Exposing the Fed’s Incompetence

By Greg Hunter’s USAWatchdog.com

The Federal Reserve made a stunning revelation this week.  It admitted to pumping $9 trillion into the economy because of the financial meltdown in 2008.  It provided overnight loans to big U.S. banks with most of the trillions of dollars deployed to keep the system from imploding.  Yes, the Fed is credited with saving the world from apocalypse, but how incompetent and corrupt does an institution have to be to let things get this far out of control?  This should not be considered as a grand victory but a magnificent failure.  CNNMoney.com reports, “Sen. Bernie Sanders, the Vermont independent who had authored the provision of the financial reform law that required Wednesday’s disclosure, called the data that was released incredible and jaw-dropping. “The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution,” Sanders said.  He said that even if the Fed was right to make the loans to keep the economy from toppling into a depression, it should have made stronger demands that the banks help American consumers and small businesses.”  (Click here for the complete CNN story.)  

The Fed should have forced the banks to restructure underwater home loans.  After all, the Fed is still their supreme regulator.  It did not do that.  Instead, the Fed looked the other way, once again, as the banks started foreclosing on homes en masse by using phony paperwork.  The ongoing story is dubbed “robo signing” by the mainstream media, but the real story is simple foreclosure fraud.

It wasn’t just U.S. banks that received cut-rate bailout loans but American companies such as General Electric, Harley-Davidson and Verizon.  It also bailed out Toyota, a Japanese automaker, that competes for business against our domestic car companies.  Can’t Japan bailout its own problems?

Even foreign banks got cheap cash from the generous Federal Reserve.  The Washington Post reports, “Foreign-owned banks also benefited from the Fed’s commercial-paper facility. The Korean Development Bank, owned by the South Korean government, used the program to the tune of billions of dollars, including a $407 million short-term loan on a single day. Many foreign banks, including the French BNP Paribas, the Swiss UBS and the German Deutsche Bank, took extensive advantage of various programs. Even a major bank in Bavaria benefited, as well as another one headquartered in Bahrain, a tiny island country in the Middle East. . . . Dallas Federal Reserve President Richard Fisher defended the Fed’s actions during the financial crisis, saying the central bank “stepped into the breach” in its role as a lender of last resort. . . .That’s what we are paid to do,” (Click here to see the complete Washington Post story.)

Excuse me, Mr. Fisher, what the Fed gets “paid to do” is regulate and not allow the bankers to act as if they live in an “anything goes” Wild West casino.  The Fed should be ashamed that it did not see this monumental market melt-down coming.  It is cold comfort to see the Fed act surprised and pump cash in a panic to keep the economy from falling into a financial abyss.  The Washington Post also quoted Senator Sanders, “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”  

“Taking a very extensive look” at the Fed seems like a very good idea.  Maybe, now, Congress can push through the first full audit of the nearly 100 year old institution, but I am not going to hold my breath.  The Fed says it “didn’t lose a dime” in this deal but, at this point, I don’t really care about the money.   The Fed received even more regulatory power from the recently passed Financial Regulation bill signed into law earlier this year.  If we didn’t know before, we surely know now, that was a huge mistake because the Fed didn’t use the regulatory power it already had.  The Fed missing the enormous oncoming financial failure in 2008 clearly shows the regulators didn’t do their job.  What exactly was the Federal Reserve regulating?  The $9 trillion cash drop did more than stop (or postpone) a catastrophe–it also exposed the Fed’s incompetence.

Comments
  1. Art Barnes

    Greg, what if the Fed had loaned the banks money for Joe Doe Main Street to save his house at even a 1 percent interest the banks would be better off now. The toxic loans would be being paid. Most people who are in a home crisis can pay a one percent interest mortgage because at 6 or so percent, which is the average of the toxic loans, the reduction in monthly payment is 50 percent or more. Seems the whole mess would have been done and over in a matter of months. No, they decided that zero percent pay back whenever you want to, and get big bonus to boot without any force of arms to make them loan the money to anyone was far and away the best deal around. Imcomptence you say, no Greg, your being too kind! This Fed thing, the banks, our
    govenment lawmakers, wallstreet, the national media, and the 2 percent fat cats are becoming not revelant to the basic middle class american people. They know there has not been and never will be any help from them. They are becoming aware that the cities, counties, state(s) & federal government never does anything for them, just to them. Sooner or latter my friend, they may well stop working if they have a job and ask for food stamps like the poor and the rich do. The poor get the actual stamps, the rich get the trickle up from the stamps and welfare checks with the middle getting screwed. Of course they are betting the middle class will never quit working, but there has been times this has happened, 1897 in France comes to mind. Another point comes to mind concerning our beloved wallstreet, because a depression was precitipated in the thirties by a wallstreet downturn wallstreet is thought to forever lead the way again if a depression sould lurk on the horizon and that is why the Fed and govenment will do whatever they have to to keep it afloat. The Gov. and the people have been hoodwinked. Where is it written that you can’t have a depression except if wallstreet goes down? Wallstreet keeps this little secret to itself so that anytime anything looks dire in the economy they can yell bail us out and give us more bonuses or were all going down. Wallstreet really is not the ship we are floating on, its the middle class working americans, and we are going down while their ship floats high and dry, but that won’t be reported either, just stories about the improving economy and the holly jolly Christmas this year.

    • George

      Hi Art,
      I did like comments. I know a lot of people that are unemployeed. I am not sure how they could pay a mortgage, even at 1% intrest. Most people are living pay check to pay check and have vast credit card debt [not me ;-)]. A lot of people choose to pay their credit card bills and forgo the mortgage. Even at 1%, if your house is worth 1/2 to a 1/3 of when you bought it, some that could pay would not.

  2. LFDjr

    All the king’s horses and all the king’s men couldn’t put Humpty Dumpty back together again.

    • FluffyCone

      Humpty Dumpty was pushed…!!!

  3. Dr. Neal J. Houston

    I just got a quick question for you and your readers…
    In reference to this article…Do you think it is the Wall Street Banks or the Local Banks that caused this mess? It is my understanding the small banks were kind of forced to take the bail out funds from the feds?
    Just a thought..
    Best Regards,
    Dr. Neal J. Houston (cgvs)

    Thank-you again for your great articles

    • Greg

      Dr. Houston,
      The biggest part of the problem is the big banks but the little ones over extended themselves into residential and commercial real estate.
      Greg

      • George

        Hi Greg, I thought most small banks didn’t hold mortgages and they got hurt by buying mortgages back securities as investments.

        • Greg

          George,
          Some do still hold mortgages and loans on commercial real estate.
          Greg

  4. MarkM

    Keynesian medicine is worse than the disease! The Fed did not save us from armagedden.

    U3 unemployment is at 9.8%.

    http://www.bls.gov/news.release/empsit.t15.htm

    Hello Fed, Administration, and Congress:
    Don’t fix things economic. Next time, let us citizens suffer with our economic flu-bug, and we will all be better off. You all don’t know how to manage an economy. Only individuals making single buying decisions on an a minute by minute basis can regulate an economy. YOU AINT SMART ENOUGH! A free-market is pure democracy–let freedom ring!

    thank you,
    markm

    PS: GM was failing because we all collectively voted for GM to die by not buying their products–next time, let the UAW die with GM! Same goes for all other businesses that were bailed-out; let’m’die!.

    • Greg

      Thank you MarkM and M Smith.
      Greg

  5. M SMITH

    Greg, here’s a link to the history of the fed: http://www.ronpaulforums.com/showthread.php?t=99477. “Who Really Owns The Banks?” I found this link from http://www.DailyBell.com, a thought provoking site like yours! Have you notice there has been no real help for the small business types or middle class or poor? Every thing has been done is to bring more profits to the Feds Owners, the 1st link above explains why & detailed reasons to be rid of the fed, its agents & owners! We saw how the MSM treated Ron Paul. When progressives make up most of all government agencies we can only blame dumbed down voters that fall for the lies & promises they are promised. It will take more than a audit of the Fed, it will take a Jefferson movement! Just how we get there is a question to be asked to many to take a Gut Check. GOD help Us!

  6. Mike

    Citizens need to do what I have done to understand how banks and bankers operate today: Citizens need to pull documents from Land Registry Offices and/or Government Registry Offices [ where bank loans are duly registered ] to see and learn how banks give their bankers, to their family members, to members of the legal profession and to politicians INTEREST FREE, PRINCIPAL FREE Personal Loans disquised as Small Business Loans which, over time, are cleverly charged off as just another Small Business Loan and/or Corporate loan loss. These are facts.

    Genuine Small Business Loans and/or Corporate Loans made by Banks to Small Businesses and/or Corporations rarely result in a loan loss to a bank. Why? Real Small Business owners [ the shareholders ] MUST also pledge their personal assets to support their Small Business
    and/or Corporate Loan from a Financial Institution. By the way, that is referred to as “securing” a Small Business and/or Corporate Loan.

    Therefore, whose Loans are really being written off by Financial Institutions ? Has anyone ever asked themselves how can a genuine Small Business loan and/or a genuine Corporate Loan be written off by Financial Institutions when those loans have been fully securitized in the first place ?

    This is the fraud no one understands or speaks about. Bankers, their families, members of the legal profession and politicians gain an unfair advantage over their fellow “blind” citizens by being on the receiving end year after year of: INTEREST FREE, PRINCIPAL FREE Personal Loans disquised as Small Business Loans which usually end up being written off as a Financial Institution’s “loan loss”.

    Has anyone heard of a Banker, a member of their family, a member of the legal profession or a politician EVER losing their family home because of their failure to make mortgage payments on time ?

    How can you be foreclosed on and lose your family home to a Financial Institution when you are a priviliged citizen who is not required to make either interest or principal payments on their loans ?

    The average law abiding citizen wrongly assumes everyone is in the same boat with regards to dealing with their bank and/or mortgage loans. That is not true. I have obtained documents which supports the above.

    Therefore, there exists tens of thousands of bankers, their families, members of the legal profession and politicians who enjoy living life to the full – worry free – on the backs of the uninformed citizen.

    Millions of citizens have lost their family homes in the past few years. Millions more will lose their family homes in the next couple of years because they will FAIL to meet their debt obligations to the Financial Institutions. This is the real tragedy.

    What was the original intention of THE BANK ACT anyways ?

    • Greg

      Thanks for the info and comment Mike.
      Greg

  7. James M

    Here is a good link to Mr Sanders in congress. http://www.youtube.com/watch?v=lcLWDGb0RqA I disagree with Bernie on a lot but he really shows how far the tables are tilted to favor the rich elites. I give him credit for at least standing up and saying something. Also I was reading how Peter Orzag who has been speaking at the CFR a lot lately is heading into the private banking industry. What a coincidense. I guess he is waiting to become a lobbyist for now lol.

  8. Ron P

    There are many who do not beleive in federal regulation and I was one for many years. However, witnessing what has occurred with our banking industry since deregulation allowed for nationwide banks, I now see the error that contributed to the collapse that occurred. Had banks like North Carolina National Bank not been permitted to cross state lines and buy up a Texas bank to become Nationwide Bank, Nationwide Bank would have not everntually merged with Bank of America, becoming “too large to fail”. Maybe our grandparents and great grandparents that lived through the depression were smarted than we thought and the decisions they made create federal regulation of some industries does have a benefitial place in our society.

    • Greg

      Ron P,
      I wish we could get in the “Way-back ” machine and start over. Thank you for the good comment.
      Greg

    • Anonymous

      This whole thing is a joke. It pays to be incompetent. Create a scene of illusion while the whole system and world is raped and pillaged. Ill just silently eat my curds and wade and be a good sheep.. BAAAH! BAAAH!

  9. James M

    I came upon a good PBS Frontline http://www.pbs.org/wgbh/pages/frontline/warning/view/ with Brooksley Born. I knew of her and read about her but the video is quite revealing. I actually felt bad(not too much lol) for Alan Greenspan and I think he really thought that the market would regulate itself. He should have stuck with his origional premise that gold is the only money. No one would have risked real wealth in this derivative casino. Plunder the paper from the fools and then convert it to real assets as fast as you can before you get caught and then let the fools you ripped off bail you out and start all over again. That is the game I believe. I am not playing anymore. Greenspan was in fact correct and the market did regulate itself quite well, too well in fact. If it was allowed to finish regulating itself the too big to fails would be gone along with half of the country and a quarter of the world I suspect. Thanks for your site and the ability to contribute.

  10. lostinmissouri

    This country became great because honest, moral, God fearing citizens served in government, for the people, and Country.

    The mess we are in, is because we allowed our government, to be hi-jacked by banking criminals, who not only control Congress, but all the so called Regulators, who were supposed to be the sheriff.

    When the Cops are crooks, there is no law enforcement. Rule of Law, made this country. Lack of law enforcement, guarantees its downfall, perhaps, even its death.

    The Fed is not incompetent. They are criminals! Criminals, in lock step, with all the banksters, who know full well, they are raping America.

    • George

      Crooks = Congress : Just look at Pelosi and Rangle

  11. Bob

    the dollar is back by the oil we control, How long has it been sense you heard the word opec. You give money to other countries because they are part of the oil heist, it’s there cut. The house loans have more to do with freetrade to cover up that sucking sound. The sheep were happy as long as they could use there house as a bank. It’s a hell of a show just glad my pension is still holding out for I can watch the show and the talking heads. What is going to happen with this wikileak,is , it going to out the players who made the biggest heist the world has ever seen. I tell you this wikileak is like a game changer. Just like your playing ball and the other team is just stopping your moves. So you go from playing man on man and change into a zone the other team has to regroup and change out some players. O, who could be the coach, is what everyone want’s to know. Peace

    • George

      The US controls the oil in OPEC. You’re kidding right?

  12. hoppe

    What makes you think the Fed is incompetent? If your definition of incompetence include making huge sums of money for your handlers at the expense of working Americans, you may be right.

    I wonder, do you know if Sanders voted against Ron Paul’s bill to audit the Fed?

    • Greg

      Hoppe,
      Sanders is a Huge Fed critic and I doubt he voted “no” in that bill. Thanks for the comment.
      Greg

  13. Art Barnes

    Greg, 9.8 percent and raising so says the Gov. In my area, 18 percent and dying! So much for Fed policy.

    • Greg

      Thank you Art and FluffyCone.
      Greg

  14. nm

    Greg:

    When Bernanke said that the system would implode without this $9 trillion dollar bailout, what exactly did he mean? Like, what would have happened?

    • Greg

      NM,
      The rich would not be so rich and the Fed would have lost control of the issuing the currency of the U.S. That is the very short answer in my opinion.
      Greg

  15. Jim in GA

    There is a simple and widely held belief that the Fed is somehow part of the government. It is not, and is owned by the big banks. The original Fed charter charged the Fed with establishing and monitoring monetary policy and not long ago was also charged with maintaining reduced unemployment, which is an absurd mission for an entity with no oversight. Now it has been given regulatory authority without congressional oversight. While the Treasury prints money, the Fed creates it by making deposits into the member banks.

    Remember that TARP was a program to create a “bad bank” that would buy up toxic assets from the banks, hold those assets for a future real estate recovery, and then sell them back to the banks after they had re-established their value. In violation of the law the government used TARP to buy GM, Chrysler, etc. and never used any of the money as required by the law. Instead, the Fed bought the toxic assets (in violation of its charter). So the government and the Fed double, double crossed the taxpayer in violation of law and charter.

    The Fed is not our friend and in fact is our enemy. It purposely creates inflation in order to use inflation to cover the interest on T-bills, provides the “money” to the primary dealers (the big banks) to buy T-bills, and generally does nothing but improve the profits of the big banks through “printing money”, sucking up the big banks toxic assets, quantitative easing, and POMO operations (buying stocks and bonds to support the stock market (thereby directly enriching the big banks.

    The community banks? They are failing every week and being absorbed by the regionals, who will in turn be absorbed by the big banks. And the losses of the failed banks are paid by the FDIC, aka the taxpayer.

    That’s why people who understand the system want to de-charter the Fed, just like Andrew Jackson did long ago. The sooner we embark an a money system that is not debt based, the sooner we can begin to solve our unsustainable debt and monetary problems.

    • Chris

      I AGREE…..THE FED IS A TOXIC POS THAT ONLY CARES ABOUT ITS PROFITS!!

  16. Brian

    “The Fed says it “didn’t lose a dime” in this deal.”
    Yeah they never had a dime to begin with! They just pulled it out of there…hat.
    “The $9 trillion cash drop did more than stop (or postpone) a catastrophe–it also exposed the Fed’s incompetence.”
    Don’t forget this soup sandwich has likely amplified the carnage that will ensue when TSHTF and they can’t kick the can anymore.

    Jefferson was right. We will wake up homeless on the continent our forefathers left us due to these greedy power mongers.

    • Greg

      Brian,
      Funny but so true!!
      Greg

  17. nm

    If the fed lost it’s ability to issue the currency of the US, what happens then?

    When average middle-class Americans keep saying that the bailouts were necessary, how exactly has it helped them? This is what I’ll be seeking to understand when I attempt to watch Bernanke on 60 minutes today.

    • Greg

      I will too NM and I have written a new post about the 60 Minutes story or should I say government information report.
      Greg

    • Robert

      nm, Its my understanding the banks were so over-leveraged that even the FDIC funds couldnt cover the shortage of cash available. The funds that the Bush bail out provided as well as the Obama TARP provided liquidity to the banks. Without it, there wouldnt have been enough actual cash to do daily transactions.

      Since that time, the Dodd-Frank bill has ensured that non-interest paying checking accounts (business accounts) will be FDIC ensured for whatever balance they carry effective the end of this year (or at least thats what Ive read). Before the bill was passed business checking accounts were only FDIC covered up to the $250,000 max that personal accounts are FDIC ensured for..

      Had the Bush bail out and TARP funds not been appropriated, many of these banks would have failed thus causing many of the businesses that had over $250k in their checking accounts to not meet payroll and accounts payable demands thus causing a domino effect as vendors of businesses then couldnt meet their payrolls and accounts payable demands once the checks began to bounce…… so that is one of the big reasons the bail outs were necessary… The FDIC has limited funds except I suspect it can now tap the FED for any excess money they may need to meet all the banks that fail and are posted on every Friday…

  18. Wayne

    Another interesting sidelight to this story according to Bob Chapman is the fact that the banks were given these loans at near zero percent then turned around and bought T-bills, etc. which gave them a guaranteed return plus the fedgov gets use of these same funds at a fairly low cost….whatta deal!

    The other infuriating aspect of all this nonsense is the astounding refusal of anyone to demand accountability from those incompetent /crooked individuals and institutions whose wreckless actions precipitated this mess. The silence from those gov’t institutions, politicians and media who are supposed to be watchdogs of the public welfare is almost deafening.

    • Greg

      Thank you Wayne.
      Greg

  19. Jan

    This never ending spending needs to end, but what can we do? We all thought the rest of the nation would be on the hook to bailout California, but now we find out foreign banks and multi national corporations were in line first. The printing press will have to be cracked up to bailout the states soon too.

    When does it end?

    • Greg

      Jan,
      This is the most frightening time in U.S. history financially speaking!! Thank you.
      Greg

  20. Jonathon

    I hate to bring politics in to this but a certain political party was playing to their base voter and twisted the arms of banks to make loans to people who had no way of paying them back so that they could take credit for getting housing for certain types of people. And if you think this is not the truth, you have not been paying attention.

    • Greg

      Jonathon,
      Republicans are just as much to blame for the mess we find ourselves in right now.
      Greg

  21. Mark

    Greg-

    Those of us who want to know the truth know it. In depth efforts from the likes of Jim Sinclair, John Williams, yourself and a few others help us to understand the layers of government corruption, greed and incompetence. Can anything short of a lynching improve the situation? I seriously doubt it. Government officials, Wall St, big banks and so on have way too much power and money to allow voters to slow their agenda much less stop it.

    Oh, please don’t tell me our pure and wonderful Republican Heroes aren’t working for REAL reform.

    • Greg

      Mark,
      You are very kind. Thank you for including me in this distinguished group!
      Greg

  22. Mark

    Greg- I didnt finish what I wanted to say before cutting my message short due to my aggressive finger on the submit button.

    Oh, please don’t tell me our pure and wonderful Republican Heroes aren’t working for REAL reform. I simply refuse to believe it. They are our saviors and will certainly restore our country to the paradise we had before Obama. Glory Hallelujia !!!!!!!!!!!
    Now I see the light ……… I’m so ashamed to have ever voted for any of those goofy Libertarians. What do they know? They would probably even want to abolish our wonderful Fed and get rid of that nice Bennie Bernanke fellow.

    Why does Boehner fear Ron Paul as Monetary Policy Subcommittee Chair?

    • Greg

      Mark,
      I hope Paul get in to Chair that committee.
      Greg

  23. Ken

    The basic problem here is that these people, I call them the government class, don’t really see themselves as Americans. Not really.

    They look upon the idea of national loyalty as, at best a quaint anachronism, but not something sophisticated people such as themselves need to seriously entertain.

    As a result, they honestly don’t see the problem with bailing out overseas banks. They are fundamentally, traitors.

    Ken

    • Greg

      Thank you Ken. You are right.
      Greg

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