Federal Reserve Transparency - Audit the Fed

[Guest Fedup]

Regardless of the accounting, here's how those losses will show up in practice. When the Treasury auctioned the T-bills for the increase in its supplementary and general accounts with the Fed, and when the Fed sold off its existing holdings of Treasuries, the Treasury started making interest payments to the public. The Fed is also receiving interest on the loans it made, and returns that interest to the Treasury. As long as the loans are performing, it is a wash to the Treasury. But if some of the Fed's loans go bad, it means the Treasury is on the hook for the extra interest costs with no offsetting receipts. In other words, any losses by the Federal Reserve are equivalent to a fiscal expenditure financed by Treasury borrowing.

 

A good example would be how Fed wrote off $2.7 billion in losses on the loans to "Maiden Lane LLC," an entity created through the Bear Stearns package. The assets of Maiden Lane consisted of claims on certain troubled securities, and the liabilities consisted of a loan from the Federal Reserve.

 

 

U.S. M-2 money supply fell by

$9.3 billion in the Dec. 21 week to $8,396.1 billion, the

Federal Reserve said on Thursday.

 

The Fed said the four-week moving average of M-2 was

$8,404.6 billion vs. $8,403.7 billion in the previous week.

 

Following are the details of the money supply report, and

the Fed's H.3 and H.4 reports:

 

One week ended Dec. 21 (billions dlrs)

 

Latest Change Prev week Rvsd from

M-1....1,685.1 up......2.1 vs 1,683.0.....1,683.0

M-2....8,396.1 down....9.3 vs 8,405.4.....8,405.5

M-2 Avg 4 wks (Vs Wk ago)..8,404.6 vs ...8,403.7

Monthly aggregates (Adjusted avgs in billions)

M-1 (Nov vs Oct)..........1,688.7 vs.....1,674.0

M-2 (Nov vs Oct)..........8,392.0 vs.....8,360.0

 

Federal Reserve's H.3 and H.4 report:

 

Two Weeks Ended Dec. 30 daily avgs-mlns (H.3)

Free Reserves..............972,351 vs.rvsd.1,004,064

Other Borrowings............87,607 vs.........85,627

Seasonal Loans...38 vs.............34

Total Borrowings...........163,525 vs........171,457

Term Auction Credit.........75,918 vs.........85,832

Excess Reserves..........1,059,958 vs......1,089,691

Required Reserves (Adj).....63,056 vs.........63,235

Required Reserves...........68,689 vs.........61,128

Total Reserves...........1,128,647 vs......1,150,819

Non-Borrowed Reserves......965,123 vs........979,362

Monetary Base (Unadj)....2,015,425 vs......2,035,676

 

One week ended Dec. 30 (H4.1)

Bank Borrowings..........88,133 up...........1,053

Primary Credit...........18,743 down.............6

Secondary Credit............956 down.............4

Seasonal Credit..............39 up...............2

Primary Dealer..............nil vs............unch

Asset-Backed.nil vs............unch

AIG Credit Ext...........20,771 up.............486

TALF......47,624 up.............575

Other Credit Ext............nil vs............unch

Float.....-1,822 down...........238

Balances/Adjustments......3,025 vs............unch

Currency.929,568 up...........4,448

Treasury Deposits.......118,523 up..........23,572

Maiden Lane LLC..........26,597 up..............18

Maiden Lane II...........15,598 up..............20

Maiden Lane III..........22,651 up...............8

 

One week ended Dec. 30 - daily avgs-mlns

Fed bank credit...........2,219,936 up.........5,645

Treasuries held outright....776,583 up............11

Agencies held outright......159,879 up.........1,324

Mortgage-Backed secs........909,575 up.........4,954

Repos............nil vs..........unch

Other Fed assets.............97,194 up...........260

Other Fed liabilities........66,834 down.........906

Other deposits with Fed......11,863 up........11,254

Foreign deposits..............2,340 up...........396

Gold stock....11,041 vs..........unch

Custody holdings..........2,955,294 down.......2,420

 

Factors on Dec. 30

Bank borrowings..............89,700 vs........87,979

Float.........-1,956 vs........-2,088

[Guest Mister X]

The $1.25 trillion in treasuries and Mortgage Backed Securities (MBS) the Federal Reserve has bought have produced low interest rates is ending this March of 2010. Everything is now dependent on the continuing sluggish health of the housing finance and in financial markets. The Federal Reserve is discussing re-entering the MBS later this year if its buying power is needed to force interest rates down.

 

Columbia University Professor Joseph Stiglitz, former chairman of the Council of Economic Advisors and former World Bank chief economist, warned that the mortgage market is not strong enough to withstand a halt in Fed MBS purchases.

 

Stiglitz contended the Fed has "no clear view of an exit strategy" from its quantitative easing, which centers on massive purchases of longer term securities.

 

Americans need to educate themselves on this process. Quantitative easing is a solution when the normal process of increasing the money supply by cutting interest rates is not working. Quantitative could trigger higher inflation than desired or even hyperinflation if it is improperly used and too much money is created.

 

Home foreclosures are still widespread across this United States. Unless more jobs are produced, look for the dollar to renew its downward trajectory and water down American taxpayer debt.

 

It is important to realize the other countries on this planet are not going to stand for the United States escaping from its obligations by intentionally devaluing the dollar. Look this year to global quantitative easing.

 

The race to the Fiat bottom is on. May lowest valued currency win. We already know that the working class has already lost in this shell game.

 

[Guest Fedup]

CNBC commentator Larry Kudlow, who started his career as a Fed economist and served as a high-level economic and fiscal advisor to President Reagan, and it does seem Kudlow's political instincts are on target here.

 

Kudlow made his remark during an on-air discussion of revelations that outside attorneys for the New York Fed persuaded AIG (AIG Quote) not to disclose that it was paying banks 100 cents on the dollar on credit default swaps they bought from the giant insurer.

 

AIG originally drafted a regulatory filing disclosing that the swaps would be paid in full, a disclosure that was crossed out by attorneys at Davis, Polk & Wardwell, who were advising the New York Fed.

E-mails from N.Y. Fed to A.I.G. to Not Disclose Counterparty Payments

 

http://www.scribd.co...rparty-Payments

[Guest Kharkov]

How can we trust the free markets when the government is manipulating it by buying stocks to pump it up artificially? Maybe the government can tell us which stocks they are pumping before they buy it.

 

Why do you think there's nothing but ex Goldman Sachs executives in Treasury positions? Paulson was asked to come in by Bush, where he was allowed to sell all his Goldman Sachs stock tax-free, he crashed gasoline prices in August 2006 for the Bush election(by under-weighting gasoline in the Goldman Sachs Commodity Index).

[Guest Fedup]

Robert Heller, a former board member of the Federal Reserve, said in an op-ed article in the Wall Street Journal, “Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole.”

 

Such support for stocks during a market crisis was confirmed by George Stephanopoulos, a former Clinton administration officer, in an article in the Daily Telegraph, where he referred to “an informal agreement among the major banks to come in and start to buy stock if there appears to be a problem.”

 

Biderman went on to say,

 

One way to manipulate the stock market would be for the Fed or the Treasury to buy $20 billion, plus or minus, of S&P 500 stock futures each month for a year. Depending on margin levels, $20 billion per month would translate into at least $100 billion in [new] buying power. Given the hugely oversold market early in March, not only would a new $100 billion per month of buying power have stopped stock prices from plunging, but it would have encouraged huge amounts of sideline cash to flow into equities to absorb the $300 billion in newly printed shares that have been sold since the start of April.

 

Tyler Durden at ZeroHedge.com pointed out that “virtually all of the market’s upside since mid-September has come from after-hours S&P 500 futures activity.”

 

There are strong objections to calling such potential manipulation a conspiracy. As the writer at MarketWatch.com put it, “The Fed has never said it is buying equities or equity futures. Doing so would likely violate the Federal Reserve's investment policies, and could violate federal law if not disclosed properly.”

 

Aside from the legal issues, the PPT would have operational constraints. It's hard to believe that the Fed could keep such a conspiracy a secret for 20 years or more. An operation big enough to manipulate markets for months on end would be big enough to develop leaks.

 

But he points out that “Biderman’s accusation of PPT market manipulation is another argument in favor of a complete public audit of the Fed’s books.”

[Guest Ken]

Who needs money to drive the market when you have HFT Computers flipping stock to the next computer and then back again. It doesn't take any more capital to do this as volumes are low so they just keep flipping it back and forth and walah! you just created a fake recovery. You ain't heard the last of this.

[Guest Jefferson]

The admission that the government and the central banks are intervening in the equity markets would make it apparent that the financial markets are truly a rigged game. But is this really any different than the Fed and Treasury bailing out corporate and mortgage bond investors by purchasing and guaranteeing trillions of dollars worth of toxic debt obligations?

[Guest Fedup]

the Fed doesn't have to tell the truth to anyone regarding monetary policy and, in fact, can lie to congress. This is the way the law is written into the Federal Reserve Act as amended. Ron Paul has stated this many times in hearings. They can say one thing and do another, legally!

 

How we ever allowed an institution to have so much power is beyond comprehension. They say "absolute power corrupts absolutely" well the FED has even more power than that.

 

As an analogy, a middle age despotic ruler can cut someones head off for not bowing low enough as his coach passes but there will be terrified witnesses that could form the basis of a future uprising. Using the same analogy, the FED can cut someones head off also BUT no one will ever know who did it. Now that's power!

[Luke_Wilbur]

If this is true. I wish the boys at the Fed would start manipulating the manufacturing market in our favor. This country needs real jobs. The up and down swings do not matter to a person with nothing but a "Will Work For Food" sign in their hands.

[Guest Watchdog]

Briefing by White House Press Secretary Robert Gibbs, 1/8/2010

 

Q Robert, I wanted to ask you about Secretary Geithner. Republicans on the Hill are saying they’ve found some evidence suggesting that under his leadership the New York Fed pressured AIG to conceal information about billions of dollars of the counterparty payments that were made with taxpayer money, and they’re suggesting that he was hiding information from regulators. I wonder, does the White House believe that Secretary Geithner should testify on the Hill, turn over any documents he has, to sort of clear this up?

 

MR. GIBBS: Ed, I’d point you to the Treasury Department. I’m sure you’ve already talked to them. Secretary Geithner was not involved in any of these emails. These decisions did not rise to his level at the Fed. These are emails and decisions made by officials at an independent regulatory agency --

 

Q But how do you know that he wasn’t involved? He was the leader of the New York Fed.

 

MR. GIBBS: Right, but he wasn’t on the emails that have been talked about and wasn’t party to the decision that was being made.

 

Q Well, Republican Congressman Issa says there are probably thousands of more emails and he may not be on some that some people have looked at. In the interest of transparency would the White House want more -- I mean, you run AIG now, essentially --

 

MR. GIBBS: I would point you to the Department of Treasury, which I think will tell you that --

 

Q But what does the White House believe?

 

MR. GIBBS: I just gave you what the White House believes.

 

Q Well, no, you gave me the Treasury Department -- no, what do you believe? Do you believe that more emails should come out so we can learn --

 

MR. GIBBS: What I said was I’m -- I don’t know what the story is about the emails. I would tell you that there are not emails that involve Secretary Geithner in this instance. This is emails and decisions that are being made by two people. That decision did not rise to his level.

 

Q Okay, last thing on this. Various liberals have jumped on this and other stories about Secretary Geithner, to say that he really is not fit to serve as Treasury Secretary. He still has the President’s full confidence?

 

MR. GIBBS: Of course.

[Guest Michael Baum]

Treasury Secretary Timothy Geithner will face a congressional grilling later this month about the suppression of details on deals that funneled billions to big investment banks while he was president of the Federal Reserve Bank of New York.

[Guest nForge]

So liberals are just now realizing that Obama appointed Geithner is an idiot? He tried to blame TurboTax for the fact that he cheated on his taxes and the left believed him, so this will probably end the same way.

[Guest ShameOnUs]

How does it feel America that the New York Fed used your tax payer money. Watch Don Harrold's video on How AIG gave billions of dollars to Goldman Sachs. How many secret deals are there happening that we do not know about.

 

http://www.youtube.com/watch?v=m__hjUvbINQ

 

http://www.donharrold.net/

[Guest Enron Ex]

In 1988, Ronald Reagan signed an executive order to establish a specific committee designed to prevent major market collapses.

 

As per this order, the Secretary of the Treasury, the chairman of the Federal Reserve, the chairman of the SEC and the chairman of the commodity futures trading commission make up the core of this team. By extension, major financial institutions like JP Morgan Chase and Goldman Sachs are used to execute their orders.

 

The existence of this team is said to have been confirmed by former Clinton advisor George Stephanopoulos on Good Morning America. Last year, former Treasury Secretary Hank Paulson called for this 'financial fraternity' to meet with greater frequency and set up a command center at the U.S. Treasury designed to track global markets and serve as headquarter for the next crisis.

[Guest Fedup]

This is Rep. Alan Grayson asking Federal Reserve General Counsel Scott Alvarez about the Fed's independence. Its amazing to watch this video and see no other Congressmen asking questions. Are afraid to speak out and join this fight?

 

[Guest LAW]

Who needs money to drive the market when you have HFT Computers flipping stock to the next computer and then back again. It doesn't take any more capital to do this as volumes are low so they just keep flipping it back and forth and walah! you just created a fake recovery. You ain't heard the last of this.

 

Interesting theory. High frequency traders do use computers that execute trades within milliseconds, or "with extremely low latency" in the jargon of the trade. In the U.S., high-frequency trading firms represent 2.0% of the approximately 20,000 firms operating today, but account for 73.0% of all equity trading volume. As of the first quarter in 2009, total assets under management for hedge funds with high frequency trading strategies were $141 billion, down about 21% from their high. The high frequency strategy was first made successful by Renaissance Technologies. High frequency funds started to become especially popular in 2007 and 2008. Many high frequency firms say they are market makers and that the liquidity they add to the market has lowered volatility and helped narrow spreads, but unlike traditional market makers, such as specialists on the New York Stock Exchange, they have few or no regulatory requirements.

[Guest Ken]

These bankers are front running and tailgating the markets with their technology. It happens so fast that no one can track it. Bloomberg states it all with Goldman Sachs trading program.

 

http://www.youtube.com/watch?v=O4aBf41buNw

[Guest DC38]

Goldman Sachs has engineered every major market manipulation since the Great Depression.

 

http://www.rollingst..._bubble_machine

 

After playing an intimate rolein four historic bubble catastrophes, after helping $5 trillion inwealth disappear from the NASDAQ, after pawning off thousands oftoxic mortgages on pensioners and cities, after helping to drivethe price of gas up to $4 a gallon and to push 100 million peoplearound the world into hunger, after securing tens of billions oftaxpayer dollars through a series of bailouts overseen by itsformer CEO, what did Goldman Sachs give back to the people of theUnited States in 2008?Fourteen million dollars.

 

 

[Guest Dr. Peter Morici]

he New York Times reported on Sunday that the bank bonus season, that annual rite of big money and bigger egos, begins in earnest this week, and it looks as if it will be one of the largest and most controversial blowouts the industry has ever seen.

 

Bank executives are grappling with a question that exasperates, even infuriates, many recession-weary Americans: Just how big should their paydays be? Despite calls for restraint from Washington and a chafed public, resurgent banks are preparing to pay out bonuses that rival those of the boom years. The haul, in cash and stock, will run into many billions of dollars.

 

The Times said Goldman Sachs is expected to pay its employees an average of about $595,000 apiece for 2009, one of the most profitable years in its 141-year history. Workers in the investment bank of JPMorgan Chase stand to collect about $463,000 on average.

 

Goldman Sachs, JPMorgan and other big Wall Street banks are awarding multi-million dollar bonuses to the same financiers who pushed the nation to the brink of financial ruin. President Obama voices outrage but fails to stem the abuse.

 

Wall Street leaders argue those bonuses were earned, much like jewel thieves refer to a big heist snatched from an impenetrable safe.

 

Wall Street has kept its mischief legal by salting the pockets of politicians running for Congress and President, and by making certain that key policymakers at Treasury and Federal Reserve are faithful Goldman Sachs alumni.

 

Those bonuses were made possible by billions in taxpayer financed TARP (Troubled Assets Relief Program for financial industry bailouts) funds and nearly two trillion in loans from the Federal Reserve and through the FDIC.

 

Those funds helped Wall Street financial institutions, deemed too big to fail, survive their own misdeeds. Bankers used this cash, much obtained at near zero interest rates, not to make loans for homes and businesses but to trade derivatives, currency futures and other exotic contracts.

 

The fallout is a dramatic drop in the interest paid by banks for private capital too. Retirees suddenly found CDs that once paid four or five percent interest, now pay two or three percent.

 

Essentially, Treasury and chiefs Timothy Geithner and Ben Bernanke are taxing grandma to subsidize Goldman Sachs and finance huge big paydays for bankers who hatched the greatest financial calamity in 80 years.

 

Meanwhile Goldman Sachs, JPMorgan and others continued their pay cartel salaries to everyone from top executives to the mailroom clerk.

 

It is not surprising that their CEOs, who get the biggest paydays, claim huge bonuses are essential for rewarding talent. When my students grade themselves, they reach self-serving conclusions too.

 

Sadly, Obama, Geithner and Bernanke could halt this madness but don't.

 

These banks serve as primary dealers in U.S. Treasury securities—a very profitable business—and depend on Fed lines of credit to sustain business. Status as primary securities dealers and access to Fed financing could be withdrawn from banks that refuse to establish sane compensation practices going forward.

 

Cynically, Wall Street has contributed mightily to the campaigns of Senate and House committee members who make the rules and President Obama's election campaign.

 

Goldman Sachs and others paid Obama's senior economic advisor Lawrence Summers millions in speaking and consulting fees the year between being fired as President of Harvard and joining the Obama Administration.

 

Americans should expect better but won't get it as long as Barack Obama has the audacity to hope voters will look the other way.

 

Dr. Christina Romer, Chair of the White House Council of Economic Advisers said on ABC Sunday: "We've provided extraordinary aid, and the -- and the idea that, as the financial system heals, they just go back to business as usual is -- is simply outrageous."

 

Peter Morici,

 

Professor, Robert H. Smith School of Business, University of Maryland,

 

College Park, MD 20742-1815,

 

703 549 4338 Phone

 

703 618 4338 Cell Phone

 

pmorici@rhsmith.umd.edu

 

http://www.smith.umd.../cv_pmorici.htm

[Guest Stephen Marchant]

I believe in capitalism but this whole scandal has shown how the system has been rigged to protect the wealth of the Establishment and parasitic banking community.

[Guest anothervoice]

The WH is clearly been bought and is owned by the banks. Obama hoodwinked the electorate with populist rhetoric, turned out he is just another two-faced politician.

[Guest telee]

You are absolutely correct. The Obama administration apparently feels that their political goals will be met by serving the political donor class. Job loss, forclosures, support for EFCA, renegotiating NAFTA, making the formulation of the health bill transparent (remember "we're going to put them on C-Span"). These are not the administration's main concerns.

[Guest LBX]

Treasury Secretary Timothy Geithner will face a congressional grilling later this month about the suppression of details on deals that funneled billions to big investment banks while he was president of the Federal Reserve Bank of New York.

 

Look at Geithner's chief of staff...... the one who actually does most of the day-to-day work:

 

"The new chief of staff to Treasury Secretary Timothy Geithner was a top lobbyist for Goldman Sachs Group Inc. until last year, and will have to recuse himself from some government duties under new White House ethics rules.

 

The appointment of Mark Patterson runs into an executive order President Barack Obama signed to limit the ability of officials to move between industry and government. "

 

The old saying is starting to make sense - "The more things change, the more they remain the same".

 

http://online.wsj.com/article/SB123309702282121649.html

[Guest Fedup]

 

A good example would be how Fed wrote off $2.7 billion in losses on the loans to "Maiden Lane LLC," an entity created through the Bear Stearns package. The assets of Maiden Lane consisted of claims on certain troubled securities, and the liabilities consisted of a loan from the Federal Reserve.

 

It is all right here.

 

http://www.newyorkfed.org/markets/maidenlane.html

 

In 2008, as part of extending support to specific institutions, under section 13(3) of the Federal Reserve Act, the Federal Reserve Board authorized the New York Fed to facilitate formation of three limited liability companies.

 

Maiden Lane LLC (ML LLC) was formed to facilitate the merger of the Bear Stearns Companies, Inc. and JPMorgan Chase & Co. The New York Fed extended credit to ML LLC to acquire certain assets of Bear Stearns.

 

Maiden Lane II LLC (ML II LLC) and Maiden Lane III LLC (ML III LLC) were formed to facilitate the restructuring of the New York Fed’s financial support to American International Group (AIG). The New York Fed extended credit to ML II LLC to purchase residential mortgage-backed securities from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG. The New York Fed extended credit to ML III LLC to purchase multi-sector collateralized debt obligations from certain counterparties of AIG Financial Products Corp.

 

More detailed description of each of the Maiden Lane transactions, along with certain information on each company’s assets and liabilities is provided below.

[Guest Jenny Skates]

Although they continue to allow us the illusion of a representative democracy, the FEDERAL RESERVE, a private corporation, is super-governmental, unelected, and totally unaccountable to the people.

 

It was formed during a special session of Congress on December 23, 1913, for which only a very few members of Congress were actually present for the vote. As terms of the bankruptcy, the FEDERAL RESERVE required that Americans hand over all their gold, under threat of fines and imprisonment, and eventually we lost all allodial titles to real property as well. Since then, Americans have had to pay taxes on their land, and a myriad of additional federal taxes have followed. The IRS was formed, and most Americans believe to this day that they must even pay taxes on their labor. In fact, only corporate entities must pay taxes on income.