Audit the Fed Under Attack

Why does the Obama administration want to kill the popular Senate Bernie Sanders amendment to audit the Fed? The amendment may be up for a vote later this week and there are reports the amendment vote will be hit with that magical, fictional 60 to pass, instead of 50, which is the norm for amendments.

According to the Wall Street Journal:

Obama administration officials have declined to weigh in on any specific amendments, with one exception: a move by Sen. Bernie Sanders (I., Vt.) to give the government more power to audit certain operations at the Federal Reserve. Fed and administration officials have signaled they would fight to stop it at all costs. Mr. Sanders has more than a dozen co-sponsors.

At all costs. Really? Including a veto? What is wrong with wanting to know what happened to $2 trillion dollars? Why would the Obama administration demand to remove public disclosure out of the financial reform bill?

So, the Federal Reserve can keep things secret, such as Greenspan did, to stop public disclosure on the housing bubble? Imagine if the public had been warned, how many people would not have lost their life savings.

Senate Bernie Sanders on the Obama administration trying to kill the amendment:

The Obama administration has sided with the Fed and powerful Wall Street interests in opposition to the amendment. “When it comes to openness vs. secrecy, Wall Street vs. Main Street, taxpayers vs. the big bankers, I am sorry to say that the White House has come down on the wrong side,” Sanders said. “With growing support for this amendment from both the left and right, I hope that the administration reconsiders.”

Now Rahm Emanuel, Obama Chief of Staff, is working with the Federal Reserve to stop the audit.

My, my, such an obvious thing. It's our money, we want to know what's going on and where it is going and this is the result. Perhaps it has to do with the mortgage backed securities the Fed has purchased, now over $1.1 trillion dollars:

 

 

Maybe it's the reserve bank credit, a mix of Maiden Lane, commercial bank loans, repurchase agreements, assets held and so on...now valued at $2.32 trillion dollars. I see, the public has no idea who received these loans, for what, what kind of assets were exchanged, if they were correctly valued.... $2.32 trillion.

 

 

Salon:

The Fed, I am convinced, went to these commercial banks and offered to take many of their toxic mortgage assets off their books, often accepting them as collateral for loans to the banks. In exchange, the Fed credited the commercial banks with an increase in the reserves held at the Fed, so long as the banks agreed not to withdraw the excess reserves immediately. Magically, the Fed was able to take a bad asset like a CDO and transform it into a sparkling good asset: bank reserves at the Fed. The irony is that the CDO itself began as a compilation of leaden BBB subprime mortgages and had been transformed into a golden AAA security only through the alchemy of the CDO process. And I think the record will show that the Fed intentionally overpaid for these securities, so that the banks wouldn't have to acknowledge life-threatening losses on the sales or the remarking of their inventory of similar assets. The Fed also began buying mortgage securities directly in the marketplace in an attempt to create demand in the absence of a healthy securitization program.

So the Federal Reserve, with no approval by the president, the Congress, the people or their elected representatives, ended up purchasing $1.5 trillion of new assets of unknown quality.

It's public from a SIGTARP report that the Federal Reserve is the residential housing market through it's actions. SIGTARP has reported this as well. Additional SIGTARP tallied up the potential risk America is on hook for and at one point it was $23.7 trillion dollars (link overviews this report from last year). We've also asked how far does corruption of the banking regulators go?

Representative Alan Grayson has an online action item asking you to help get the Audit the Fed Sanders amendment passed.

Obviously since Wall Street, the White House and the Federal Reserve are all trying like hell to fight any public disclosure, there is clearly something to hide. Look at the latest appeal attempts, by the Federal Reserve. They are trying to stop Bloomberg from obtaining the specifics of which banks received loans, what deals were made and what assets were used in the $2.32 trillion dollars the Federal Reserve issued. Bloomberg won their case, yet the appeals drag on in what appears to be a stalling tactic at minimum.

The whole nation should demand the Sanders Audit the Fed amendment be passed. I suggest you get on the phone and call your Senators saying so.

Meta: 

Comments

For years I've wanted them audited

but I doubt it is going to happen, at least not now. I have that funny feeling that a lot of money went to the well connected and for things outside of propping up failing entities.

I am amazed at the positions of some people. I was on a forum of people who could not understand why someone would want to see an audit done on the FRB; actually arguing with people that called themselves progressive thinking people. They felt that the FRB is a quasi government entity and is above reproach.

To me auditing the FRB is not a political party platform but makes reasonable financial sense to see where the money went. If the President is really big on transparency he would give his support for an audit.

But why do I feel that none of them want it? Skeletons falling out of closets could be one reason.

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Reasons?

Jack Nicholson said it best: "You (we) can't handle the truth!"

Then Greenspan is reported to have said he did not want leaking out (of FRB meetings) the details of a problem which "only we understand."

This secrecy is said by Bernanke to prevent runs on banks. We won't tell you because you might react rationally by protecting your assets. The FRB relies on our buying into a mass illusion (or delusion) that we can trust the financial elites to act in our best interests.

If "Nobody saw it coming," was it because of a lack of transparency at the Fed? The Tea Party people should channel their rage and get behind this effort and see which of our leaders is really wearing clothes. Is our country making "Liar's loans" to other countries in the interest of protecting commercial banks?

If the Sanders amendment does not get the 60 votes (Senate rule, sorry!), let's have a recorded vote so we can publish the names of the 41 who opposed it.

Frank T.

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Frank T.

"run on the banks"?

Really. I think they almost had that with their secrecy. Then to stop it, they publicly announced a guarantee on money market funds.

There is only one reality I can think of and that's the global markets, other nations using transparency against the U.S. economy, i.e. a national security interest.

But I've yet to hear any rational justification. Instead we see $2.32 trillion dollars buying god knows what to who and being a glorified back door bail out and buying up god knows what worthless "assets" and putting the U.S. taxpayer on the hook for them.

MTGM blog put up a post title "you can't handle the truth" and if you read the Greenspan preventing a warning that housing was in a major bubble...again the claim is Americans are just not "sophisticated enough" to understand.

I will never forget watching people being frenzied during the housing bubble, buying up this and that, claiming they would rent it out to make payments at rents 20x what the local market would support, taking on ridiculous loan terms because "we've got to get in before prices rise" or "no worries, we're going to sell this in 3 years" and on and on.

It was an obvious bubble to anyone with an ounce of financial sanity and they could have stopped it, yet claimed "American's were not sophisticated enough".

I honestly do not know about Sherrod Brown's break up the big banks based on a percentage of GDP. The focus on financial reform should be contagion, systemic risk and fraud in my view. Then gambling with people's private money or taxpayer money should be banned, period.

So, that all implies at least the Volcker rule and a banning of some derivatives, and I say an approval to even peddle a "new financial product", where that new "financial product" needs to be evaluated for accuracy, transparency, contagion and systemic risk potential and outright fraud.

But on the audit the fed deal, I just cannot find a rational reason to justify keeping things secret.

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The Audit of Feds

The Senate vote was 96-0 to approve the Bernie Sanders (I-vermont) amendment. The amendment calls for the GAO to audit the special lending facilities put in place to support the financial systems created in 2008 and 2009. In the House the bill was co-sponsored by Represenative Ron Paul and Alan Grayson. This review will audit all the facilities created in december 2007-2009. At these facilities the FED loaned more than 2 trillion dollars
Now the Senate version differs from the House's version in that the House version would call for an annual audit of the FED instead of a one-time audit of the special facilities. However the Sanders amendment makes it mandatory for the terms of the loans to be made public. It is typical of the Senate to "dilute" what comes from the House. I believe that an annual audit would go further in terms of transparency and act as a deterrent to--excuse the usage of Penal Code nomenclature--to any Malfeasance or misappropriation or even political considerations in their activities. The findings of this audit will be available one year from now. The FED has always resisted this type of transparency,so much so that they have taken it to court and even to theAppellate courts before.

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Leo Marquez

NC post reviewing Maiden Lane III

There were some disclosures on Maiden Lane III and it was horrifying. NC reviews those disclosures to amplify the need for a Federal Reserve audit.

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bait n switch - Merkley amendment

Grim on HuffPo has managed to get some emails on the Federal Reserve lobbying activity.

There was a bait n switch on a Fed Audit in the House and now they are trying the same tactic in the Senate.

They are claiming this would interfere with the FOMC policy/meetings debates but the Sander amendment excludes interest rate/monetary policy from the audit.

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Is the Prohibited by Law?

Is the Federal Reserve an arm of government? Yes, the executive branch does lobby, but one would think the Fed ahould be more like the Supreme Court, and not use public funds to influence legislation. If Congressional oversight is to mean anything, the Fed should be required to testify but not allowed to lobby.
Frank T.

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Frank T.

I fear we're going to get nothing

Seriously. Since when has the unconstitutionality of anything made a difference when it comes to the banksters and the Fed.

You might look at the derivatives post. This is a $600 trillion dollar market, yes you read that right. So, in spite of the fact many of these things are either fictional or worse than gambling, I'll be we see no reforms.

I think that's what the Fed is all about too, they "took" a bunch of these worthless things in exchange for loans.

It's seriously depressing because odds on, we're going to have a worse disaster than 2008.

I gotta wonder also, just how much money, investment capital and so on has been sucked out of the real economy in order to create and trade these things.

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DERIVITIVES

Warren Buffett said at a board meeting for Berkshire Hathaway that derivitives were bad for the country despite the fact that he owned Moody's he purchased it in 2000 for 100 million. During the time that he owned Moody's, he gave more AAA ratings than ever. Corporations were paying 3 times the going rate supposedly for Consulting fees in loan default-swaps that wraped up sub prime mortgages with credit card debt then tiered them as CDO'S. After the bubble burst, these corporations were downgraded. But the downgrading came after he sold Moody's for 2 billion and change.

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Leo Marquez

The Numbers Are Their Does Obama Veto?

HuffPo was reporting that 8 Senators who voted against this last April have changed their votes making something like 67 Senators in favor of this.

Its already passed the House right?

So lets say it passes does Obama veto this while barking about financial reform? Seems like a contrarian position to me if he does and something that will really bite him in the butt with the non kool aid voters.

Why we as a nation cowtow to this privately held quasi government agency is beyond me.

I agree with URDRWHO a lot of people really don't understand the Fed or why it should be audited. I mean its owned by the banks lending money to the banks. Thats simple enough in my mind - they need some oversight.

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there is talk of a veto

which is just astounding frankly. I have yet to read anything and I am not a Ron Paul fan frankly but do believe there needs to be much more transparency and I mean when the Fed runs amok, there's no recourse. I have yet to see an argument that I can say "ok, that's valid". Have you read an argument that really seems to make sense as to why we cannot audit the fed beyond the FOMC/monetary meetings, the rates and so on (which will move markets in a whisper)?

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Robert maybe you can start to understand

why some of us like the idea of a Ron Paul. He is one of the very few politicians that don't confuse you with their position. Our many, many Presidents have all shown that they are not the people who they present during their run-up to the office.

These people in charge now are always trying to pull off shifty deals. The financial reform talk also has something thrown into it that handcuffs the natural health world. I am one of those healthy nice word (mature upper middle age) people that stay away from doctors drugs, often visit health food stores and I don't need the gov stopping me from doing so. Ron Paul would never let it happen.

Imagine closing many military bases around the world or should I say, policeman of the world bases. Ron Paul supports it.

I think these are some other things he supports. I'm not a Ron Paul junkie and can't say for 100% certainity.

The Department of Education helped bring us No Child Left Behind. What a fiasco that was and Ron Paul would end such departments.

Ron Paul is not a friend of the IRS.

He would probably cut back the $billions of waste on a drug war that isn't working now nor will it ever work.

For many years he has been supporting an audit of the FRB

On and on it goes. I don't think he is a Libertarian and not anti-regulation but would create a more manageable gov. The larger the gov the more nonsense the elected officials can lay upon us.

Of course there are things I've heard him say that I don't agree with but he sure is respectable in his positions. Which is why he will never be President. Too truthful.

Maybe it is time for you to entertain real Change and think Ron Paul. :)

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You can like Ron Paul

Since this site is issue per issue, stat per stat and only economics. He is right on a number of things. That said, we're just going on economics here and what the statistics/facts are and in this case, it's understandable why this has so much bi-partisan support. There are a host of examples where the "left meets right" because the facts are so glaring. I'm thinking "Pat Buchanan" meets "Ralph Nader" on trade as one.

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interesting bedfellows

placing Pat Buchanan and Ralph Nader in the same ballpark.

The world is erupting in many places because the light is beginning to shine on those hidden places. Places like the FRB.

I think the internet has allowed the light to grow in strength. People can post all the things that were, at one time, hidden from the masses.

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Ron Paul - Audit the Fed!

Paul is pushing a proposal with cosponsorhip, to audit the Fed. The idea is to out the $2Trillion lent to the banks and
the $4.6Trillion credit line.

Which leads us to a outline of real reform:

- Bust the Trusts separate banks, investment banks, brokers.

- Use the CoC to do aggressive audits of banks as before the 90's

- Audit the Fed.

- Speculate with equity not bank debt - e.g. Long Term Capital.

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Burton Leed