The trillion-dollar fraud: Why is the Fed so opposed to being audited and what does it have to hide?

Commercial banks, by law, have to hold a certain percentage of their deposits as cash at the Federal Reserve. From January 1959 until August 2008, the total of these reserves held by the commercial banks at the Fed grew from $11.1 billion to $46.2 billion. At no time during this almost 50-year period did the total bank reserves held at the Fed exceed the minimum required by law by more than $2 billion.

But since August 2008, these bank reserves held at the Fed have exploded to more than $1.2 trillion (as of March 2010), even though only $65.6 billion was required to be deposited by law.

This increase in excess reserves resulted directly from the Fed's policy of dramatically increasing the quantity (and lowering the quality threshold) of assets it bought in the marketplace. During the past 20 months, the Fed has tripled the size of its balance sheet by acquiring more than $1.5 trillion of new assets, more than $1 trillion of which are mortgage-backed securities.

What is going on here? Why would commercial banks hold $1 trillion more than they legally had to in reserves at the Fed, earning only 0.25 percent interest per year, and why would the Fed buy more than $1 trillion of mortgage securities of undisclosed quality in the marketplace?

If you recall, back in 2008, Hank Paulson, our treasury secretary at the time, convinced Congress over a weekend that he needed $700 billion of TARP funds to get the toxic assets off our commercial banks' books. Amazingly, within weeks of being given the funds by Congress, Paulson decided not to proceed with the purchase of toxic assets from the banks, instead giving away hundreds of billions of dollars to the commercial and investment banks and funding a series of bailouts — giving money to Chrysler, General Motors and AIG (some of which immediately found its way back to the commercial and investment banking community).

At the time, nobody explained what happened to the toxic assets on the banks' books whose purchase was the original stated purpose of TARP. We now know that the financial crisis was not caused solely by a liquidity crunch or an irrational loss of confidence, but rather by the fact that the marketplace realized that the commercial banks held more than a trillion dollars of very poor-quality assets, mostly mortgage securities such as collateralized debt obligations, or CDO’s, and that these bad assets were sizable enough to bankrupt even our biggest banks. How bad? Even the AAA tranche of the typical CDO is facing a mortgage default rate of approximately 93 percent today.

Read more: http://www.salon.com/news/opinion/feature/2010/05/01/trillion_dollar_fraud


Thank GOODNESS for Grayson, Sanders, and every other co-sponsor of the Audit the Fed amendment.

I'd be overjoyed if it passes! :)

That is how we got Enron and companies like Halliburton.

:fistbump:

the leaders of our business community.

Our wars, our economic crisis, the asinine Teabagger movement (funded and advertised by corporate America), and the uncontrollable flow of oil from the toppled rig in the Gulf. These are all just symptoms of the moral decay in our society.

Somehow, the toppled rig is the supreme symptom.

It is no longer a question of correcting a system gone wrong.

We have reached a point at which we must question our values - - our national values, but most important, our personal values.

What is really important in life? The big house? The new clothes? The fancy car?

What is the American dream anyway? Is it really mostly about the things we have, what we can buy, the increase in our GDP?

Because if it is, we are headed for more and more trouble. A real gusher of trouble.

"One rumor is that the Fed is looking at selling more than $1 trillion of mortgage securities back to Fannie Mae and Freddie Mac. This would complete the circle of deceit, because Fannie and Freddie could fund their purchase with increased borrowings guaranteed by the government, which wouldn't show up on the government's balance sheet because Fannie and Freddie aren't consolidated entities of the federal government (even though they are now owned by the government). Total government debt would increase by $1 trillion, but it would be hidden from the taxpayer, off the balance sheet. The plan has the added advantage of the Fed never having to recognize the losses on any toxic assets included in the transfer, as Congress has already said it will commit unlimited resources to fund any future losses at Fannie or Freddie. Fannie and Freddie are the ideal places for toxic assets to go to die."

We need to prevent this from happening.

Not that I'm against accountability, I'm just saying. But I'm a little skeptical of any anti-Fed rhetoric and I will have to check out these statements for myself.