The Federal Reserve is and has been corrupt since it was created in 1913. It was built to take money from you and give it to the powerful money interests. And it has worked. The value of the dollar has fallen 97% in the last 100 years.
Not only was the Fed created by the banks, but the revolving door between the Fed and big banks like Goldman Sachs has also created an incestuous situation.
Under the Obama administration, in 2009 alone, Goldman Sachs took more than $20 billion in taxpayer cash through bailouts, payments, and backstops — and then turned around and paid out $16.2 billion as 2009 bonuses, plus an additional $5 billion more in bonuses in 2010.
And it is getting worse…
So much so that the House of Representative has called for a truly wide-ranging, independent audit.
The reason for the audit is simple: The Fed uses every crisis to enrich the large banks through the Treasury carry trade. The Fed loans money to the banks at a rate next to zero, and the banks buy higher-interest T-bills and make a profit in the spread.
One example of the corruption is when the Fed tasked bank examiner Carmen Segarra with monitoring Goldman Sachs in an effort to learn how and why the 2008 financial crisis unfolded.
The problem was, they didn’t think she would actually do it…
She was fired from her post after seven months, but not before she compiled 46 hours of secretly recorded conversations and other documentation amounting to an “unignorable truth” — that one of America’s biggest investment banks had co-opted its supposed overseer.
“You sort of knew that the regulators were more or less controlled by the banks,” Michael Lewis wrote in The Big Short. “Now you know.”
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New Fed Audit Bill
Last week, the House Oversight Committee passed the Federal Reserve Transparency Act (H.R.24), setting the bill up for an eventual vote on the House floor.
The bill would change the rules under which the Federal Reserve is audited. Current law exempts from audit transactions with foreign central banks and foreign governments, actions surrounding monetary policy matters, transactions made under the direction of the Federal Open Market Committee (the FOMC, which sets interest rates), and communication by Federal Reserve board members, officers, and other employees about such exempt transactions and actions.
The Federal Reserve Transparency Act would require the Comptroller General of the United States to conduct an audit within a year of the bill’s passage and to report on that audit to Congress.
Rand Paul had a bill in the Senate last fall that didn’t reach the 60 votes needed for cloture — failing by 7.
This new bill, H.R.24, will try again. Who knows? With Bernie Sanders and Donald Trump pushing populism against the old establishment, maybe it has a chance.
If by some act of God or vengeance the Fed were audited, all hell would break loose. Janet Yellen said it would “politicize monetary policy.”
The Upshot
A Fed audit by Congress would put pressure on big banks like Goldman Sachs and JP Morgan, who are benefiting from vast amounts of cheap money. It would also put pressure on the central bank to stop wealth redistribution from wage earners to those who are first in line in receiving the cheap money.
I’m not under any illusion that the rich people will not continue to take from the middle class — audit or no audit. After all, they make the laws. But I am saying you can make enough money to tell the rich guy to go to hell.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
