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"Deception and Abuse at the Fed"
WASHINGTON - January 29 - The Senate voted yesterday to approve a second term for Ben Bernanke as Federal Reserve chairman.
ROBERT AUERBACH
Professor of public affairs at the University of Texas at Austin, Auerbach is author of the book Deception and Abuse at the Fed. His recent articles include "Stop the Federal Reserve From Shredding Its Records."
Auerbach said today: "The Fed has no effective way of examining these monstrosities that its policies have allowed to become so large -- like Bank of America or Citibank or Goldman Sachs.
"With bank reserves rising from $68 billion in September 2008 to an astounding $1.14 trillion in December 2009, what has been the Fed's real interest policy since September 2008? It began to pay interest on their reserves, a clear incentive to hold the reserves rather than to lend them.
"William T. Gavin, a Federal Reserve economist, wrote: 'First, for the individual bank, the risk-free rate of 1/4 percent must be the bank's perception of its best investment opportunity.' (March/April 2009 St. Louis Federal Reserve Review)
"The Federal Reserve should phase out these interest payments and end Chairman Bernanke's false argument (National Press Club luncheon, February 18, 2009) that the billions of dollars in interest payments are a method of insuring banks do not lend at a lower rate. Given that the target Fed short-term interest rate is zero to 1/4 of one percent, is he afraid the banks will pay borrowers to take the reserves at less than zero percent interest if the Fed does not pay interest on them?"
See "Did Ben Bernanke Pull the TARP Over Eyes?"
ROBERT AUERBACH
Professor of public affairs at the University of Texas at Austin, Auerbach is author of the book Deception and Abuse at the Fed. His recent articles include "Stop the Federal Reserve From Shredding Its Records."
Auerbach said today: "The Fed has no effective way of examining these monstrosities that its policies have allowed to become so large -- like Bank of America or Citibank or Goldman Sachs.
"With bank reserves rising from $68 billion in September 2008 to an astounding $1.14 trillion in December 2009, what has been the Fed's real interest policy since September 2008? It began to pay interest on their reserves, a clear incentive to hold the reserves rather than to lend them.
"William T. Gavin, a Federal Reserve economist, wrote: 'First, for the individual bank, the risk-free rate of 1/4 percent must be the bank's perception of its best investment opportunity.' (March/April 2009 St. Louis Federal Reserve Review)
"The Federal Reserve should phase out these interest payments and end Chairman Bernanke's false argument (National Press Club luncheon, February 18, 2009) that the billions of dollars in interest payments are a method of insuring banks do not lend at a lower rate. Given that the target Fed short-term interest rate is zero to 1/4 of one percent, is he afraid the banks will pay borrowers to take the reserves at less than zero percent interest if the Fed does not pay interest on them?"
See "Did Ben Bernanke Pull the TARP Over Eyes?"
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1 Comment so far
Show AllDeception is rampant at the FED. I always read "Investment Outlook"
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Let’s+Get+Fisical+January+2010.htm
by Bill Gross a.k.a Mr.Bond from PIMCO. In his January newsletter he proves that forgien purchases of U.S. Debt is really quite small; only 20 percent with China picking up 100 billion out of 1.5 trillion. This conflicts with most talking heads in the media that would lead us to beleive that China is buying all of our bonds. The real deal is that in 2009 the Fed had a couple of failed auctions and wanted to guarantee that this did not happen in the future, ohterwise faith in treasuries would dimish. So what the FED does is have the treasury print money, which they give to a firm like PIMCO for stinky mortgage instruments. PIMCO then steps in and buys the treasuries and keeps the auction from failing. I imagine that Goldman Sachs is in on the game also. These are things we dont get on our cable business news channels. I remember when Cramer announced to the world via live TV that people should get out of the market because it was going to tank; not long afterward the news all started leaning toward positive stories. These days if the market is up 2 points the talking heads claim we have a rally. You would really be suprised to find who sits on the boards of 6 of our major news networks. Technically when an economy lowers intrest rates and lends, lends, lends, it makes a bubble that breaks. Something stinks. The current economic situation does not fit any of the models. There is surely a hidden agenda but I just cant put my finger on it.