Mysteries of the Fed
Last week I wrote about how Tim Geithner was rolled by the big New York Banks into buying out their AIG Credit Default Swaps at Par. And then on Friday came the Paul-Grayson bill to Audit the Fed. But in all the reporting I have read on the AIG Bailout, not a single reporter has mentioned the elephant in the room. The Federal Reserve Bank of New York is owned by the big New York Banks. As the Fed’s website explains, “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations.” Every bank in New York owns a proportional amount of stock in the New York Fed, which pays them a guaranteed 6% coupon. So therefore, Tim Geithner was essentially employed by the banks that he then bailed out by taking over AIG.
The average citizen has no idea that the Federal Reserve Bank of New York is a private corporation owned by JP Morgan Chase, Goldman Sachs and Morgan Stanley. They think it’s some kind of government agency. Is there any wonder why people are so distrustful of Wall Street? Where is the duty of the press to inform citizens? Here is Andrew Sorkin, the New York Times’ “deal reporter” criticizing the Paul Amendment on Fed Transparency.
Representative Ron Paul of Texas won committee approval of a far-reaching amendment that would give Congress vast new authority over the Federal Reserve. The Fed has long enjoyed Lone Ranger autonomy, but that will quickly end if the final bill passes.
Now granted, Sorkin makes his living chronicling the BSD’s known as the “Masters of The Universe”, so his loyalties are clearly with the bankers, but where does he get the idea that Jamie Dimon (Board Member of the New York Fed and CEO of JP Morgan Chase) telling Tim Geithner to buy out the hugely devalued AIG Credit Default Swaps at 100 cents on the dollar (when they were probably worth 20 cents in the open market) is some act of “Lone Ranger autonomy”?
I always thought the Lone Ranger was on the side of the little guy needing justice?
That’s what Tonto thought. Then you realize he wore a mask, had a secret silver mine, was an ex-government employee and didn’t pay social security for his man servant who was an illegal alien.
Some things never change.
That’s what Tonto thought. Then you realize he wore a mask, had a secret silver mine, was an ex-government employee and didn’t pay social security for his man servant who was an illegal alien.
Some things never change.
@Len: LOL, thanks for that.
@JT: The more I learn, the angrier I get. W.T.F.
@Len: LOL, thanks for that.
@JT: The more I learn, the angrier I get. W.T.F.
@Len: LOL, thanks for that.
@JT: The more I learn, the angrier I get. W.T.F.
Wait, it this exactly right? I mean, saying this is simply a private corporation?
Their FAQ page positions them (rather elaborately) as an “independent entity within the government” which is to say they are not funded by Congress (like the Post Office), and that they are not run by cabinet-level secretaries who serve at the pleasure of the President, and leave office with him.
And that stock they issue – it’s not something that can be traded on the open market, or even possessed by an entity that isn’t a Federally Chartered Bank. Moreover, (as they say)
So again, that’s not really a private corporation in the traditional sense of the word – especially since their charter exists at the Federal level, which is unheard of among normal corporations.
All that said, there’s a huge gap between this arrangement and what the general public – even after a year of ‘scrutiny’ by the Fourth Estate – seems to grasp. So agreed – WTF MSM? (p.s. this is why you’re dying).
Whatever. My question is about the privileges conferred by this stock. We see the restrictions, and the 6% dividend, but is that the only privilege of membership?
What other institution-specific rights do shareholders get? In other words, just how “independent” is the Fed?
I suppose the truly dangerous question is whether the men responsible for the bailouts had a binding fiduciary responsibility to the big banks – one that demanded that they operate against the interests of taxpayers at the same time they were, nominally, placing them first – and spending $700,000,000,000 based on this assumption. (Is this intractable conflict the reason for Paulson’s demand for total immunity when he first floated the number?)
I’m just trying to imagine what would happen if the DoD was legally required to push up the price of Boeing stock each and every year. Or if the Secretary of Agriculture could be fired and sued if Monsanto’s share price dropped. What would happen to air traffic safety if the FAA could be held responsible for lost revenue after accurately assessing systemic problems with aircraft maintenance?
In short, I’m trying to imagine any situation in which an organization in possession of regulatory powers and rule-making authority could also maintain private loyalties that take precedence over the interests of the State?
Granted, I can see how these conflicts could be finessed by simply viewing the interests of State and Bank as inexorably intertwined – especially if the stockholders recognized that individual policy decisions with negative impacts could rarely (if ever) outweigh the broader benefit of their participation in an organization with extra-legal status.
In fact, it’s possible that there has never been an irreducible Us or Them conflict between the Fed’s shareholders and the State – at least not until the existential crisis of last September hit, and finesse went out the window.
So was the crew in charge the first to actually confront the impossible contradiction at the heart of the Fed?
Did Geithner, given the choice between lying to America and seeing GS fail go with GS? If so, the only honorable choices are siding with the State, or resigning immediately. To do neither, then go onto a job in the highest level of government seems to be, well, a bit like getting a medal for treason.
Wait, it this exactly right? I mean, saying this is simply a private corporation?
Their FAQ page positions them (rather elaborately) as an “independent entity within the government” which is to say they are not funded by Congress (like the Post Office), and that they are not run by cabinet-level secretaries who serve at the pleasure of the President, and leave office with him.
And that stock they issue – it’s not something that can be traded on the open market, or even possessed by an entity that isn’t a Federally Chartered Bank. Moreover, (as they say)
So again, that’s not really a private corporation in the traditional sense of the word – especially since their charter exists at the Federal level, which is unheard of among normal corporations.
All that said, there’s a huge gap between this arrangement and what the general public – even after a year of ‘scrutiny’ by the Fourth Estate – seems to grasp. So agreed – WTF MSM? (p.s. this is why you’re dying).
Whatever. My question is about the privileges conferred by this stock. We see the restrictions, and the 6% dividend, but is that the only privilege of membership?
What other institution-specific rights do shareholders get? In other words, just how “independent” is the Fed?
I suppose the truly dangerous question is whether the men responsible for the bailouts had a binding fiduciary responsibility to the big banks – one that demanded that they operate against the interests of taxpayers at the same time they were, nominally, placing them first – and spending $700,000,000,000 based on this assumption. (Is this intractable conflict the reason for Paulson’s demand for total immunity when he first floated the number?)
I’m just trying to imagine what would happen if the DoD was legally required to push up the price of Boeing stock each and every year. Or if the Secretary of Agriculture could be fired and sued if Monsanto’s share price dropped. What would happen to air traffic safety if the FAA could be held responsible for lost revenue after accurately assessing systemic problems with aircraft maintenance?
In short, I’m trying to imagine any situation in which an organization in possession of regulatory powers and rule-making authority could also maintain private loyalties that take precedence over the interests of the State?
Granted, I can see how these conflicts could be finessed by simply viewing the interests of State and Bank as inexorably intertwined – especially if the stockholders recognized that individual policy decisions with negative impacts could rarely (if ever) outweigh the broader benefit of their participation in an organization with extra-legal status.
In fact, it’s possible that there has never been an irreducible Us or Them conflict between the Fed’s shareholders and the State – at least not until the existential crisis of last September hit, and finesse went out the window.
So was the crew in charge the first to actually confront the impossible contradiction at the heart of the Fed?
Did Geithner, given the choice between lying to America and seeing GS fail go with GS? If so, the only honorable choices are siding with the State, or resigning immediately. To do neither, then go onto a job in the highest level of government seems to be, well, a bit like getting a medal for treason.
Wait, it this exactly right? I mean, saying this is simply a private corporation?
Their FAQ page positions them (rather elaborately) as an “independent entity within the government” which is to say they are not funded by Congress (like the Post Office), and that they are not run by cabinet-level secretaries who serve at the pleasure of the President, and leave office with him.
And that stock they issue – it’s not something that can be traded on the open market, or even possessed by an entity that isn’t a Federally Chartered Bank. Moreover, (as they say)
So again, that’s not really a private corporation in the traditional sense of the word – especially since their charter exists at the Federal level, which is unheard of among normal corporations.
All that said, there’s a huge gap between this arrangement and what the general public – even after a year of ‘scrutiny’ by the Fourth Estate – seems to grasp. So agreed – WTF MSM? (p.s. this is why you’re dying).
Whatever. My question is about the privileges conferred by this stock. We see the restrictions, and the 6% dividend, but is that the only privilege of membership?
What other institution-specific rights do shareholders get? In other words, just how “independent” is the Fed?
I suppose the truly dangerous question is whether the men responsible for the bailouts had a binding fiduciary responsibility to the big banks – one that demanded that they operate against the interests of taxpayers at the same time they were, nominally, placing them first – and spending $700,000,000,000 based on this assumption. (Is this intractable conflict the reason for Paulson’s demand for total immunity when he first floated the number?)
I’m just trying to imagine what would happen if the DoD was legally required to push up the price of Boeing stock each and every year. Or if the Secretary of Agriculture could be fired and sued if Monsanto’s share price dropped. What would happen to air traffic safety if the FAA could be held responsible for lost revenue after accurately assessing systemic problems with aircraft maintenance?
In short, I’m trying to imagine any situation in which an organization in possession of regulatory powers and rule-making authority could also maintain private loyalties that take precedence over the interests of the State?
Granted, I can see how these conflicts could be finessed by simply viewing the interests of State and Bank as inexorably intertwined – especially if the stockholders recognized that individual policy decisions with negative impacts could rarely (if ever) outweigh the broader benefit of their participation in an organization with extra-legal status.
In fact, it’s possible that there has never been an irreducible Us or Them conflict between the Fed’s shareholders and the State – at least not until the existential crisis of last September hit, and finesse went out the window.
So was the crew in charge the first to actually confront the impossible contradiction at the heart of the Fed?
Did Geithner, given the choice between lying to America and seeing GS fail go with GS? If so, the only honorable choices are siding with the State, or resigning immediately. To do neither, then go onto a job in the highest level of government seems to be, well, a bit like getting a medal for treason.
Need a new acronym: W.B.H.
We Been Had.
What we are left with is a steady diet of dry toast, sardonic sour grapes, bitter roots of cynicism, mordant cutlets and slices of self-derision for being A-Number-One FREIERS.
One little snippet from the link: there’s freiers, and then there’s the “non-freiers,” who are described as having “a particularly strong ego and sense of honor [as in being certain they are better than anyone else and quick to take affront], avoidance of law and rules, individualism without responsibility, competition and machismo.”
I wonder, thinking like an anthropologist now, if there might be an ‘informant’ in the jungle-and-veldt culture of “Wall Street” who might enlighten us about how often the words “freier” and “putz” and “schmuck” and “nebbish” are used to describe the cows to which these “non-freiers” have attached their milking machines, and cranked up the pumps to the point that they’re sucking blood and not just milk, while we placidly nibble what’s left of the forage and hay and chew our mildly discontented cud.
Need a new acronym: W.B.H.
We Been Had.
What we are left with is a steady diet of dry toast, sardonic sour grapes, bitter roots of cynicism, mordant cutlets and slices of self-derision for being A-Number-One FREIERS.
One little snippet from the link: there’s freiers, and then there’s the “non-freiers,” who are described as having “a particularly strong ego and sense of honor [as in being certain they are better than anyone else and quick to take affront], avoidance of law and rules, individualism without responsibility, competition and machismo.”
I wonder, thinking like an anthropologist now, if there might be an ‘informant’ in the jungle-and-veldt culture of “Wall Street” who might enlighten us about how often the words “freier” and “putz” and “schmuck” and “nebbish” are used to describe the cows to which these “non-freiers” have attached their milking machines, and cranked up the pumps to the point that they’re sucking blood and not just milk, while we placidly nibble what’s left of the forage and hay and chew our mildly discontented cud.
Need a new acronym: W.B.H.
We Been Had.
What we are left with is a steady diet of dry toast, sardonic sour grapes, bitter roots of cynicism, mordant cutlets and slices of self-derision for being A-Number-One FREIERS.
One little snippet from the link: there’s freiers, and then there’s the “non-freiers,” who are described as having “a particularly strong ego and sense of honor [as in being certain they are better than anyone else and quick to take affront], avoidance of law and rules, individualism without responsibility, competition and machismo.”
I wonder, thinking like an anthropologist now, if there might be an ‘informant’ in the jungle-and-veldt culture of “Wall Street” who might enlighten us about how often the words “freier” and “putz” and “schmuck” and “nebbish” are used to describe the cows to which these “non-freiers” have attached their milking machines, and cranked up the pumps to the point that they’re sucking blood and not just milk, while we placidly nibble what’s left of the forage and hay and chew our mildly discontented cud.
“For these are honorable men,” said Marc Antony. “See, they’re wearing really good suits and very expensive ties.”
The folks who say “Audit the Fed!” seem to stop at some kind of public-accounting line. Alex is getting closer to the nub, I think — too bad there’s no institutional organ and tools to actually break open the National Treasure lockup and show how the machine actually works. Of course, it’s too complicated for anyone to understand, really — so that’s kind of how it’s gone along: “In Them We Trust.”
And speaking of honorable men, it appears that The Only President We Have is going to send (according to one eyeblink report in Yahoo!, since disappeared) another 34,000 GIs to Faghinistican to “finish the job.” What ever the fuck that is supposed to mean, except maybe to keep the generals from deposing him. Should I hope that he is just kind of like the Popes in Avignon, during the “Babylonian Captivity,” under the thumb of the real imperial rulers and not just another skulker and front man for the Powers That Be?
“For these are honorable men,” said Marc Antony. “See, they’re wearing really good suits and very expensive ties.”
The folks who say “Audit the Fed!” seem to stop at some kind of public-accounting line. Alex is getting closer to the nub, I think — too bad there’s no institutional organ and tools to actually break open the National Treasure lockup and show how the machine actually works. Of course, it’s too complicated for anyone to understand, really — so that’s kind of how it’s gone along: “In Them We Trust.”
And speaking of honorable men, it appears that The Only President We Have is going to send (according to one eyeblink report in Yahoo!, since disappeared) another 34,000 GIs to Faghinistican to “finish the job.” What ever the fuck that is supposed to mean, except maybe to keep the generals from deposing him. Should I hope that he is just kind of like the Popes in Avignon, during the “Babylonian Captivity,” under the thumb of the real imperial rulers and not just another skulker and front man for the Powers That Be?
“For these are honorable men,” said Marc Antony. “See, they’re wearing really good suits and very expensive ties.”
The folks who say “Audit the Fed!” seem to stop at some kind of public-accounting line. Alex is getting closer to the nub, I think — too bad there’s no institutional organ and tools to actually break open the National Treasure lockup and show how the machine actually works. Of course, it’s too complicated for anyone to understand, really — so that’s kind of how it’s gone along: “In Them We Trust.”
And speaking of honorable men, it appears that The Only President We Have is going to send (according to one eyeblink report in Yahoo!, since disappeared) another 34,000 GIs to Faghinistican to “finish the job.” What ever the fuck that is supposed to mean, except maybe to keep the generals from deposing him. Should I hope that he is just kind of like the Popes in Avignon, during the “Babylonian Captivity,” under the thumb of the real imperial rulers and not just another skulker and front man for the Powers That Be?
@JT:
My only remaining hope is that the Big O is hoping to reprise W’s ‘surge’ sleight-of-hand. Make a show of shifting troops hither and yon, talking up political ‘progress’ w/o being too specific all while reorienting the generals around a draw-down.
It’s a slim reed, but I have to keep myself motivated to resist the Beckian hordes somehow. It helps to dream up air-castles in which King O is outwitting his devious subordinates. But I’m getting back to that frustrating place where I’m a lot clearer about being AGAINST the R-team’s leadershp than I am about being FOR the D-team’s efforts.
@JT:
My only remaining hope is that the Big O is hoping to reprise W’s ‘surge’ sleight-of-hand. Make a show of shifting troops hither and yon, talking up political ‘progress’ w/o being too specific all while reorienting the generals around a draw-down.
It’s a slim reed, but I have to keep myself motivated to resist the Beckian hordes somehow. It helps to dream up air-castles in which King O is outwitting his devious subordinates. But I’m getting back to that frustrating place where I’m a lot clearer about being AGAINST the R-team’s leadershp than I am about being FOR the D-team’s efforts.
Auditing the Fed’s interest rate decisions carries significant risks, but increasing transparency about regulatory activities and the ownership of the regional banks is a no-brainer. Eliot Spitzer savaged Geithner in Slate yesterday for his decision making on AIG.
Auditing the Fed’s interest rate decisions carries significant risks, but increasing transparency about regulatory activities and the ownership of the regional banks is a no-brainer. Eliot Spitzer savaged Geithner in Slate yesterday for his decision making on AIG.
Auditing the Fed’s interest rate decisions carries significant risks, but increasing transparency about regulatory activities and the ownership of the regional banks is a no-brainer. Eliot Spitzer savaged Geithner in Slate yesterday for his decision making on AIG.
34,000 troops times one million bucks for the first year they’re there. That’s a lot of zeros before a decimal point.
34,000,000,000
That would pay for a lot here at home, even if our dear corrupt leaders pocketed half of it. And how much of that do the poor grunts get? They’re merely a medium for passing money from tax payers to the MIC at this point.
I’m sinking into cynicism of the deepest order. If McCain had been elected, at least we wouldn’t be attempting to defend his actions, and we’d have a lot of fun with the VP.
34,000 troops times one million bucks for the first year they’re there. That’s a lot of zeros before a decimal point.
34,000,000,000
That would pay for a lot here at home, even if our dear corrupt leaders pocketed half of it. And how much of that do the poor grunts get? They’re merely a medium for passing money from tax payers to the MIC at this point.
I’m sinking into cynicism of the deepest order. If McCain had been elected, at least we wouldn’t be attempting to defend his actions, and we’d have a lot of fun with the VP.
34,000 troops times one million bucks for the first year they’re there. That’s a lot of zeros before a decimal point.
34,000,000,000
That would pay for a lot here at home, even if our dear corrupt leaders pocketed half of it. And how much of that do the poor grunts get? They’re merely a medium for passing money from tax payers to the MIC at this point.
I’m sinking into cynicism of the deepest order. If McCain had been elected, at least we wouldn’t be attempting to defend his actions, and we’d have a lot of fun with the VP.
What, Rick, you don’t think Biden is funny?
I don’t often take the time to read articles in The Nation all the way through — some combination of tone or repetitiveness or something deters me. But Jonathan Schell had a good piece last week. The 50 year war. It begins:
And continues some paragraphs later with this cry of distress:
Worth a read. Sort of a duty to those about to be sent to die to provide a political cover story for the DC village people.
What, Rick, you don’t think Biden is funny?
I don’t often take the time to read articles in The Nation all the way through — some combination of tone or repetitiveness or something deters me. But Jonathan Schell had a good piece last week. The 50 year war. It begins:
And continues some paragraphs later with this cry of distress:
Worth a read. Sort of a duty to those about to be sent to die to provide a political cover story for the DC village people.
What, Rick, you don’t think Biden is funny?
I don’t often take the time to read articles in The Nation all the way through — some combination of tone or repetitiveness or something deters me. But Jonathan Schell had a good piece last week. The 50 year war. It begins:
And continues some paragraphs later with this cry of distress:
Worth a read. Sort of a duty to those about to be sent to die to provide a political cover story for the DC village people.
Something else to consider, so called “American” banks are, in fact, promiscuously international.
There was a time that once could credibly say “What’s good for GM is good for America, and vice versa.” These are not those times. And there’s no highly fixed manufacturing base needed to produce financial products.
To the contrary, we live in an age where capital routinely plays a form of regulatory and geographic arbitrage, moving freely while goods, services, commodities, and labor (to say nothing of agricultural assets and real manufacturing operations) are all restricted to some degree or another. The important thing is at value is derived not simply from the extent of capital’s freedom, but from the exclusivity of that liberty. That unrestricted internationalism represents the ultimate form of leverage.
This may or may not be in keeping with the natural order of things. I’m not one to say. But assuming it is (which, I believe, most international bankers do) it’s easy to conclude that capital lives everywhere and nowhere. Like the atmosphere, it is truly global. Ultimately, it is accountable only to itself, and sees no cause has being greater than its own expansion.
Again, this may simply be reality. If so, it doesn’t square with the whole “Wall St. vs. Main Street” filter, which naively suggests that both “streets” are still here in America, and that “we”, in spite of our salary differences, are still united by a deeper commitment to a common thing. Kind of like Republicans and Democrats, or the Red Sox and the Yankees. All of us still celebrate the 4th of July, right?
Um, no.
In reality, only one side suffers from deep national constraints and loyalties. Referred to correctly, this divide is actually between “private global entity with no natural allegiance to anything but itself” and “one country”. Or rather, “our country”.
All this is way beyond my pay grade, but I strongly doubt that there’s a routine and lockstep convergence between the the interests of Americans with regard to their own monetary policy, and the quintessentially international organizations that own the group who sets that policy for them.
And yes, I know GS is famously dedicated to sending its alumni into Federal service. But is this really a commitment to country? Or is it all about managing what is, for now, the world’s most pliable and generous host?
More importantly, is there any other form of national policy set by an organization accountable to those who routinely profit from operating against the interests of the State?
Maybe an ease with this situation explains why Geithner had no trouble slipping from a sell-out of the Treasury one week, to its direct oversight a few weeks later.
Imagine if Hitler hadn’t died, and we decided to put him in charge of the Marshall Plan because after all, no one knew the landscape better.
I was impressed with the Republican inquisitor who blew of Geithner’s furious defense by saying the whole “you guys handed us an economy going off the rails” argument doesn’t fly when its delivered by a guy who was one of “the other guys” just a few months prior – and in charge of a lot while the damage was actually being done.
Something else to consider, so called “American” banks are, in fact, promiscuously international.
There was a time that once could credibly say “What’s good for GM is good for America, and vice versa.” These are not those times. And there’s no highly fixed manufacturing base needed to produce financial products.
To the contrary, we live in an age where capital routinely plays a form of regulatory and geographic arbitrage, moving freely while goods, services, commodities, and labor (to say nothing of agricultural assets and real manufacturing operations) are all restricted to some degree or another. The important thing is at value is derived not simply from the extent of capital’s freedom, but from the exclusivity of that liberty. That unrestricted internationalism represents the ultimate form of leverage.
This may or may not be in keeping with the natural order of things. I’m not one to say. But assuming it is (which, I believe, most international bankers do) it’s easy to conclude that capital lives everywhere and nowhere. Like the atmosphere, it is truly global. Ultimately, it is accountable only to itself, and sees no cause has being greater than its own expansion.
Again, this may simply be reality. If so, it doesn’t square with the whole “Wall St. vs. Main Street” filter, which naively suggests that both “streets” are still here in America, and that “we”, in spite of our salary differences, are still united by a deeper commitment to a common thing. Kind of like Republicans and Democrats, or the Red Sox and the Yankees. All of us still celebrate the 4th of July, right?
Um, no.
In reality, only one side suffers from deep national constraints and loyalties. Referred to correctly, this divide is actually between “private global entity with no natural allegiance to anything but itself” and “one country”. Or rather, “our country”.
All this is way beyond my pay grade, but I strongly doubt that there’s a routine and lockstep convergence between the the interests of Americans with regard to their own monetary policy, and the quintessentially international organizations that own the group who sets that policy for them.
And yes, I know GS is famously dedicated to sending its alumni into Federal service. But is this really a commitment to country? Or is it all about managing what is, for now, the world’s most pliable and generous host?
More importantly, is there any other form of national policy set by an organization accountable to those who routinely profit from operating against the interests of the State?
Maybe an ease with this situation explains why Geithner had no trouble slipping from a sell-out of the Treasury one week, to its direct oversight a few weeks later.
Imagine if Hitler hadn’t died, and we decided to put him in charge of the Marshall Plan because after all, no one knew the landscape better.
I was impressed with the Republican inquisitor who blew of Geithner’s furious defense by saying the whole “you guys handed us an economy going off the rails” argument doesn’t fly when its delivered by a guy who was one of “the other guys” just a few months prior – and in charge of a lot while the damage was actually being done.
Something else to consider, so called “American” banks are, in fact, promiscuously international.
There was a time that once could credibly say “What’s good for GM is good for America, and vice versa.” These are not those times. And there’s no highly fixed manufacturing base needed to produce financial products.
To the contrary, we live in an age where capital routinely plays a form of regulatory and geographic arbitrage, moving freely while goods, services, commodities, and labor (to say nothing of agricultural assets and real manufacturing operations) are all restricted to some degree or another. The important thing is at value is derived not simply from the extent of capital’s freedom, but from the exclusivity of that liberty. That unrestricted internationalism represents the ultimate form of leverage.
This may or may not be in keeping with the natural order of things. I’m not one to say. But assuming it is (which, I believe, most international bankers do) it’s easy to conclude that capital lives everywhere and nowhere. Like the atmosphere, it is truly global. Ultimately, it is accountable only to itself, and sees no cause has being greater than its own expansion.
Again, this may simply be reality. If so, it doesn’t square with the whole “Wall St. vs. Main Street” filter, which naively suggests that both “streets” are still here in America, and that “we”, in spite of our salary differences, are still united by a deeper commitment to a common thing. Kind of like Republicans and Democrats, or the Red Sox and the Yankees. All of us still celebrate the 4th of July, right?
Um, no.
In reality, only one side suffers from deep national constraints and loyalties. Referred to correctly, this divide is actually between “private global entity with no natural allegiance to anything but itself” and “one country”. Or rather, “our country”.
All this is way beyond my pay grade, but I strongly doubt that there’s a routine and lockstep convergence between the the interests of Americans with regard to their own monetary policy, and the quintessentially international organizations that own the group who sets that policy for them.
And yes, I know GS is famously dedicated to sending its alumni into Federal service. But is this really a commitment to country? Or is it all about managing what is, for now, the world’s most pliable and generous host?
More importantly, is there any other form of national policy set by an organization accountable to those who routinely profit from operating against the interests of the State?
Maybe an ease with this situation explains why Geithner had no trouble slipping from a sell-out of the Treasury one week, to its direct oversight a few weeks later.
Imagine if Hitler hadn’t died, and we decided to put him in charge of the Marshall Plan because after all, no one knew the landscape better.
I was impressed with the Republican inquisitor who blew of Geithner’s furious defense by saying the whole “you guys handed us an economy going off the rails” argument doesn’t fly when its delivered by a guy who was one of “the other guys” just a few months prior – and in charge of a lot while the damage was actually being done.
People whose souls run on “money and what it will buy them” hold the Royal Flush hand over people whose souls run on “emotion and a sense of what’s supposed to be the case.” That’s why, inter all the other alia that’s flailing today, Florida is facing another wave of “development,” as the motherfuckers who profit from paving over and building on top of and changing the ecology to be more friendly to monoculture lawns and monochromatic, deed-restricted “consumers” win once again, all over the tree-huggers and lovers of Right-Sizing and folks that want to preserve a little of What We Really Believed For A Moment That We Actually Had, for nostalgia’s sake. Onaccounta they’re at the center of a positive-feedback (and that’s NOT a good thing, in most cases) system of greed, influence-buying and all the rest. On the other hand, if you got some spare investment capacity, it might be a good tome to buy into the housing market down here — looks like the upper curve of another moderate bubble is peeking over the horizon… “Two, Four, Six, Eight, Time to Get In and Speculate!” And how’s them oil prices doing these days?
Welcome To The Monkey House, folks. Come on in, and pull up a rock or log — they just put out the Purina Monkey Chow for the evening meal.
Yeah, I’d say that the stock prices for Cynics, Inc. and Despair, Ltd. are doing well now. We all seem to be bullish on these insider tips.
AB-Just because the banks can’t sell their shares in the New York Fed doesn’t mean they don’t control it. The Fed website goes to great lengths to say that because it’s not a “profit-making” entity, it’s somehow different. But quite frankly, do you have access to a guaranteed 6% return on your cash with no risk?
Another trial balloon pitching Dimon for Treasury:
Why not say “we were asked by some guys in the administration to print up a story about Dimon as a replacement for Geithner, so here it is”?
Sounds dreadful to me, so maybe it’s really gonna happen.
It’s called “debt money”. It’s a Ponzi scheme and most of us are interest-rate-slaves to the Gold Man-Sacks. Watch your currency devalue before your very eyes.
Geithner is a complete f**k and has to go.
It’s called “debt money”. It’s a Ponzi scheme and most of us are interest-rate-slaves to the Gold Man-Sacks. Watch your currency devalue before your very eyes.
Geithner is a complete f**k and has to go.
It’s called “debt money”. It’s a Ponzi scheme and most of us are interest-rate-slaves to the Gold Man-Sacks. Watch your currency devalue before your very eyes.
Geithner is a complete f**k and has to go.
Oh I know. And my question is what else do they get, aside from the (generous) 6%?
Specifically, do the Fed’s managers have a fiduciary responsibility to its shareholders? And even more specifically, where to the loyalties of those managers rest when there’s a conflict of interest between the interests of their stockholders and the State from which they get their authority?
Have we granted them freedom from oversight in return for regulatory power that they are then (secretly) absolved from using on behalf of those who gave them this power? Unless there is a perfect and inviolable convergence between the interests of the US, and the interests of certain private, international banks that happen to be headquartered here, how can we expect the Fed’s managers to serve two masters?
My suspicion is “they can’t”. And given the secrecy with which the Fed operates, my suspicion is that shareholders have far more information about what it does than anyone else. Consequently, they have far more leverage than anyone else, meaning that the inherent conflict of interest between Bank and State routinely resolves itself in favor of the Banks – even if Fed managers don’t have a fiduciary responsibility in the traditional sense.
In short, I suspect that the value of these resolutions is far greater than the 6% that’s acknowledged in public. Put differently, how much of the revenue generated by these banks is derived exclusively from what amounts to the ultimate form of insider trading?
Oh I know. And my question is what else do they get, aside from the (generous) 6%?
Specifically, do the Fed’s managers have a fiduciary responsibility to its shareholders? And even more specifically, where to the loyalties of those managers rest when there’s a conflict of interest between the interests of their stockholders and the State from which they get their authority?
Have we granted them freedom from oversight in return for regulatory power that they are then (secretly) absolved from using on behalf of those who gave them this power? Unless there is a perfect and inviolable convergence between the interests of the US, and the interests of certain private, international banks that happen to be headquartered here, how can we expect the Fed’s managers to serve two masters?
My suspicion is “they can’t”. And given the secrecy with which the Fed operates, my suspicion is that shareholders have far more information about what it does than anyone else. Consequently, they have far more leverage than anyone else, meaning that the inherent conflict of interest between Bank and State routinely resolves itself in favor of the Banks – even if Fed managers don’t have a fiduciary responsibility in the traditional sense.
In short, I suspect that the value of these resolutions is far greater than the 6% that’s acknowledged in public. Put differently, how much of the revenue generated by these banks is derived exclusively from what amounts to the ultimate form of insider trading?
It get’s worse.
http://www.nytimes.com/2009/11/26/business/economy/26fed.html
Under the Fed’s convoluted governance structure, enshrined in the Federal Reserve Act of 1913, the Fed’s 12 regional banks are governed by boards that are almost by definition beholden to the banking industry.
The nine-member boards have three classes of directors: Class A directors are selected by member banks in each region and are supposed to represent the banks; Class B directors are selected by banks but are supposed to represent the public; and Class C directors are selected by the Federal Reserve Board in Washington, and are also supposed to represent the public.
It get’s worse.
http://www.nytimes.com/2009/11/26/business/economy/26fed.html
Under the Fed’s convoluted governance structure, enshrined in the Federal Reserve Act of 1913, the Fed’s 12 regional banks are governed by boards that are almost by definition beholden to the banking industry.
The nine-member boards have three classes of directors: Class A directors are selected by member banks in each region and are supposed to represent the banks; Class B directors are selected by banks but are supposed to represent the public; and Class C directors are selected by the Federal Reserve Board in Washington, and are also supposed to represent the public.
S0 the Fed is kind of like your pancreas or liver, just chugging quietly away doing its job to keep the body health and digesting and respiring and movin’ and groovin,’ and now we’ve come to the point where we are sitting in the doctor’s office and he is pulling a long face, half hiding behind our chart, and telling us he is a little disturbed by some of the lab values and imagery reports he has just gotten back, and how we should probably go for some more tests and maybe a biopsy or three, and to keep our chins up and hang onto a good mental attitude and keep feeding ourselves, because the science and therapies are getting better every day, and by the way, please check with the billing department on the way out of the office so we can get our insurance coverage checked again, and bring our payments on account up to date.
S0 the Fed is kind of like your pancreas or liver, just chugging quietly away doing its job to keep the body health and digesting and respiring and movin’ and groovin,’ and now we’ve come to the point where we are sitting in the doctor’s office and he is pulling a long face, half hiding behind our chart, and telling us he is a little disturbed by some of the lab values and imagery reports he has just gotten back, and how we should probably go for some more tests and maybe a biopsy or three, and to keep our chins up and hang onto a good mental attitude and keep feeding ourselves, because the science and therapies are getting better every day, and by the way, please check with the billing department on the way out of the office so we can get our insurance coverage checked again, and bring our payments on account up to date.
S0 the Fed is kind of like your pancreas or liver, just chugging quietly away doing its job to keep the body health and digesting and respiring and movin’ and groovin,’ and now we’ve come to the point where we are sitting in the doctor’s office and he is pulling a long face, half hiding behind our chart, and telling us he is a little disturbed by some of the lab values and imagery reports he has just gotten back, and how we should probably go for some more tests and maybe a biopsy or three, and to keep our chins up and hang onto a good mental attitude and keep feeding ourselves, because the science and therapies are getting better every day, and by the way, please check with the billing department on the way out of the office so we can get our insurance coverage checked again, and bring our payments on account up to date.
And on the other hand, I hope all who still tune in to this extended conversation, which is pretty much devoid of prurient interest or gratuitous violence, had a wonderful Thanksgiving day, complete with family, football and a triptophan-induced Turkey Nap.
Remember the immortal words of that other Tiny Tim:
“”God bless us, every one!” said Tiny Tim, the last of all.”
And on the other hand, I hope all who still tune in to this extended conversation, which is pretty much devoid of prurient interest or gratuitous violence, had a wonderful Thanksgiving day, complete with family, football and a triptophan-induced Turkey Nap.
Remember the immortal words of that other Tiny Tim:
“”God bless us, every one!” said Tiny Tim, the last of all.”
And on the other hand, I hope all who still tune in to this extended conversation, which is pretty much devoid of prurient interest or gratuitous violence, had a wonderful Thanksgiving day, complete with family, football and a triptophan-induced Turkey Nap.
Remember the immortal words of that other Tiny Tim:
“”God bless us, every one!” said Tiny Tim, the last of all.”
Tomorrow while we are laying back, digesting, burping, and watching football, Canadians will be working quietly and productively and fuming.
Once again, let us give thanks.
Tomorrow while we are laying back, digesting, burping, and watching football, Canadians will be working quietly and productively and fuming.
Once again, let us give thanks.
Tomorrow while we are laying back, digesting, burping, and watching football, Canadians will be working quietly and productively and fuming.
Once again, let us give thanks.
Bravo for stepping up to the plate on the Fed issue, Jon.
Here’s a few thoughts. First, the notion that the Fed operates with “lone ranger autonomy” is simply ridiculous. Any honest, rational review of the past two years sees an organization that has been in very close coordination with the treasury department under both Bush and Obama. This is nothing new. Our constitution grants congress the right to coin money and the congress delegated that role to the fed. The Fed is a creature of government and deserves full scrutiny if we are to take seriously our public institutions. “independence” is just another word for totalitarian power.
Now, concern that our deluded spend thrift congress would go Weimar on us with more direct control of the money supply is legitimate. History bears that out over the long term with frightening reliability. We’re already nearly guaranteed inflation ahead as a means of partial default on our unsustainable government debt.
The fact that the Fed has deviated from it’s role as a regulator of the money supply and provider of temporary liquidity for solvent firms amid a bank panic is cause for a full audit. They’re doing stuff that’s way out of bounds, having gotten into the specific bailouts of failed firms, provision and allocation of credit to specific sectors of the economy like housing and enormous arrangements with foreign central banks to stablize exchange rates.
Worry about whether the Fed is “private” or “public” is fun but a side show. The real problem is the structure of the institution and the inherent problems of central planning they hit as the most powerful monopoly on earth.
The audit is needed. We must get to the bottom of what appears to be potential corruption in our defacto fourth branch of government. The fact the bailout creditors have been repeatedly made whole is a major cause for our current mess. The creditors are the ones who worry about solvency whereas the equity holders worry about growth. The history of creditor bailout via “too big to fail” ideology has lowered the prudence of creditors and thus enabled a “heads I win, tails you lose” expectation (and reality)
The fed should be stripped of it’s regulatory power and it’s “full employment” mandate. It should (probably) be set to target nominal GDP at 3% annual growth and leadership should be evaluated for renewal based on meeting that target. Scott Sumner has very interesting ideas for how a futures market in ngdp could help disperse this process to the market. The result would be a stable policy where sudden changes in the demand to hold money due to economic uncertainty shocks would be met by increased supply of money. Similarly, fast productivity growth would “see the punch bowl taken away before the party gets stared” an asset bubbles form.
Bubbles are the result of central bank lose money policy. We’re experiencing that again now as stocks and commodities have soared as the dollar has fallen sharply. Devaluing money leads people to seek other stores of value like stocks, gold and oil. Meanwhile, private credit is being crowded out by massive government deficits which are being financed partly by new money from the fed.
Audit the fed, then radically reform it. Ideally, we’d be better off switching to a commodity-backed money as an international standard and no central banks at all. For now, the above is a compromise.
Bravo for stepping up to the plate on the Fed issue, Jon.
Here’s a few thoughts. First, the notion that the Fed operates with “lone ranger autonomy” is simply ridiculous. Any honest, rational review of the past two years sees an organization that has been in very close coordination with the treasury department under both Bush and Obama. This is nothing new. Our constitution grants congress the right to coin money and the congress delegated that role to the fed. The Fed is a creature of government and deserves full scrutiny if we are to take seriously our public institutions. “independence” is just another word for totalitarian power.
Now, concern that our deluded spend thrift congress would go Weimar on us with more direct control of the money supply is legitimate. History bears that out over the long term with frightening reliability. We’re already nearly guaranteed inflation ahead as a means of partial default on our unsustainable government debt.
The fact that the Fed has deviated from it’s role as a regulator of the money supply and provider of temporary liquidity for solvent firms amid a bank panic is cause for a full audit. They’re doing stuff that’s way out of bounds, having gotten into the specific bailouts of failed firms, provision and allocation of credit to specific sectors of the economy like housing and enormous arrangements with foreign central banks to stablize exchange rates.
Worry about whether the Fed is “private” or “public” is fun but a side show. The real problem is the structure of the institution and the inherent problems of central planning they hit as the most powerful monopoly on earth.
The audit is needed. We must get to the bottom of what appears to be potential corruption in our defacto fourth branch of government. The fact the bailout creditors have been repeatedly made whole is a major cause for our current mess. The creditors are the ones who worry about solvency whereas the equity holders worry about growth. The history of creditor bailout via “too big to fail” ideology has lowered the prudence of creditors and thus enabled a “heads I win, tails you lose” expectation (and reality)
The fed should be stripped of it’s regulatory power and it’s “full employment” mandate. It should (probably) be set to target nominal GDP at 3% annual growth and leadership should be evaluated for renewal based on meeting that target. Scott Sumner has very interesting ideas for how a futures market in ngdp could help disperse this process to the market. The result would be a stable policy where sudden changes in the demand to hold money due to economic uncertainty shocks would be met by increased supply of money. Similarly, fast productivity growth would “see the punch bowl taken away before the party gets stared” an asset bubbles form.
Bubbles are the result of central bank lose money policy. We’re experiencing that again now as stocks and commodities have soared as the dollar has fallen sharply. Devaluing money leads people to seek other stores of value like stocks, gold and oil. Meanwhile, private credit is being crowded out by massive government deficits which are being financed partly by new money from the fed.
Audit the fed, then radically reform it. Ideally, we’d be better off switching to a commodity-backed money as an international standard and no central banks at all. For now, the above is a compromise.
Another little snipe at economists, of whatever flavor.
Interesting increase in the number of folks pointing out that NGDP or WGDP have a few flaws as, and I hate this word, “metrics” for any kind of healthy survival-and-sustainable thinking about the whole world in our hands.
You even have some slight hint that maybe macro mavens feel, in their hearts, that something is missing from the set of comprehension, wisdom, and recommended behaviors needed to survive as a species, and not totally just fuck up the planet for future generations of all species, in the name of “cheap efficient consumer prices for things like car tires that the Chinese can make via cheap labor that is also working itself out of a job and with no pollution controls and even with the carbon costs of shipping to the US,, and that’s GOOD FOR THE CONSUMER who in the world system the libertarians like will earn enough to own a car and buy tires and fuel, jsut exactly how? By cooking burgers for other unemployed people?” and a “steady 3% WGNP growth.” I especially like the little bit in the link about how GDP is a good measure of general well-being “because people prefer higher to lower incomes [as everyone knows, so it's not even worth examining the truth and implications of the statement].” Well, yeah, and my daughter preferred chocolate ice cream to broccoli. And of course since things like happiness and comfort and the enormous “cost” of externalities somehow don’t get factored into those GDP calculations, for which there are so many contending economists offering so many competing and inconsistent and incomplete models and spreadsheets, well, if it can’t be reduced to a publishable “metric” that fits comfortably into whatever model the economist works from and plays to, I guess it doesn’t exist in the “real world.”
And lo and behold, this little arcane corner of what-everybody-knows-and-talks-so-seriously-about-plays-to-even-though-it’s-absolutely-the-wrong-tool-for-the-job, is even getting some press in something closer to the mainstream, and in a form that is like what the mainstream “press” should be doing.
“Audit the fed.” Should we call the Scientologists in on this? I hear “auditing” is a big deal with those folks, and they sure have their well-established tools and a reputation for making things come out the way their dogma says they should, within their circle of influence. I don’t see any potent mechanism to actually track and and investigate and discover and uncloak and explain the horror of the present corruption and concentration of wealth. Nothing, even in any of the widely visible and credible press, to explicate to Joe Sixpack what’s so very wrong with the hidden behaviors. And more important, in the context of the present corruption, any means to compel “change” by application of the necessary coercion by the central government to which “we” have delegated these small-r republican decisions. How does “the Fed,” a nice little shorthand for Everything That Is Wrong About Our Totally Suborned And Perverted Way Of Life, get “radically reformed?” “We,” whoever “we” are, seem to be like the Pope admonishing Hitler, who can respond, “And how many divisions of troops does the Pope have?”
All well and good to focus on the swollen belly of the sick patient and drain the ascites, the fluid that’s leaked out of the damaged organs, and toss in some IV fluids and meds to keep the patient alive a little bit longer. “Appears to be potential corruption”? Hey, the flimsiest assessment shows there is a deadly disease process at work. But if you want to bring the patient back to a little better health, you have to treat the liver cancer or cirrhosis or systemic infection that’s killing him, radically and effectively. And since these guys have either figured out how to stand above the legal system, or have covertly re-written your ruleoflaw so that what they have been doing is “not illegal,” what tools do “we” have to “do something about it”?
I don’t think a “futures market in the ngdp” is going to make the cut. Nor is focusing all on a nice steady “target” of “growth” of 3% in the GDP. That, to me at least, is like saying that a good target for the annual increase in a person’s belly fat is 3%.
JT,
how about a little less marginally useful medical analogies and a little more constructive suggestion. maybe you just don’t have any. Maybe you’re sole contribution to each discussion is “system” analogies divorced from practical human decision making. So be it.
“economics is bs” isn’t an answer or even a contribution. It’s just hand waving. I wish you could approach a topic with something other than a tirelessly (tiringly?) mile-high metaphysical romp.
Tell you what, JP, you go off into your little corner and I’ll go off into mine, and you can throw out your nicely bulleted “constructive suggestions,” and I can suggest what my life experiences suggest are very practical-human-decision-making reasons why they should indeed be thrown out. You don’t choose to reason by analogy, or look for clues to bettering the human condition (though I guess you believe “we” who are poor are just steadily becoming “better off”) in “systems” behavior outside your “uncoerced transaction constitutionalruleoflaw framework.” I think there’s something to be learned from a wider view.
Seems to me that your “constructive suggestions” look a lot like re-arranging the formatting of a spreadsheet that has some serious internal flaws, formulae with subtle but fatal errors, lots of efforts to divide by zero, and references to empty cells, rather than the stuff of a workable re-casting of our entire social order in a way that is possible and realistic and sustainable. Call it “hand-waving” or “broad strokes” or whatever your list of pejoratives includes — “libertarianism” is as much a dead-letter metaphysical pipe dream as “liberalism” or most any other ism.
But hey, congratulations for staying tightly on message, and in the repeated use of the plural pronoun (“we” — now is that the presumptuous, the editorial or the royal form?) in your pronunciamentos, as a means of building apparent solidity and seeming solidarity for your talking points, like that “libertarian-liberal coalition” thing. (By the way, that should read “liberal-libertarian” if you want it to have a chance of getting off the ground –lots more self-identified liberals than libertarians, and as at state dinners, precedence and protocol and having an actual invitation do count.)
Hey, if “it” works, and the Fed Gets Audited, and Something Wonderful Happens, we can always do the Stalin-Trotsky two-step later, to see who gets to be the next Emperor. That’s how it’s worked in every other revolution… The human “system” is always changing, and the rate of change and degree of dislocation is already on the way to new maxima. Fiddling with “futures markets on ngdp” and lots of your other suggestions depend on exercise of some kind sovereign power, and the central government is not going to even listen to you or Hayek either, and the power of the polis does not paint the great canvas of history with a pointilist’s tiny brush — the mob paints in very broad strokes indeed, usually red.
Cool thing about this blog format, of course — either or both of us can be discounted and ignored by the “community” as “tiresome,” which I think is the root word you were scratching for to put me down with, just above.
Keep your ice axe sharp, amigo…