The Giant Banks, Federal Reserve and Treasury Have All Blackmailed America → Washingtons Blog
The Giant Banks, Federal Reserve and Treasury Have All Blackmailed America - Washingtons Blog

Saturday, May 22, 2010

The Giant Banks, Federal Reserve and Treasury Have All Blackmailed America


As I wrote last October:

Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn't passed. And Rahm Emanuel famously said:

Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before.

Last year:

  • Senator Leahy said "If we learned anything from 9/11, the biggest mistake is to pass anything they ask for just because it's an emergency"
  • The New York Times wrote:
    "The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress."

    ***

    Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.

    Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.

    “This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”

Not Just Government

But it's not just government . . .

If the too big to fails say that the world economy will crash and there will be martial law unless they are bailed out, politicians - most of whom don't understand finance or economics - will believe them, and sound the alarm themselves.

As Karl Denninger wrote yesterday:

[S]ounds like "Bail me out or I will crash everything."

Isn't that analagous to walking into a bank, opening one's coat to reveal an explosives-laced belt, and saying "gimme all the money or everyone dies!"

I noted in November:

In the 1974 comedy Blazing Saddles, Cleavon Little plays the new sheriff in an old Western town. The sheriff is African-American, and when he rides into town for the first time, the [racist] townspeople pull out their guns and are about to shoot him.

But he quickly puts a gun to his own head, pretends he's scared of his own gun, and says "BACK OFF OR THE AFRICAN-AMERICAN GUY GETS IT!!!" The townspeople are dumb and fall for it, suddenly terrified that he'll kill himself. Here's the scene.

That's what Wall Street is doing with the bailout.

The fat cats on Wall Street are saying "give us a lot of money, and buy all of our bad debt for a lot more than its worth, or Wall Street will get it and we'll go into a depression!"

Are Americans stupid enough to fall for it?

In a recent interview, William K. Black uses the exact same Blazing Saddles sheriff-bank analogy.

Miles Kendig has a different - but parallel - analogy for the giant banks:

In essence, what we have here folks is a characterization of the banks and the government that has assumed the risk profile of these banks as some sort of 1,000 pound men, unable to move without assistance. They have suckered everyone else into the idea that if anything is done to move these overweight, unhealthy "persons" to health they will have a heart attack and kill us all since they sit upon the crossroads of commerce and have sold most folks the idea that they are the heart of the nation and indeed the world. Given these "objective" circumstance the government is not only beholden to the 1,000 pound persons, but is one of them itself, will do everything to make the rest of us carry them so as to save them the indignity of actually addressing their morbid obesity and the cycle of codependency that enables them all to remain so fat.

Any way you look at it, the too big to fails are not needed and they are dragging our economy into a black hole. Like the sheriff in Blazing Saddles or Kendig's 1,000 pound men, they are playing us for fools.

[Yves Smith] shared another analogy with me: a man with 15lbs. of Semtex strapped to his waist. She says "any surprise people in the vicinity are very attentive to his desires?"

As Bloomberg notes today:

The vote was another victory for the Fed, which months ago faced one of the biggest challenges to its power and independence in its 96- year history as lawmakers responded to public anger over bailouts of Wall Street firms. The amendment Ensign supported was included in the financial regulatory bill the Senate approved yesterday.

“The Fed’s authorities seemed to be under serious threat,” said David Nason, a former assistant U.S. Treasury secretary who’s now a managing director at Promontory Financial Group LLC, a Washington-based consulting firm. Instead, the Fed “appears to have regained its footing and now appears to be emerging with at least as much authority and likely more.”

***

The Senate bill contains most of what Fed officials sought. In addition to preserving their bank-supervisory powers, it maintains a ban on congressional audits of interest-rate decisions that some lawmakers had sought to strip away.

***

The outcome puts Fed Chairman Ben S. Bernanke in a stronger position to withdraw record monetary stimulus as the economy recovers ...

And Tyler Durden provides details of how the Fed blackmailed Congress into expanding the Fed's powers:

A reader provides us with the following letter he received from Senator Mikulski in response to dissatisfaction expressed about Bernanke's reconfirmation. The response from the Senator demonstrates [that the Fed is pressuring] gullible and incompetent senators ... to pass law after law that is only in the Fed's, and thus Wall Street's interests, as the alternative would always be a "market nose dive" ....

Thank you for getting in touch with me about Ben Bernanke's nomination to chair the Federal Reserve. It's great to hear from you.

***

I was advised that rejecting his nomination would cause markets to nose dive, which would hurt retirees and families saving for their future. I am not enthusiastic in my support. But I think Mr. Bernanke understands the job that he still has to do.

***

Sincerely,
Barbara A. Mikulski
United States Senator

And for the counterpoint, here is an example of a Senator who does not fall for the Fed's racket:

Dear Friend:

Thank you for contacting me. I appreciate hearing your thoughts about President Obama's decision to nominate Ben Bernanke for another four-year term as Chairman of the Federal Reserve (the Fed). I voted against approving Mr. Bernanke, who was nevertheless confirmed by the Senate by a vote of 70-30.

***

While I have heard the concerns of many that the failure to confirm Mr. Bernanke would have damaged the financial markets and jeopardized our economy recovery, I do not believe that anyone, including Mr. Bernanke, is too big to be replaced. We should not hold our economy hostage to the Wall Street threat that total economic collapse is the sure result of not doing everything they want.

Thanks again for contacting me. Please do not hesitate to do so again about this or any other issue that may concern you.

Sincerely,

Tom Harkin
United States Senator

6 comments:

  1. Thank you, friend, for saying this loudly and clearly again. I agree with everything you say.

    I've said it myself time and time again at my blog but it seems that the sheeple have decided to just make the best of a very bad deal (no retirement or good jobs ever again - for at least the next 10 years anyway) and are now lying down for the final blow.

    What can we do?

    S

    Any way you look at it, the too big to fails are not needed and they are dragging our economy into a black hole.

    . . . The Senate bill contains most of what Fed officials sought. In addition to preserving their bank-supervisory powers, it maintains a ban on congressional audits of interest-rate decisions that some lawmakers had sought to strip away.

    . . . The response from the Senator demonstrates [that the Fed is pressuring] gullible and incompetent senators ... to pass law after law that is only in the Fed's, and thus Wall Street's interests, as the alternative would always be a "market nose dive"

    . . . I do not believe that anyone, including Mr. Bernanke, is too big to be replaced. We should not hold our economy hostage to the Wall Street threat that total economic collapse is the sure result of not doing everything they want.

    _____________

    ReplyDelete
  2. From The Washington Post:
    "Marie Antoinette could fit into this crowd without missing a beat," said Nell Minow, co-founder of the Corporate Library, which found in recent studies of several thousand U.S. companies that more chief executives received club memberships than a year earlier, and companies paid more to cover executives' personal use of corporate planes. "Many people would think the solution would be not to be so provocative of unrest and unhappiness, but no, they're saying, 'Go ahead and do that, just build bigger walls around your house.' "

    http://www.washingtonpost.com/wp-dyn/content/article/2010/05/22/AR2010052200331.html?hpid=topnews

    ReplyDelete
  3. I find the arguments made by the giant banks, Federal Reserve and Treasury all quite cogent -in an empirical sense-.

    These guys all know what they are doing. It's more what-they-are-doing -that they seem not to understand. (I realize that sounds gibberish.)

    In essence, yes, if we do not continue to throw our children into this volcano of empirical insanity, it will blow up.

    Empirical Knowledge has got a-hold of us in the worst way. It's true. -Scientifically speaking- there is no other choice BUT to continue down this course into what is clearly an massive-inferno.

    Categorical Knowledge -though- indicates unambiguously, -it doesn't make any difference whether or not you throw your children into the empirical volcano. The volcano is going to blow up -anyway-.

    Either way, humanity has constructed for itself a scientific reality that simply cannot be sustained, -not even in the nearest term.

    The question at hand is, with all these many recent clearly-even-more-suicidal fixes being effected, how much worse will the blow-up be?

    My humble estimation today is, -close to 80% of humanity is going to die-off. Yes, I think it is going to get very ugly -indeed-.

    Furthermore though the envelope cannot be pushed much further...

    The remaining 20% could -however- also be extinguished in the coming scientific maelstrom.

    It looks, sounds and even smells like it-will-be-war that will cause the massive die-off.

    But it will only be war, if something else science has been doing doesn't first trigger the wave-of-death that is coming.

    This is the predicament we are all left with when the common moral compass -impinges on the more natural instinct rising amongst the populace.

    Storming the Bastille is a much safer route than we are taking -being so "civilized"-.

    ReplyDelete
  4. Wait a minute. These banks hold deposits for probably tens of millions of people, businesses, and state and local governments. If the big banks failed, there is no way the FDIC could cover the losses. I think that in the short term the bailouts are preferable to the country going broke.

    However, the writing is on the wall in giant, dripping red letters. If you are still banking with TBTF, your grace period is rapidly expiring.

    Unfortunately, what should have been a temporary measure appears to be turning into a "long con." "People seem to be buying it, let's run with it as long as we can, and maybe things will turn out all right." Fah. The self-deluded idiots who sleazed their way into positions of authority are ensuring that near-total economic annihilation must precede real recovery.

    And you know what? Even if the worst-case scenario came to pass, after a short period of turmoil we'd probably be better off, as long as we have the guts to say no the protection racket pimps and easy money mafiosos.

    PS For you gold bugs out there, consider the Gold Reserve Act of 1934. If you're comfortable with the possibility of buy gold at $1,200 an ounce and selling it back to the Treasury at $50 an ounce, by all means, go ahead. Just saying it might happen.

    ReplyDelete
  5. Senator Harkins wrote: “We should not hold our economy hostage to the Wall Street threat that total economic collapse is the sure result of not doing everything they want.”

    The senator clearly does not understand the operation of the Fed. The Fed establishes a line of credit for Congress in the amount of the principal from securities (bills, bonds, or notes) that Congress gives to the Fed. Every “dollar” in circulation is based upon this amount.

    (The commercial banks multiply this ‘reserve’ by fractional reserve requirements. The Treasury serves as auctioneer to sell the Fed‘s securities to Primary Dealers and make it look like the public is funding the government. The auction reduces the inflationary exposure.)

    The promise is to pay back the principal plus interest. The interest does not exist. If a security is for a one year extension, it is obvious the interest must come from another security or the inherent Ponzi scheme is obviously bankrupt. Ref. http://usa-the-republic.com/items%20of%20interest/Inherent%20National%20Bankruptcy.html

    The Fed operates on fraud. The national debt can never be paid off.


    What the senate is doing is postponing the inevitable by funding the Ponzi scheme a bit longer. The economy is held hostage by the Fed, regardless of what Senator Harkins says.

    ReplyDelete
  6. The "blackmail" was a bluff. The only losers without a bailout would have been, and still will be (wait, it's coming) the banksters and those who trusted them (lots of little people). But the little people will have gained in the long run, e.g.,learning not to trust government and those in bed with them,e.g.,the Federal Reserve Board. The bailout only prolonged the collapse and makes it worse. Secession, state by state, is the answer.

    ReplyDelete

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