuffPost.
Paul's opponents also placed a letter from former Fed chairmen Alan Greenspan and Paul Volcker on the seats of every committee member. Such a move is in violation of House rules and Grayson was able to have the letters removed.
As the day wore on and support held for the Paul-Grayson side, the Fed still could hope that both would pass. Watt's amendment, which included additional restriction, would then trump Paul's.
To counter that possibility, the Paul-Grayson side moved to fully replace Watt's amendment with theirs, leaving only one amendment to vote on. The motion carried and the amendment passed in a landslide.
The GOP broadly backed the amendment, though Frank chided them for finding their love of Fed transparency only after they lost power, noting that Paul has been introducing some version of the measure since 1983.
Frank said he was opposing the Paul amendment because it could be perceived as influencing monetary policy, which can have inflationary pressure. "Perception is very important in monetary policy," said Frank.
He urged a no vote, yet 15 Democrats bucked him, voting with Paul. Key to winning Democratic support was a letter posted early Thursday from labor leaders and progressive economists. The letter, organized by the liberal blog FireDogLake.com, called for a rejection of the Watt substitute and support for Paul.
Grayson was able to show Democratic colleagues that the liberal base was behind them.
"Today was Waterloo for Fed secrecy," a victorious Grayson said afterwards.
Watch video here:

http://www.youtube.com/watch?v=Q8EKGtf_Y...r_embedded
http://www.commondreams.org/headline/2009/11/20:

[David Guyatt]

Nod and a wink.

[Magda Hassan]

Please click link below to see video
http://www.globalresearch.ca/index.php?c...&aid=16201
VIDEO: House Financial Services Committee approves Bill to Audit the Fed
Votes to Rein In Foreign Currency Swaps

by Washington's Blog


Global Research, December 4, 2009
Washington's Blog - 2009-11-20



Congressman Watt tried to de-rail the bill to audit the Federal Reserve (H.R. 1207) with a fake alternate bill. See this, this, this and this.

Fortunately, the House Financial Services Committee approved H.R. 1207 by 43-26, and rejected Watt's bill.

In addition, Congressmen Grayson and Paul's bill requiring written concurrence by the Treasury Secretary prior to the Federal Reserve engaging in a foreign currency swap passed the House Financial Services Committee by a voice vote today.

If you haven't already seen it, watch Congressman Grayson grill Bernanke about foreign swaps:


If you don't know what foreign currency swaps are, or why the Fed has been running amok with them, watch Congressman Grayson discuss the amendment:



Washington's Blog is a frequent contributor to Global Research. Global Research Articles by Washington's Blog

[David Guyatt]

How interesting. Bernanke looked very uncomfortable, if not nervous, and clearly didn't know the law.

Let's hope future audits are carried out meticulously.

[David Guyatt]

Beware the fabulous federal money machine

By Spencer Jakab
Financial Times
Published: February 26 2010 17:07

A group doesn't earn the nickname Goldmine Stacks in a city as blasé
about mammoth paydays as New York without some truly gaudy numbers.
Though its unofficial moniker reflects a mix of awe and envy from less
fortunate financiers and bile from the 99.9 per cent of Americans who
don't summer in the Hamptons, they should be concerning themselves
with an even more profitable financial institution.

This one's earnings sparked a few feel good headlines rather than
treatises on greed, in spite of the fact that it makes Goldman's
record $12bn profit look like chump change. But Americans should be
very concerned indeed about how and why it makes its money and what
happens when it stops.

Don't think about getting a decent pastrami and rye near this bank's
headquarters, which are 208 miles from Manhattan in sleepy Washington
DC. Unlike its New York brethren though, the Federal Reserve has a
literal licence to print money, minting some $52bn in profit last year
and paying $46bn in dividends to its shareholder, Uncle Sam. The most
profitable investment fund on the planet sits just a mile away. The US
Treasury's Troubled Asset Relief Programme's $4bn in profits since
inception puts most masters of the universe to shame.

The bosses of both institutions make $191,300, less than all but the
greenest Wall Streeter. Messrs Bernanke and Geithner thus escaped the
"fat cat" label in articles whose celebratory headlines blared: "Fed
posts record $52bn profit" and "Government to earn billions on bail-
outs". Unfortunately, they have much bigger problems such as
dismantling their unwanted profit centres without doing serious
economic damage.

"The man on the street doesn't understand the $46bn earned by the Fed
and given to the Treasury," laments David Kotok, chairman of
Cumberland Advisors.

Financial markets do, and it is making them increasingly skittish. The
Fed's profits stem largely from its purchase of mortgage securities, a
programme that is slated to end in about a month at some $1,250bn. The
first hurdle is weaning the market off this money-printing exercise.
That alone could lead to an unwelcome rise in mortgage costs. More
daunting will be soaking up the excess cash created before it sparks
inflation in the real economy.

The most straightforward and obvious method, selling the securities,
would be likely to crush the mortgage market while wiping out its
"profits" from the operation to date. Instead, it will be likely to
soak up the excess funding in the banking system – a delicate task
that could lower inflationary expectations and cement a recovery if
done right or spark deflation if botched.

Almost as troubling as the distortions that generated the Fed's
profits are those that fuelled headlines about the Treasury's bonanza.
The $4bn in gains so far on warrants and preferred dividends from
financial firms are likely to be swamped by substantial losses on the
remaining $130bn investment. Tarp is of course not a for-profit
enterprise.

Thus it has committed the cardinal sin for money managers of selling
its winners and doubling down on the losers in its portfolio like AIG
and GMAC. Its own projection of losses on those investments, along
with mortgage subsidies and debt unprofitably converted to equity in
bankrupt carmakers, is $117bn. Outside Tarp, losses on stakes in
mortgage groups Fannie Mae and Freddie Mac may reach about $175bn.

The issue is not so much the budget-busting nature of these losses but
the ability of financial institutions to withstand this prop's
removal. Smaller banks are still reeling. Regulators note that credit
contraction last quarter, the sixth in a row, accelerated, and they
project more bank failures in 2010 than last year. As for the mortgage
market, practically all lending now depends on Fannie, Freddie or
other government affiliates. Withdrawal of support could lead to a
fresh house price crash.

One of the few upbeat stories that average Americans are hearing about
the financial crisis, the fabulous federal money machine, could be a
precursor to its nastiest phase yet.

http://www.ft.com/cms/s/0/2250b77a-22f8-...ab49a.html

[Magda Hassan]

Interesting that the nightmare computer glitch on Wall Street happened the day before.

Last-minute maneuvering in the Senate allowed the Federal Reserve to sidestep legislation that would have exposed its interest-rate decision-making to congressional auditors.
Pressure from the Obama administration led Senate lawmakers to alter a provision pushed by Sen. Bernie Sanders (I., Vt.) that was gaining momentum despite opposition from the Treasury and the Fed. It would have largely repealed a 32-year-old law that shields Fed monetary policy from congressional auditors.
View Full Image



European Pressphoto Agency Sen. Bernie Sanders of Vermont








The compromise, endorsed by Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and the Treasury, would require the Fed to disclose more details about its lending during the financial crisis. It would also require a one-time audit of those loans and a one-time review of Fed governance. A formal vote was pushed back until next week.
Thursday's Senate showdown came after senators on the left and right joined forces to support Mr. Sanders' provision.
"At a time when our entire financial system almost collapsed, we cannot let the Fed operate in secrecy any longer," Mr. Sanders said. "The American people have a right to know."
But Fed Chairman Ben Bernanke, while insisting on a commitment to "openness" at the Fed, said in a letter to Congress the Sanders measure would "seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation."



Deputy Treasury Secretary Neal Wolin, in a statement, endorsed the revisions to the Sanders provision, saying they would provide a comprehensive audit of the Federal Reserve Board's operations in response to the financial crisis, "while preserving the existing protections of the Federal Reserve's independence with respect to monetary policy."
A House bill sponsored by Rep. Ron Paul (R., Texas) that passed in December contains a proposal similar to the original Sanders measure. If the Senate bill passes, it will need to be reconciled in a conference committee. That keeps the pressure on the Fed alive for the coming months.
The original Sanders measure stated that it shouldn't be "construed as interference in or dictation of monetary policy." But the Fed and administration warned that would allow auditors to interview Fed policy makers and staffers about monetary policy, thereby allowing congressional critics to pressure the Fed and undermine its independence.
Like most other capitalist democracies, U.S. politicians have given the central bank considerable latitude to control interest rates on the theory that elected politicians are prone to keep rates too low to get more growth during their terms at the cost of more inflation later. Although sponsors of legislation insisted that wasn't their intent, the Fed and its allies said otherwise.
"It's a chilling kind of circumstance," former Fed Chairman Paul Volcker, an Obama adviser, said in an interview. "The more you have no clear boundaries about what's appropriate and what's inappropriate, you castrate the decision-making process. That's true for any organization, but it's particularly true when you get into the sensitivities of monetary policy that can generate speculative waves in financial markets and speculation in people's minds," said Mr. Volcker, who also urged lawmakers to eliminate the audit provision.
Who's Who in the Senate Financial Overhaul

Learn more about key players in the Senate's discussion.
View Interactive








Anil Kashyap, an economist at the University of Chicago's Booth School of Business, stressed that independent central banks need to be insulated from politics and make decisions several months ahead of expected trends.
"There are times when you have to start raising interest rates before the economy's recovering. If you're going to get audited while you do that, you know you're going to be slower—meaning we're going to tolerate higher inflation."
Before the last-minute compromise, the Fed's foes appeared to be winning, and got a major boost when Senate Majority Leader Harry Reid (D., Nev.) said he would side with Mr. Sanders.
Mr. Bernanke, meanwhile, returned to Washington Thursday afternoon after a morning speech in Chicago to continue pressing for changes to the Sanders bill. In the past few days, Mr. Bernanke has spoken to at least a half-dozen senators to argue the Fed's case that the bill would deeply damage the Fed's credibility and ability to make tough decisions about interest rates.
At least half a dozen Obama administration officials joined the blitz, including Treasury Secretary Timothy Geithner—a former Fed official—and Rahm Emanuel, the White House chief of staff. Administration aides credited Mr. Dodd with pushing back against the original amendment and developing an acceptable alternative.
New York Fed President William Dudley also advocated to scale back the scope of the auditing. He was among those arguing that ongoing reviews of the Fed's regular lending to financial institutions would stigmatize the program and cripple the Fed's role as the nation's lender of last resort.
The Senate beat back another amendment with populist tinges, defeating 61-33 a provision that would have put strict caps on the size of the nation's banks. Offered by a bloc of liberal Democrats, it would have capped at 10% the limit on the nation's total insured deposits any single bank holding company could carry. It would have also set a 6% leverage limit for banks and capped their non-deposit liabilities at 2% of U.S. gross domestic product.
http://online.wsj.com/article/SB10001424...NewsBucket

[Jan Klimkowski]

Interesting that the nightmare computer glitch on Wall Street happened the day before.

Market Ticker's Karl Denninger exposed another layer of thievery relating to that, ahem, impossible event.

http://market-ticker.org/archives/2287-E...-NBBO.html

Does any sane person still believe in unregulated free market capitalism?

Oh yes, silly me, all our political rulers.....

[Lauren Johnson]

A Fictional Look at the 25 Minute Market Crash

href=http://www.zerohedge.com/article/call-%E2%80%93-fictional-look-25-minute-market-crash>


U.S. Senator Howard A. Lancaster, who’s served over 20 years in both houses of Congress, is on the phone as the others file in and take their seats. There’s Sam, Howards chief of staff and long time confidant; Lois, Howards personal assistant and office manager; Tabatha, the office stenographer and all around gopher and John, a full time “hired gun” for a powerful interest group and the reason this meeting was convened. As soon as everyone is seated, Howard finishes his call, hangs up and turns to face John.

Howard: “John, I’m a busy man. What’s so damn important that you’d demand I clear my afternoon schedule and see you immediately?”

John: “Well, before we start, could we clear the room and conduct a private conversation? We don’t have much time.”

Howard: “Obviously we have all afternoon. And I’d be happy to clear everyone except my chief of staff. Sam’s my eyes and ears on the floor and must be included in this meeting.”

John: “Senator, what I’m about to discuss is extremely sensitive. All I ask is that you and I talk privately. Afterwards, if you still want to bring your chief of staff up to speed, I’ll help you brief him. OK?”

Howard and Sam exchange a knowing glance and everyone quickly exits the room. Sam will activate the hidden recording devices as soon as he gets back to his desk, assuring Howard there’ll be a complete record of whatever’s said in this room. Howard walks over to the wet bar as the door closes.

Howard: “You want something to drink? Whiskey? Soda? Or maybe some bottled water?”

John: “Thanks but I’m all set. It’s going to be a long afternoon and I want to remain sharp.”

Howard glances up at the large LCD TV on the wall, which has been tuned to CNBC all day. The markets have been dropping from the open and with 10 minutes to go before 2 PM the S&P is down nearly 20 points. It looks like a good old fashioned sell off and with 2 hours to go before the close, it might get ugly. Howard makes a mental note to move some money out of the market before 4 PM, then returns to his desk and drops into his chair.
Howard: “Since you say you’re short on time, what’s this all about? We’ve gone round and round about my bill and I’ve already told you I won’t change it.”

John: “We were hoping you’d reconsider your position. Some of your political support is wavering and while the public might think a Fed audit is a good idea, that’s just populist poppycock and you know it. There are a lot of powerful people who’d like to see this problem go away. You might want to think twice before pissing them off.”

Howard: “Cut the crap John, you’re not talking to some teary eyed freshman here. I’m fully aware of who and what I’m up against and I’m not backing down. You and your puppet masters have gone too far this time and while you might eventually gut me on this one, I’m willing to take that chance. There’s strong support in the House for Paul’s version and while things are still up in the air in the Senate, I’m certain with elections coming I can pull together a super majority to get this passed. Face it John, you’ve lost. Take that back to your people with love from me.”

John: “These are serious people we’re talking about Howard. People who’ll stop at nothing to see their interests furthered. You’ve seen some of their handy work yourself; you know what I’m talking about. Why can’t we compromise on this one? I’m sure we can find some language that will satisfy everyone with no need for blood to be shed.”

John’s statement angers Howard and it shows as his face quickly becomes beat red and his blood pressure goes through the roof. While this is pretty common for Howard, to someone who doesn’t know him, it might look like he’s about to suffer a heart attack.

Howard: “Fuck you John and the fucking horse you rode in on. Who the fuck do you think you are? First you demand to be seen immediately and then you come in here waving your dick around, threatening me with spilled blood. Fuck you!”

John: “I’m sorry Howard; I wasn’t implying you’d be physically hurt, just that your political career could be ruined over this issue. Now please, calm down………”

Howard: (Shouting) “I won’t calm down. Who the fuck do you think you are? Get the hell out of my office. Now!”

Howard’s become so livid he’s tongue tied, speechless. He can’t believe what he’s hearing from this stooge, showing no respect for either Howard or the office. Howard jumps out of his chair and nearly runs the 10 paces to the private bathroom, slamming the door behind him. He needs to regain his composure before he can continue. He hopes that if he waits a bit, John will get the message and leave. After sitting for 10 minutes on the commode, then splashing some water on his face to freshen up, he opens the door and walks out.

Howard: (Seeing that John is still seated) “I thought I told you to get out.”

John: “Howard, before I go I need you to listen to something. May I use your phone?”

Without waiting for an answer John reaches across the desk and grabs Howard’s office phone, pulling it over to his side of the desk as he punches in a phone number. Howard notices that it’s well over 15 digits, indicating John is accessing a secure network. John looks up at the TV while waiting for the first ring and Howard, seeing John’s attention shift, does the same. It’s now 2:10 PM and the S&P is down 26. The CNBC repeaters are looking a bit frantic as well. Howard feels a cold chill run down his back. What’s going on here? He knows these people are powerful but is John about to do what Howard thinks he’s about to do?

John: (On the phone) “Yeah, it’s me. I know I’m late. Howard was in the bathroom. Are you ready? Can we still go or have you lost control? Ok, hold on a minute, I’m putting you on speaker.” (John pushes the speaker button and returns the handset to its cradle. He then looks up at Howard who’s now retaken his seat) “We’d hoped you’d be reasonable and it wouldn’t need to come down to this but you’ve left us no choice. I don’t think you understand the gravity of the situation, how determined we are to stop this audit and what we’re willing to do. So we’ve arranged for a demonstration.”

Howard’s feeling confused and a little frightened. He remembers that day in September of 08 when the market plunged in reaction to the failed vote on the bailout bill. At least that’s the story. There were thinly veiled threats made back then and while he suspected the drop had been engineered, he hadn’t been able to confirm it. But it was pretty clear what John was implying with his words and actions and Howard didn’t want this to go any further. He decides to stop this here and now.

Howard: “I’m not sure what it is you think you’re doing here John and I don’t want to know. So just hang up that phone and let’s talk about this.”

John: “Howard, I’m afraid that unless you’ve seen our capabilities first hand you’re not going to fully appreciate who it is you’re dealing with. With the help of some…..shall we say like minded people, we’ve been burning down the market all day, in effect preparing it for this demonstration to show you what we can do. Your unwillingness to listen to reason along with your escape to the bathroom has pushed this past the point of no return.”

Of course, John’s last sentence is a lie. The plan was always to finish the demonstration regardless of what Howard said or did. It’s Howard that needs to be prepared and conditioned before the button’s pushed. Psychological operations are always tuned to the personality type of the person or group it’s directed towards. Howard is what you might consider a care-giver personality, someone with a strong moral compass and a sense of responsibility for others. Success of this portion of the psyops depends upon John’s ability to transfer a sense of responsibility for the coming debacle to Howard even though Howard could in no way be responsible.

Howard is that rare Senator who feels he works for the people and thus he’s the easiest to manipulate once you have his full and undivided attention focused upon the disaster he is being conditioned to believe he could have stopped. This is crucial, for Howard must be left with some hope for the future, otherwise he won’t play ball. John turns his attention back to the speaker phone, which has been silent since he turned it on.

John: (To the speaker phone.) “Are you still there?”

Phone: “Yup, waiting on you.”

John: “Everything ready to go?”

Phone: “Yup, we’ve been walking it down for the past 5 hours to the point where nearly every algorithm is primed and ready to trigger. But the situation is extremely unstable because of the delay so we need to go now or we might lose it.”

Howard: “John, hang up the phone. I don’t want you to do something stupid that you might regret. Just hang up and let’s talk.”

John: “Howard, at this point it would be best if you just remained quiet and watched. Things were set in motion when I made this call, a call you could have stopped if you hadn’t hidden from me in the bathroom. If I don’t coordinate this properly, you will live to regret it. (John turns back to the phone) It’s me again. Now I want to make sure you understand what we’re doing here. Take it down quickly but don’t trigger the stops. At worst, I want to kiss the stops, then immediately recover nearly everything that was lost. I’m looking for some soiled drawers but no real damage. We don’t want to close at the lows under any circumstances. You got that?”

Phone: “Yup, understood, dump and pump to send a message. Is that all?”

John: “Yes, that’s it. When can you make it happen? It’s now 2:25 and it looks like you have the S&P down by 30.”

Phone: “It’s somewhere around there. Just give us the word and it will pretty much happen instantaneously. There’ll be a quick pop up to prime the algorithms, then we open the trap door and kick out our support. Round trip in about 20 to 25 minutes unless we lose all control, which is unlikely because no one will be trading near the bottom except those we let trade. Don’t worry, we’ve done this before and we know what we’re doing. But this assumes we go now, not in 5 minutes.”

John: “Ok, do it.”

John hangs up the phone and reaches over the desk to place it back on Howard’s side. He then grabs the TV remote control from the edge of the desk and turns the mute off. The room is suddenly filled with noise and John quickly lowers the volume to where they can hear what’s going on without it drowning out their conversation. He turns his attention back to Howard and sits back in the upholstered chair. It was important for Howard to listen to John’s conversation with the operative in order to cement the psychological effect of the operation. Howard must hear the matter-of-fact explanation of what’s going to happen and then see it done so there’s no doubt in his mind who has the power to move heaven and earth. John came up with the idea after a late night reading of the bible, where he usually looks for ideas. God always announced what he was about to do before doing so. Even the Lord wasn’t above using a little psyops to drive the point home.

John: “Now Howard, you’ve been on Congressional finance committees for a long time. You understand how interconnected the world is today, how dependant everyone is upon continued access to credit and liquidity, how shaky the economic system is right now. And you know most of what the government says about the economy is bullshit. There are serious problems both here and in Europe right now. I could go on but you know what I’m talking about. The system is approaching an inflection point and any interference or unwanted second guessing by self righteous do-gooders who think they know what’s best is only going to cause serious problems for all of us, including your constituents. Regardless of the reasons for our current situation, we’re way past the point of no return and any meddling by you or your supporters will push it off the cliff.”

While John’s talking, Howard is watching the TV and is stunned. No sooner did John hang up but the S&P popped up 5 points in less than 3 minutes, paused and has now started back down. Is this possible? The US market is huge. How could these people have this kind of control? His staff briefed him last December on the power and reach of the too-big-to-fail banks but this is just incredible. Howard hears John pause and looks back at him.

Howard: “You just did that? How’d you do that? That’s impossible. You can’t just move the market at a moment’s notice like it’s a toy.”

John: “Well Howard, you’d be surprised what we can do, now that the major trading computers are co-located and the competition pretty much has been squashed. Remember, the months long 08 crash, which we also engineered, was just as much about who died as who lived. Not only was banking consolidated but any significant resistance was removed. While I’ll admit we don’t have total control, we don’t need it in order to push the markets around in any direction we want. And when we do want spot control, if we have a few hours notice and the conditions are right, we can do exactly what we’re doing today.”

Someone is yelling and Howard looks back at the TV. It’s now 2:37 and the Dow is down almost 400 and the S&P down 45. While John continues to talk about the financial reform bill, Howard hears little because he’s transfixed by what he’s witnessing. John flips the channel over to Bloomberg because idiot Cramer is now on CNBC. Over the next 15 minutes, Howard watches as the Dow plunges 1000 points, the S&P drops nearly a 100 and the NASDAQ dives over 200. Then just as quickly it recovers. He’s certain the ticker on Bloomberg isn’t accurate because it’s jumping all over the place.

At one point John pulls out his cell phone and briefly talks to someone, then hangs up and sits back, quiet for now as he watches the mayhem on TV. It’s total chaos on the screen, with people talking over each other, conversations in the back ground as microphones are left open and people off camera shoving sheets of paper into the announcer’s hands. John sees with satisfaction that the planned disinformation campaign has already swung into action, with Bloomberg repeating that there appears to have been a fat fingered trade or other trading errors that caused the plunge. This little gem was timed to be released just before the markets were turned back up. Howard’s desk phone rings but Howard just hits the do-not-disturb button without looking. 10 seconds later Lois walks in.

Lois: “Senator, Sam wanted me to make sure you’re aware of what’s going on in the markets and…….”

Howard: (Howard waves his hand to cut her off.) “Yes, yes. Can’t you see I’m watching the TV? Now get out. And no more phone calls.”
Lois is startled and scurries out. Howard is rarely rude to his staff and Lois is hurt. Howard will need to deal with that later. John changes back to CNBC in time to see the producers switching away from Cramer. Looks like CNBC has also been successfully fed the disinformation as well with a stressed Pisani confidently explaining that it was all just a trading error, going so far as to explain what a fat fingered trade is to the most savvy financial viewing audience in the world. The market rapidly regains lost ground, with the Dow ticker in the lower right hand corner at one point moving from -856 to -523 in one click.

John smiles to himself. Damn, those boys really are as good as they said they were at the meeting. He considers the money he just made, knowing that he was promised a large buy at the bottom and a quick sale at the top of the planned rebound in some leveraged ETFs as compensation for the risk. It’s all over but the shouting by 2:58 with the Dow only down 400 and climbing, so John flips off the TV and throws the remote onto Howard’s desk. He knows the team will now play the market swings in the last hour to feed themselves. There’s nothing to see here so move along little doggy.

John: “Now wasn’t that fun? Pretty unbelievable, wasn’t it? It never ceases to amaze me what those boys can do with their computers. But hell, I’m not a geek, so I’m not exactly sure how they did it. But it’s pretty clear they did it, right Howard?...........Howard?”

Even though the TV’s off, Howard’s still staring at the dark screen, not sure what to make of it all. This can’t be happening. While intellectually Howard knows he’s not responsible for this, he also understands that tens of billions of dollars were lost today solely to prove a point to him. He feels responsible because he didn’t take these people seriously enough to even listen to John, forcing John to make the call. But how could he have known what they were capable of? Who could have known? He realizes his mouth is open and he closes it, turning his attention back to John. His stomach is churning, his head hurts and he realizes his hands are shaking. He places them on the desk to steady them, gathers his wits and then speaks.

Howard: “You fucking bastard. You’ll never get away with this. I’ll make sure there’s an investigation and the truth will come out.”

John: (Laughing) “Yeah right, a Senate investigation. Oh, I’m scared. I don’t care what you think you’ll do about this. Our tracks are being covered up as we speak and the SEC and the White House will accept the fat finger story or whatever else we come up with. What choice do they have? What do you think would happen if people realized the market could be tanked on purpose at any time? Public knowledge of that alone would take markets down worldwide. Nope, people will believe the cover story because they want to believe the cover story. The investigation will ultimately point to high frequency trading and some toothless regulations will be proposed and maybe even passed. It doesn’t matter what’s eventually found to be the cause because it won’t be the truth. The truth serves no one in or out of power so the truth will be whatever we say it is. Nothing will result from this that we can’t handle. Wake up Howard, its over.”

Howard is exhausted and just wants to lie down. While he doesn’t want to back off, it’s now obvious even to him that he’s lost and lost badly. Even with the tapes from this conversation, he can’t do much more than to fight these bastards at another time under more favorable conditions. That small comfort helps sooth his wounded ego. As much as he feels he shouldn’t give up the fight, Howard’s a political animal and his years in Congress have taught him that when you’re out gunned, scratch for what you can and live to fight another day. He walks over to the bar, pours himself a two fingered Black Label straight up and returns to his seat.

Howard: (In a shaky voice) “I still want some kind of audit of the Fed, even if it’s superficial. And I want someone’s head on a platter. If you’re going to get this to fly with the public, you’ll need to hand them someone to blame and to hate. I’ll accept no less than that.”

John: “We’re way ahead of you.” (John pulls a few sheets of paper and a thumb drive from his breast pocket and hands them to Howard) “As you can see, the language will still authorize an audit that’s well beyond what’s been done in the past as long as it doesn’t interfere with monetary policy, which is all we ever asked. And we’ll release the names of the banks that were lent to. It doesn’t matter anymore anyway. While the disclosures will be embarrassing to them and it might actually take out a few CEOs, the public’s come to understand that they’re married to the banks whether they like it or not. One of those CEOs can even be your head on a platter. That’s your job. Your new co-sponsor is waiting for your call to work out the details. You know who I’m talking about. Now if you’ll excuse me, I have some things I must attend to. I’ll show myself out.”

John smiles in pity at Howard, then stands and walks a few steps towards the door before pausing. It’s almost like he’s forgotten something but can’t remember what. Then he quickly brightens and turns to Howard, once again smiling broadly. John needs to drive home the point that resistance is futile.

John: “Oh, I almost forget. You’re going to find that your recording system has malfunctioned, with nothing we’ve talked about saved. Instead, you’ll find one of your rousing Senate floor speeches denouncing the evil bankers for your listening pleasure. Those wireless microphones were a really bad idea, allowing an intrusion without physical access. The NSA guys were very helpful without even leaving their desks. And your network’s been compromised. No real damage’s been done but you might want to get on it pronto. I suggest you immediately fire your IT people. But what the hell, I’m not a geek so what do I know. I’ll be in touch Howard.”

Howard collapses into his chair and admits total defeat. He’s been played masterfully and he knows it. Howard then makes a decision that would bring a smile to John if he were here to witness it for it signals a successful assimilation of the psyops. Howards realizes he’d better make that call now and get ahead of this PR disaster by taking advantage of a news cycle that will be consumed by the market plunge. But before he can pick up the phone, an ugly realization comes over him. How many other Senators and Representatives had visitors to their offices this afternoon, receiving the same lesson in the use and abuse of raw power? For the first time, Howard’s thoughts turn to retirement.

[Paul Rigby]

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...

Time, one suspects, to dust off that late nineteenth century staple of state terrorism, the unhinged incendiarist (aka the Anarchist). Surely there must be at least one of these splendid, all-purpose patsies lying around the Langley refrigerators? If not, the American tax-payer should start asking questions.

[Ed Jewett]

Tuesday, June 1, 2010

HOT: Curious Trading by Federal Reserve Advisor May Result in JPMorgan Chase $1.264 Billion Windfall


There is some mighty curious trading going on in Maiden Lane LLC, the entity set up by the Federal Reserve to buy some of Bear Stearns' assets. The Federal Reserve hasn't released enough information to be able to determine the exact details of the trading, but from the information that is available, it appears that trades are being made for the benefit of JPMorgan Chase.

There are big questions, such as why is a portfolio, that is supposed to be wound down, showing a double digit turnover of its portfolio?

In an EPJ exclusive, Bob English does a forensic analysis of the public information surrounding Maiden Lane and it doesn't come out smelling roses. The analysis is here.