Tax & Financial Consulting Services
The Fed trying to pull a fast one!
Dear G&G Reader,
Apparently the Federal Reserve is hiring a new lobbyist. Wait a tick, you say, isn’t that absurd? Isn’t it almost like the FDIC hiring their own lobbyist? What’s the point?
Well first; it’s not like that at all… Because the FDIC’s actually a government agency, and the Federal Reserve isn’t…
In reality, it’s neither Federal nor an actual Reserve per sé. Instead, it’s a cartel of America’s most powerful banks – along the same lines as OPEC, for example. Sure, the Chairman of the Board of Governors (currently Ben Bernanke) is obligated to speak before Congress at least twice a year, but we’ve all seen how well that works…
What about the $2.2Trillion in undisclosed loans from last year? Bernanke won’t say peep. What about details…results from the “Stress Tests”? He’ll tell you what you want to hear…
But apparently even that is too much restraint for the Federal Reserve. Apparently congressional concerns are chafing the seemingly endless power of the world’s most overstretched Central Bank. So they’re bringing in a familiar face to smooth things over.
The Handiwork of Enron’s Linda Robertson
The truth is always in the details, isn’t it?
I mean; on the surface, it’s pretty unnerving that the Fed is hiring a lobbyist. But only when you dig in – only when you pick through her track record – does it become borderline criminal. Let me explain…
The Commodity Futures Modernization Act (CFMA) of 2000, if you're a business-history junky, then that particular piece of legislation probably rings a bell.
Because this was the act that gave us the "Enron Loophole," which took specific types of energy trading outside the regulatory authorities' reach. But beyond setting the stage for Enron’s spectacular failure, this piece of legislation had immense repercussions for the Credit Default Swap (CDS) market.
Remember that a CDS is basically insurance on a bond. The bond goes defaults, you still get your money back. But unlike insurance, there aren’t any capital requirements no safeguards or regulations. Remember, they’re just obscure swap agreements.
And thanks to the CFMA, they were kept out of reach for regulator until it was too late.
At the time, the market for CDS was only three years old but quickly growing. But then the market for CDS simply exploded. With some US$900 Billion in total contracts before the act, there were trillions of dollars in CDS contracts by 2003 and then the market expanded 10 times over between 2003 then and 2007.
I don't think I have to tell you why.
Every financial institution in the world was running with the pedal-to-the-metal, piling on questionable subprime mortgages in an all-out race to bring in the most fees, all the while offsetting their risk with CDS insurance
But – as mentioned above – there wasn’t anything behind the CDS insurance. Nothing to pay claims with. Turns out the CDS market was one of empty promises and a means for inflating everyone’s books in what was quite possibly the greatest Ponzi scheme the world has ever seen.
Oh, the tangled web we weave. But now we’re paying the price…
AIG is “too big to fail,” so we throw a few hundred billion dollars at ‘em. Why? To fulfill their CDS contracts. They never had the cash to pay up on these contract but if they fail to pay, then the rest of the system – JP Morgan, Goldman, etc. – will be at risk. A brilliant business strategy for them, but one that’s costing the U.S. government trillions upon trillions of dollars.
All thanks to one little act – the CFMA. One little sheet of paper, one legally-bribed Phil Gramm and a handful of Enron lobbyists (the lobbyists actually wrote the bill’s language) created hundreds of trillions in liabilities that would fall on generations of American taxpayers and dollar-holders.
And spearheading this effort? The lobbyist in charge of Enron’s Washington office? You guessed it; none other than Linda freaking Robertson.
The Fed’s Mad Grab for Power
They can’t be serious! I think...but of course, they are!
In reality, the blame for today’s crisis falls squarely on the Federal Reserve. You can attribute it to any of a hundred different causes, but most of them trace their roots back to the “easy money” policy of the Fed and the lowering of reserve ratios that happened in the '90’s and '00’s.
For more details on the creation of the Federal Reserve, click on the following link:
Now, today, the Fed is turning its greatest long-term blunder into a mad grab for power.
Their balance sheet has ballooned by trillions, and yet they’re as obscure as ever…they’re seeking greater authority over U.S. non-financial institutions, but they haven’t truly “saved” anyone just yet…and they hold themselves out to be one of the only institutions truly capable of stopping the systemic failure they helped bring about
But alas, they can’t do it alone.
Ben’s already got his hands full with Congressional hearings. And Linda’s already proven her worth to the cause; pulling a fast one on the slow crowd in Washington back in 2000.
She’s proven that she’s capable of getting esoteric, potentially disastrous legislation through the horse-traders in Congress, and that’s just the kind of qualification the Fed was looking for.
P.S. CDS – aka “Demon Derivatives” – are still ripping a hole in Wall Street, slowly sucking up banks and financial companies as the CNBC crowd talks about the “new bull market.”
Tax & Financial Consultant, RFC
866-361-3872 toll free fax
"A Prudent man foresees the difficulties ahead and prepares for them; the simpleton goes on blindly and suffers the consequences."
Proverbs 22:3 -- Living Proverbs
LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. G&G Associates gets paid a commission from a membership purchase at www.publicgold.com/gngpreciousmetals.