Posted by: John Gilmore | September 16, 2006

Not Everyone Is Cheering Fed’s New Role

In recent days, President Obama has proposed sweeping regulatory changes over the banking and financial system. Under this new proposal, the Federal Reserve’s power will expand across the entire system. Remember – what is the Federal Reserve? It is a private corporation owned by a cartel of international bankers. What is causing this crisis? Is it caused by lax regulatory oversight? As we’ve discussed – while there are many problems accelerating the crisis (oversight, greed, derivatives, sub-prime mortgages, etc.) – none of these things caused the crisis. This crisis is a direct result of our debt-based monetary system. Who created this system? The Federal Reserve. You can see how deceptive these people truly are – they create a problem and then propose a solution – a solution that expands their power. Their tentacles are now spreading into the entire system.

Here is a summary of the proposed changes:

• The Federal Reserve will be able to ‘monitor’ risks across the entire financial system (this is a very broad statement – and essentially means that the Fed will oversee everything)

• The Federal Reserve will be able to ‘examine’ any firm that could threaten ‘financial stability’ (again – broad powers over all banking/financial firms)

• Our nations largest banks and financial firms would be subject to ‘heightened oversight’ by the Fed (Sounds like big brother will be watching closely)

• Our government would be given power to seize large financial companies (just what we need – more government intervention)

My personal belief is that our President is being told what to say and do – to implement these changes. The following excerpt from the article below says it all.

“President Obama said the plan would ensure “that lines of responsibility and accountability are clear” by placing authority in the Fed’s hands.”

It shouldn’t surprise anyone that Tim Geithner supports the plan – he’s been nothing more than a mouthpiece for supporting the Fed since moving to Treasury Secretary – from the New York Fed. Mr. Geithner – there are always alternatives. There are alternatives that would remove this ridiculous, unsustainable system – but we certainly won’t hear these alternatives from you, our President or from most of our leaders in Congress (Ron Paul is an exception).

“Treasury Secretary Timothy Geithner reiterated the administration’s determination to make the Fed the systemic regulator. “I do not believe there is a plausible alternative,” he told reporters.”

Does anyone really believe that our President and leaders of Congress are so blind (or ignorant) that they do not understand what the Fed is – or is trying to do? I don’t. If this follows their standard operating procedure – then we’ll see some minor opposition to this plan – and then the changes will be passed – and the Fed will gain greater control over – everything. The only way this will ever be stopped – is if the American people wake up to what is really happening – and decide to do something about it. Currently – we’re a lot like lemmings being led off a cliff. I sincerely hope this changes.

jg – June 18, 2009
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JUNE 18, 2009

Not Everyone Is Cheering Fed’s New Role

By SUDEEP REDDY

Wall St. Journal

WASHINGTON — The Federal Reserve would become the nation’s most powerful financial overseer, an approach that is becoming a flashpoint as lawmakers and consumer groups attack the central bank for its role in creating and handling the financial crisis.

WSJ’s Damian Paletta discusses President Barack Obama’s new plan to overhaul supervision of financial markets.

The proposal, if passed into law, would represent one of the biggest changes ever in the Fed’s role. The central bank would win power to monitor risks across the financial system, and sweeping authority to examine any firm that could threaten financial stability, even if the Fed wouldn’t normally supervise the institution. The nation’s biggest and most interconnected firms would be subject to heightened oversight by the central bank.

President Obama said the plan would ensure “that lines of responsibility and accountability are clear” by placing authority in the Fed’s hands.

Critics who wonder about the wisdom of the move say the Fed failed to use its authority to address loose lending practices and the housing bubble that pushed the U.S. into a recession. The Fed responded aggressively after the crisis began, but some argue those actions were overly secretive.

A movement is spreading in Congress to force the Fed to disclose the identity of institutions that borrow from the bank, a move officials say would discourage firms from seeking needed emergency funds. A large group of House members is pushing to audit the Fed.

“I don’t have a lot of faith in the Fed being able to handle that big a universe,” said John Taylor, president of the National Community Reinvestment Coalition, a group of 600 community organizations.

Senate Banking Chairman Christopher Dodd (D., Conn.) and House Financial Services Chairman Barney Frank (D., Mass.) both said Wednesday the Fed’s role is the biggest potential source of friction in the plan.

Mr. Dodd said there is well-founded concern the Fed’s responsibility for monetary policy, including setting interest rates, could conflict with its role monitoring systemic risk. Fed officials have said they can handle multiple responsibilities. “There’s not a lot of confidence in the Fed at this point, and I’m stating the obvious,” Mr. Dodd said.

Mr. Frank said most of Mr. Obama’s proposals reflect a broad consensus on Capitol Hill. But “the interplay between the Fed and the rest of the regulators on systemic risk” will be a thorny issue.
Some lawmakers want an interagency council, another feature of the plan, to have greater responsibility for systemic risk, and the authority to act. Obama administration officials believe a committee approach would allow problems at financial institutions to fester without a clear regulator responsible for addressing them.

Listening to President Barack Obama’s speech on Wednesday at the White House, from left, were Rep. Barney Frank, Sens. Dick Durbin and Christopher Dodd, HUD Secretary Shaun Donovan, Treasury Secretary Timothy Geithner and administration economic adviser Lawrence Summers.

“How much power the Fed is going to have is going to be probably one of the most controversial issues about this plan,” said Robert Litan, a senior fellow at the Brookings Institution. He said he thinks the Fed’s role in the new regulatory framework is likely to be changed by lawmakers.
Treasury Secretary Timothy Geithner reiterated the administration’s determination to make the Fed the systemic regulator. “I do not believe there is a plausible alternative,” he told reporters.

Fed officials said they took action throughout the financial crisis because the central bank was often the only institution with the power to prevent turmoil. The regulatory overhaul would provide a mechanism for the government to unwind failing nonbank financial institutions, freeing the Fed of the need to act. The central bank has also taken steps to release details about its lending programs.

Despite a major conceptual change in the Fed’s role, central bank officials believe perhaps only a handful of additional firms would fall under their supervision. They are also expected to make a case to keep the Fed’s consumer-protection responsibility — with some tweaks — instead of giving up that role entirely, as envisioned under the plan.

The regulatory overhaul proposed by the Bush administration last year also would have given the Fed responsibility for financial stability. But that plan would have removed its role of supervising banks. Fed officials quietly objected, saying it would be hard to guard against systemic risks without also performing routine bank examinations. The proposal gained little traction amid an escalating financial crisis.

The Obama proposal would require the central bank to seek approval from the Treasury secretary before invoking emergency lending powers. It also calls for the Fed to work with the Treasury and outside experts to review the Fed’s structure and governance, including the role of the regional Fed banks. A report due by Oct. 1 would be used to propose changes to the Fed’s structure “to improve its accountability and its capacity to achieve its statutory responsibilities.”
—Jonathan Weisman and Damian Paletta contributed to this article.
Write to Sudeep Reddy at sudeep.reddy@wsj.com

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