This is Congressman Alan Grayson talking about his questioning of Federal Reserve Vice Chair Donald Kohn, with a 30 second shout-out to the Big Picture.

If you have suggestions for follow-up questions for these officials, or for Ben Bernanke, leave them in comments, and they may get asked of the Fed Chair.

Category: Bailouts, Federal Reserve, Video

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

64 Responses to “Questioning the Fed”

  1. Winston Munn says:

    Question for the Fed Chair:

    How can issues of insolvency be resolved by attempting to increase credit?
    How does the TARP fund address the growing discrepancy in the U.S. between rich and poor?
    Why have all but the richest Americans had to rely on debt creation to enjoy the fruits of increased productivity?
    Rather than bail out insolvent banks, wouldn’t the TARP have more economic impact if spent as a guaranteed minimum wage increase?
    How can new debt be termed a “wealth effect” if the new consumption is only a result of an increased debtload – isn’t the term really disingenuous?

    Why haven’t you invited outside thinkers into the planning stages – people like Roubini, Batra, and others who can offer perspectives worthy of consideration?

  2. R.D. says:

    Post the itemized $pending on a web site daily or resign NOW. Why isn’t there an accounting site of

    this BS bailout NOW ?? No excuse!!

  3. ronin says:

    Question: If the Federal Reserve and the US government created this boom and then ultimately helped its demise, shouldn’t the people at the top be held accountable? What happened to the checks and balances in our country? Since my family has to pay $4000.00, we would like that to be used to prosecute those who paved the way for this economic crises to happen (whether currently holding office or not).

    Lastly, if we are going to go after the private sector (Madoff) for their “Ponzi” schemes, why are the crooks in Washington getting away with murder (yes, murder!)?

  4. usphoenix says:

    OK, I’ll bite.

    Once again, aren’t publicly traded companies obligated to disclose funds received under TARP and the terms and conditions to shareholders? If so, how does that differ from a public accounting to taxpayers?

    Is taxpayer money being given to foreign banks? Did Credit Suisse receive money? They certainly should be obligated to answer at least one of those questions.

    If a bank is so perilously on the brink of failure that disclosure could pull it down, what’s the likelihood of its failing anyway? And if that’s the case, what’s to be gained by not allowing it to fail? Citi’s help has certainly been the focus of media attention. How is it other banks should receive less scrutiny?

    With the abrupt passage of TARP II today, I am completely and totally convinced Armageddon is once again at hand in spite of $1 trillion plus so far, and that there is a mad scramble to sweep lots of dirt under the carpet without hearings. And TARP II ain’t gonna get it done either.

    Sheeple Unite! As an old friend put it, if we’re getting screwed, we may as well move around a little so we can enjoy it too.

  5. Winston Munn says:

    One final question for the Fed Chair: Mr. Bernanke, have you ever taken into consideration that the economic theory in which you rely may be wrong?

  6. donaldofr says:

    Question: What if all the money thrown at the banks doesn’t help solve the credit crisis?

    If after spending trillions, there is no improvement in terms of lending or growth in the economy, then what we’ll have thrown trillions of dollars trying to fix the mess and we’re back to where we started. The only exception is that now we’re trillions deeper in the hole. If such a situation arises, how can you assure me that it wouldn’t be better for us to let the chips fall as they may and then use the trillions to clean up the mess? Atleast, then maybe we’d have a better idea of what needs to be done.

  7. Kelja says:

    Question:

    What do you recommend the common man and woman do to weather the coming financial storm?

    Buy precious metals perhaps as the U.S. Dollar craps out?

  8. km4 says:

    Another Question for the Fed Chair:

    Is the much much BIGGER Madoff Ponzi scheme alive and well in the Fed, Treasury Dept. SEC, US Congress, and Wall St. ?

  9. ben22 says:

    Ask again, and again and again why they will not be transparent about where the money is going.

    What is the long term expected impact of the massive inflation of the Fed’s balance sheet, if there isn’t a long term expectation, why not?

    After they reveal where the TARP money is, then ask what is the exit strategy for those funds, what is the time-line for exit as well. If there is not an exit strategy, why?

    Since Mr. Bernanke is only an academic what makes him qualified to determine a fix for the banking system?

    Are they trying to wipe out the dollar?

    How are you measuring the success of the TARP and how will you measure success of TARP II?

  10. ronin says:

    One more:

    You: “What stops us from sending over armed government enforcement agencies, entering the Fed and shutting it down before you cause further damage to our sovereign nation?”

    (I mean, this is only fair and balanced, right? This happens to many Americans on a daily basis, why not to the most corrupt private institution on the face of the Earth?)

  11. marka says:

    What important lessons have you learned from the first round of bail outs, and what do you intend to do differently in second round?

  12. going broke says:

    Would it be possible for the employees of a company that are receiving bailout money to have a salary cap not to exceed $250,000.00. This includes stock options, bonuses, etc… If they don’t agree to this then NO money!

  13. babscos says:

    We supposedly have a free market economy, yet the artifically low interest rates over an extended time period and government regulation contributed to this historic bubble. With all the trillions of dollars that have already been appropriated, the markets are still in disarray. Do you think it’s time to allow the free market economy to work and to liquidate the bad debt and to eliminate the malinvestment that has been encouraged over many years? Wouldn’t those be the Constitutionally mandated steps to take as opposed to using taxpayers money to bailout private industry?

  14. ben22 says:

    going broke, forget that 250k they should be subject to some multiple rule, it’s something like the CEO can make no more than 5 times the lowest paid employee.

    if your company needs tarp and you oversaw during the build up to all of this your compensation should then be 0, I mean after all, if you were running your own business and you messed it up so bad you would also be paid zero and it would haunt you for years.

    Ken Lewis for example, makes bad moves and makes a fortune no matter what.

  15. Transor Z says:

    Congressman, chalk one up for the little guy with your tour-de-force questioning of Vice Chairman Casper Milquetoast and move on. As satisfying as it was to see Mr. Smith Goes to Washington, talk is cheap.

    Introduce/support an amendment to the existing TARP legislation requiring disclosure of these alleged “loan” documents to Congress. Grandstand in the media when the measure dies on the vine, which it will.

  16. napster says:

    Mr. Bernanke, could you put to rest the following 3 false notions:

    1) that supply-side economics only allows financiers more money with which to make foolish investments

    2) that tax rates alone are not an effective tool to “spur economic growth”, and do not diminish or limit the available investment opportunities

    3) that throughout all of history there has never been such a thing as a market that existed without government setting the boundaries and regulating the transactions … because no one wants the alternative

    I think the sad permissiveness of these false notions limits the scope of our economic understanding, inhibits our ability to comprehend our nation’s economy, and restricts or distorts the available policy choices.

  17. frank_ruscica says:

    Longtime reader, first comment.

    A wee tangential, but worth the congressman’s attention, imho.

    I’m about to publish a petition at http://www.LandofOpportuniTV.com.

    The title:

    “Pols, draw from the economic stimulus and the BigCo-praised business plan adapted below to establish a new venture capital (VC) firm that is similar in form to In-Q-Tel, the VC firm capitalized solely by the CIA, and that invests in (a) markets-makers that provide people with new and improved ways to develop, showcase and earn money from expertise, and (b) providers of complements of the markets (e.g., software, media). The first investments to make are described below, as are reasons the new VC firm is likely to earn profits for taxpayers.”

    The preamble (online, the below [footnotes] are hyperlinks to details):

    “Below descriptions of foundational online markets, and of software and media that best complement the ’1.0′ market, are adapted from a business plan praised by executives at Microsoft and Amazon.com, and by an analyst at top-tier venture capital firm Draper Fisher Jurvetson [0] (click on the ’0′ to read excerpts of emails I received from these reviewers). Why am I not hording said descriptions en route to launching a markets-maker? Because I’m not a technology entrepreneur; my pursuit of a writing sale led me to develop the plan [0b]. The business case for one of the markets — for customized education — is made also in a 2008 book titled Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns [0c]. One of the book’s co-authors is Clayton Christensen, a Harvard Business School professor and the developer of the must-know theory of disruptive innovation [0d].”

    The petition:

    “We the undersigned call on the U.S. federal government to use part of its upcoming economic stimulus package to create and fund a venture capital firm that invests in American companies that introduce:

    * online markets that provide people with new and improved ways to develop, showcase and earn money from expertise [1] (for details, click on the ’1′)
    * complements to the markets (e.g., software, media)

    The venture capital firm should be similar in form to In-Q-Tel [2], a venture capital firm that is funded solely by America’s Central Intelligence Agency.

    The new firm can be expected to earn a profit, because companies that it supports are likely to be acquired by American media conglomerates that own a broadcast television network [3].

    The firm may also catalyze a lot of economic growth. The Stanford economist who has led the updating of growth economics for the information age, Paul Romer [4], feels ‘safe’ predicting that ‘the country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the private sector’ [5]. Nobel laureate economist Joseph Siglitz: ‘I’ve been a bit astonished that all the discussion around the private-sector stimulus has centered on infrastructure…We would be much better off spending our money forward-looking. If we spend $700 billion on new technology and innovation, we’d have a stronger, new, real economy’ [6].

    Next stop, The Land of OpportuniTV? :-)”

    I hope you will consider reading and signing it, and forwarding this message to others.

    From within Facebook, you can sign at http://apps.facebook.com/petitions/view?pid=509580866. (Omit the period at the end of the sentence when you are cutting and pasting the url.) The Facebook application also makes it easy for you to share the petition with your Facebook friends.

    There is reason to be optimistic that our efforts to raise awareness of the petition will soon be aided by very popular sources of news.

    From the January 4, 2009 edition of the New York Times:

    “Citing an Op-Ed essay on Nov. 30 in The New York Times by the economist Joseph Stiglitz, the Silicon Valley petition calls for a tax credit…The petition’s creator is David Thompson, the chief executive of Genius.com.”

    And at least once an unsolicited proposal has led to government action that helped a lot of Americans after an economic downturn.

    From the November 17, 2008 issue of The Nation magazine:

    “The financial crisis continues to spread upheaval in many directions, and we do not yet know how wide or deep the destruction will flow. But strange and sometimes wonderful surprises can happen in unsettled circumstances. In the crisis of the Great Depression, a Mormon Republican banker from Utah showed up in Washington, pushing his heretical understanding of the crisis. Marriner Eccles never graduated from college, but he figured out from his banking experiences the basic economic principles the nation should follow (which later became known as Keynesian economics). Eccles was desperate to share his insights. In February 1933, he managed to testify before the Senate Finance Committee. In one sitting, he laid out an agenda that encompassed nearly all of the important measures the New Deal subsequently enacted. The left-wing advisers around Roosevelt recognized a kindred spirit, and Eccles was asked to join the White House staff. He drafted the 1935 reform legislation that created the modern Federal Reserve. Then FDR appointed him as Fed chair.”

    Thanks kindly for your consideration.

    Best regards,

    Frank Ruscica

  18. mitchn says:

    What is your plan for the tens of trillions in credit default swaps that are about to blow up?

  19. Mannwich says:

    Has the Swedish plan of nationalizing the banks been seriously analyzed and considered? If not, why not? If so, why have we not chosen to go that route?

  20. kblasi says:

    Chairman Bernanke,
    We have been presented for many months now of the likely REWARDS that the creation of the TARP would reap – namely, the stabilization of the structure of our financial system, and the consequential avoidance of a worldwide financial meltdown. In addition, the most recent Federal Open Market Committee statement notes that exceptional low levels of the federal funds rate may be warranted for some time.

    Would you please elaborate on the RISKS that these noted actions carry? Surely, you must have envisioned some “what-if” scenarios with respect to these actions. Would you please elaborate on some of the more unpleasant scenarios that you and your fellow Committee members have discussed?

    This great mess we find ourselves was based on a colossal inability for individuals, companies, and governments to manage risk. Please demonstrate how your risk management skills are exceeding the skills of those who have brought us all to this point.

  21. napster says:

    I agree with Ben22, in addition to the 3 false premises.

    Ask again, and again and again why they will not be transparent about where the money is going.

  22. bcasey says:

    Question for Mr. Bernanke and the Federal reserve: What do you propse to do once all your efforts to save these failing banks ultimately fail? Is there a plan to freeze and seize the assets of the banks and their executives? Why not? How can we trust government officials to do the right thing when they are as much to blame for the problem as the crooked bankers?

  23. cfish says:

    There’s no systematic risk on the Madeoff scandal, so why are tax payers bailing out the rich Madoff scandal victims?

  24. napster says:

    furthermore, I most vehemently agree with TransorZ:

    Introduce/support an amendment to the existing TARP legislation requiring disclosure of these alleged “loan” documents to Congress. Grandstand in the media when the measure dies on the vine.

    Talk, you know, is cheap.

  25. ben22 says:

    the fact that Kohn’s answer was that they wouldn’t borrow anymore if he said which bank got what is such a joke to me. He looked like such a fool, …or perhaps a fox.

    As if Pandit at Citi had the choice btwn the bank going under and being propped up by TARP he’d choose going under rather than run the risk of people knowing what they got.

    That answer was about the dumbest damn thing I’d ever heard.

  26. cfish says:

    When the first TARP was proposed, Dr. Roubini argued that banks would horde cash instead of lending, which is exactly what happened. Why didn’t the Federal Reserve forsee that until hundreds of billions of tax payer’s money is gone?

  27. cfish says:

    This is my BIG QUESTION, please take a look at how tax payers $138 billion dollars disappeared mysteriously after Lehman Brother’s collapse. Who authorized it? Why? What happened to the money?

    http://dealbook.blogs.nytimes.com/2008/12/16/how-the-fed-reached-out-to-lehman/

  28. cfish says:

    Can the fed give us the record and summary of what happened to our money with names anonymized? e.g.

    Entity 1: $100billion in loans, $20 billion in equities,
    Entity 2: $20 billion CDS,

    etc.

  29. I have a question for “B-52″ Ben. At what point do we stop the charade and just nationalize Citi, JP Morgan and Bank of America? How is it fair for the average American to bail out the CEO stupidity of the three banks? At what point do you stop throwing good money after bad? And Mr. Bernanke, since you’ve been wrong about most everything so far, why should we trust you to make it better?

  30. ben22 says:

    cfish,

    I’m just guessing here on that money but it could have had something to do with the money market The Primary Reserve, that went down after Lehman went belly up.

    I’m probably wrong but it’s just a guess.

  31. cfish says:

    Well the $138billion dollar loan also had no recepient’s name attached to it, and it was speculated here on the Big Picture that the most obvious guess is that it went to JP Morgan under the table to settle the huge contracts they were left holding.

    Anyway, $138 billion is not a small number of tax payers’ monday, so why didn’t we have a say on it? This was before TARP, mind you.

  32. Greg0658 says:

    # Can you release any relevant top secret meeting minutes from the time period when Germanys people were slowly being drawn into Fascism?

    # May I rant into the Congressional record as a tribute to Phil Graham?
    >How many people on the government payroll are skate’g for a living?
    >Was HiDefDigTV initiated (inception to fruition in 8 years time period) to create a surveillance camera structure, push a chiptech boom, push a massive replacement program and put little guys like me outta the tv production business? (I can do web production)
    >Can I get a 1 dollar refund check to frame (or cash) even tho I fall below the tax shellout threshold? (I do create sales tax revenue and pay sales tax on everything I buy for production.)
    >Do you think a long tail tax system would fix alot of problems and let this guy pay alittle bit into the system to fund our poilce force for the world (Army Navy Air Force Marines) and a new and improved SEC to watchover the financial capital of the world?

  33. Wrath of God says:

    question:

    Economist A claims: debt-deflation represents no more than a redistribution from one group (debtors) to another (creditors) and should have no significant macroeconomic effects.

    Economist B responds: I’m sorry, there’s just no other word for it–mind-numbingly stupid statement.

    Who in your opinion is right, A or B?

    (from naked capitalism, http://www.nakedcapitalism.com/2009/01/bernanke-expert-on-great-depression.html, where Ben Bernankes Phd thesis is being analyzed by Steve Keen)

  34. ronin says:

    Alan Grayson: “Can I have a mil? Please? Come on, what’s a mil? No one will miss a million dollars… hook me up! Wire it to my BVI account and we’ll act like it never happened.”

  35. Marcus Aurelius says:

    Specifically, who got the money, how much, and at what terms?

    I really like Alan Grayson – he stays on point and he’s tenacious.

  36. batmando says:

    I second Jeff’s question:
    “Has the Swedish plan of nationalizing the banks been seriously analyzed and considered? If not, why not? If so, why have we not chosen to go that route?”

    If we, the taxpayers, our children and grandchildren, are going to back stop all these loser financial institutions, why not go the whole hog, take them all over for 5 years, bring all the dirty laundry into the light of day, have the perp walks big-time, find out once and for all how much we are on the hook for, and get on with the nation’s business?

    @ cfish @ 9:39 pm
    “When the first TARP was proposed, Dr. Roubini argued that banks would horde cash instead of lending, which is exactly what happened. Why didn’t the Federal Reserve forsee that until hundreds of billions of tax payer’s money is gone?”
    They DID see it. It was/is the only way they can see to let the financial institutions fail in slow motion, a controlled fall if you will, to avoid the over-the-cliff, waterfall market scenario.

  37. cajun says:

    Mr Bernanke: You have accepted undisclosed collateral against hundreds of billions of dollars of loans from the Federal Reserve to private banks and other firms. Can you tell us what will be the consequences for American citizens if, say, twenty percent of those collateral assets turn out to be worthless? Or fifty percent?

    If they are not worthless, and if it can be shown that they are not worthless, why won’t private sector investors buy them? If they are, in fact, such sound assets, what would be the harm in identifying the assets and the firms that provided them?

    Knowing what you know about these assets, would you personally be willing to have your own pension investments swapped for these collateral items?

    You are claiming the recipient firms are more stable and viable as a result of receiving Fed loans. Shouldn’t disclosing their names therefore help their reputation in the market? By arguing that disclosure would cause a loss of confidence, are you saying that the financial condition of these firms is far worse than the market currently realizes? And if so, isn’t the Fed complicit in an organized scheme to withhold material information from investors?

  38. batmando says:

    Probably more like “to delay the over-the-cliff, waterfall market scenario into Obama’s watch”

  39. mark mchugh says:

    The best advice I could give politicians questioning bankers, is control the Q & A. Make them talk with short, pointed questions and cut them off when they drift off topic or get Greenspanny on you:

    Examples:

    Price stability is one of the Fed’s stated missions, correct?

    Why were you unconcerned about price stability in housing?

    Could you explain to me your concept of moral hazard?

    As I understand it, the Federal reserve is a collection of private banks, not a government entity would you agree with that?

    So you have asked the American Taxpayers to borrow money from a private banking system to bailout that very same private banking system? (when he started to ramble I’d interrupt with, “True or False Mr Bernanke”?)

    And you don’t feel the need to account for that money? (then no matter what he says I’d remark, “absolutely surreal”)

    What disciplinary actions have you taken against your member banks?

    So, you don’t think anyone should go to jail or lose their high-paying job over the asinine decisions that no matter what will literally cost trillions?

    So smart, honest, decent men with good intentions managed to engineer the biggest financial meltdown in history? And now you actually think these very same individuals might know how to fix it?

    Do you have any ideas how we can create enough good jobs to raise the tax revenues we’ll need to pay for this bailout?

    bang..bang…bang…bang…Don’t be cordial. Make him talk.

    99% of our politicians use the forum as an opportunity to blather on. BEAT HIM UP! (rent ” A Few Good Men”) Despite his high SAT scores, this guy is a dunce who can’t think his way out of a wet paper bag. He fully understands the nature of the situation, however and if you make him answer enough questions he will hang himself. Our financial system has become essentially a Ponzi Scheme that now wants to feed directly on the taxpayer, that’s all

    Make it the longest five minutes of his life.

  40. Steve Barry says:

    Anyone find it odd that TARP II was quickly approved tonight, right before B of A and C announce losses tomorow?

  41. Pat G. says:

    What do you think holds more relevance and persuasion; acceptance by a majority of 70% of the GDP in this country on what action to take during this financial crisis by consuming less, paying down debt and saving more now or a handful of legislators spending our future wealth?

  42. Pat G. says:

    @Steve

    I found it interesting but all they are doing is prolonging the eventual blow to the banks, us or both down the road.

  43. Pat G. says:

    I watched your Fast Money spot. Albeit too short, you were on target with your subject and Ratigan appeared to be in harmony with it. He kind of reminds me of the Howard Cozell of CNBC. I think he is begining to see the reality and becoming a believer or maybe he was just being cordial.

  44. Mike in Nola says:

    Congressman Grayson: Congrats on the professional cross exam of the Fed official. Keep fighting the good fight. It’s not just the right thing, it’s the popular thing. Seldom do the two coincide.

    In the “old days” when a bank failed, it was taken over by the FDIC, the shareholders were wiped out, the FDIC made good on its guarantees to depositors and the assets were sold off to the highest bidder to recoup some of the losses that the FDIC took.

    This model was the basis for the Resolution Trust Corporation set up to deal with the S&L crisis of the the 1980′s.

    My question is why we cannot follow the example of the Resolution Trust Corporation in resolving the the S&L Crisis. You are probably a little young to remember it, but the S&L crisis was pretty huge at the time, on the order of $500B back when a dollar was worth something. The RTC was charged with taking over, cleaning up and selling off the equity of insolvent thrifts who got that way because of a tremendous amount of bad lending and outright fraud, much like the situation we have today. While it took years to work through the mess, it was very successful in keeping down the net cost to the taxpayer. This was brought to mind by an exchange this morning on CNBC involving Bill Seidman

    http://www.cnbc.com/id/15840232?video=999503805&play=1

    What happened in the 1980′s was that the owners of the insolvent thrifts were wiped out, as should have happened if they couldn’t run their own businesses right. The loans got written off and the assets with value were sold to minmize the cost. While the total worth of problem banks that were taken over was of the order of a half trillion dollars, the cost to the taxpayers was “only” about $125B.

    The difference, and the problem, today seems to be that there is an unstated assumption that stockholders in the troubled institutions (who have already lost most of their investement because of collapsing stock prices) and those who bought the toxic securities from those institutions without due diligence have somehow to be protected at all costs, even that of bankrupting our own Government.

    What should happen is that these failed institutions should be liquidated at the least cost to taxpayers: those guaranteed protection by the Federal Government compensated and the worthwhile parts of the failed intitutions sold to those who know how to run a business and lend money as they should. And we move on.

    This will cause pain among stockholders, bondholder, and the buyers of toxic loans. But, there will be pain somewhere in this mess. Why should it be borne by those who did not cause it? I personally and almost all of those on this blog have avoided investing in these banks we could see were frauds. The American people at large were not investors in these banks and did not reap the dividends, capital gains and bonuses generated during the boom years. We did not buy collateralized mortgages. Why should we have to bear the cost?

    However, the political influence of the big financial institutions seems to be succeeding in making sure that we do through the TARP scheme to buy toxic assets and the Fed’s practice of lending money to the insolvent banks by accepting worthless paper as collateral.

    Why should we have to buy worthless assets?

    Why does the Fed have to accept worthless assets as collateral? The Fed can more cheaply and efficiently protect the financial system by providing guarantees of items essential to maintaining liquidity, e.g. commercial paper and money market funds.

    Why do stockholders in these failed banks have to be protected?

    No one is asking these questions.

  45. jw says:

    During a large part of the Bush Administration you (and your predecessor) told us in various ways the economy was on solid ground.

    We were also told by various officials in Washington: a) tax cuts were absolutely necessary; and b) that they paid for themselves due to the robust growth generated by said tax cuts.

    Rising stock prices and rising home values were pointed to as proof of the success of monetary and fiscal policies.

    However, despite those successes, we continued to generate enormous budget deficits, nearly doubling the national debt.

    Question #1: If we couldn’t balance our budget during the boom years, then when will we ever… E_V_E_R!… balance our budget??!

    We are now told we *MUST* provide real negative interest rates… fiscal stimulus in the trillions… etc., because of the obvious evidence that the economy is now in dire straights.

    And we are now being told by officials in Washington: a) this spending is absolutely necessary; and b) it will cost the taxpayers even more if we don’t do something (another variation is to assure us these are actually investments).

    Question #2: Have any of you people figured out yet that you can’t control a $14 Trillion economy?

  46. Stuart says:

    Question 1 for the Fed: Did the Federal Reserve purchase any assets for which a market price was not available? If so, how was price determined and what was the price that paid as a percentage of what it was carried at on the books of the entity it was purchased from?

    Question 2: The Federal Reserve carries on its books over 8,000 tonnes of gold. Why won’t the Federal Reserve allow a fully independent audit to validate that this stated amount actually physically resides in Federal Reserve vaults since it is suspected that the Federal Reserve has swapped much of this gold out. In effect the same as a corporate including receivables in with a cash balance and reporting it all as a cash balance.

  47. Chief Tomahawk says:

    “Big Picture”, “Big Picture”, “Big Picture”….. obviously on your payroll, BR!

  48. Big Tony says:

    If all else fails, tell him that you did his Mom!

  49. wunsacon says:

    Dear Congressman,

    Many of us understand the motive to reinject money into the system to replace the money disappearing via massive writeoffs of debt. But, we disagree with the methods of achieving this, because it is being spent in a way that directly rewards people who helped create the present situation — often in a spectacularly focused manner — and only indirectly helps the rest of us. And, in many cases, it hurts the rest of us.

    Many of us believe the financial authorities’ motives are good. Without intervention, all markets would clear at much lower price levels. Every American would look at his/her 401k’s, money markets, and other investments, and panic at the ever-decreasing nominal values. They would become more risk averse. They would spend less. Businesses would invest less in new goods, services, inventions, medical research, etc. because they expect Americans would have neither the means nor the inclination to purchase those goods and services. And what would be the result of this spiral? Although “consumerism” is endlessly criticized for a number of reasons, would we as a people be “richer” because we slow down our production and consumption of goods and services? Many of say “no, we do not want the US to continue a deflationary spiral.” And although there is work to be done to encourage savings, millions of unemployed people would not be “saving”.

    Many of us also believe that fighting deflation *is* possible. Here, the government is not attempting to control prices on specific goods (via price controls, which never work) but to control the general price level. Dollars are nothing more than “IOU’s” which the government can either “print” or “unprint”. The government has the capability to create more “IOU’s”, either thru existing agencies, legislation, or new legislation. Yes, the velocity of money is decreasing. But, by increasing the supply of these IOU’s, certainly the price of everything else tends to increase. Eventually, with enough IOU creation, banks will want to lend — at high rates — because their fear of inflation will motivate them to conserve the real value of their holdings by lending them out and making those IOU’s “work for them”. I.e., these inflationary expectations will force banks to “put money to work”.

    However, as stated earlier on, many of us are livid — LIVID — at the beneficiaries of these distributions. Consider these distributions and alternatives:
    (a) The USG is rewarding incompetently-run insurers and banks, who *chose* to deal in financial instruments they had every reason to know were impaired or would become impaired beforehand. These entities pay their staff handsomely and pay dividends. By giving money to these entities — instead of wisely-run banks like Hudson City Savings — the USG is hurting everyone else.
    (b) The USG is rewarding incompetently-run auto manufacturers — and their private backers — who when confronted with big decisions made the wrong ones. By giving money to these manufacturers, the USG is hurting competing companies who made better decisions and would survive/thrive with less competition. (If there are indeed any supply chain issues, then direct money there. And only if private investment wouldn’t step in first.)
    (c) The USG is rewarding house purchasers (a.k.a., home owners) who often stretched to buy the most money they could afford with zero room for miscalculation. Years ago, the folks in trouble essentially bid up the price of a home beyond my ability to pay for it, which means I’m still living in a small apartment with little sense of “roots” while waiting for the housing market to come back to earth. By giving money to these people (either indirectly via “cheap money” for refinancing or perhaps soon even directly), the USG will compound my injury and threaten to keep me out of the housing market another 10 years.
    (d) Above all, the USG is maintaining “the current order” of a massive disparity between the rich and poor. How so? It is common knowledge that the “top 1%” holds 50% of the financial assets in this country. By guaranteeing many of the IOU’s in the system, the USG is maintaining the price of those assets. That means that 50 CENTS OF EVERY DOLLAR SPENT HELPS THE TOP 1% maintain their relative wealth disparity over everyone else! And do they deserve it? First, collectively, they freely invested in companies with a lot of debt, in companies that were part of the “biblically corrupt” housing/financial industrial complex that robbed the country the past 8-30 years, and in companies that freely fired Americans and moved jobs offshore. How dare we bail them out. Second, if they had been more reluctant to invest in the now-troubled companies, then the cost of capital for those companies would’ve been higher earlier on. So, we wouldn’t be in this mess. … Look, I can feel sorry for them but feel there is no justification for the bottom 98% to directly compensate the wealthy for their loss.

    What’s the alternative? The USG should print additional IOU’s — in the order of magnitude of that being given to all the undeserving people and companies now — and hand them out to everyone. Consider the following:
    (a) Is that a lot of money? Of course! But, it’s no more than what’s being “guaranteed”, “lent”, and “invested” now.
    (b) It helps everyone without regard to their culpability in creating the mess.
    (c) It helps everyone without regard to their current wealth.
    (d) It repairs the consumers’ balance sheets.
    (e) It gets commerce and invention moving again. (The purpose of a business is to provide a good or service in an attempt to induce a potential consumer to part with his/her money. When businesses know consumers have money to spend, entrepreneurs form businesses and hire staff.)
    (f) It helps the auto makers. Give me $50k and I’ll spend some of it to finally trade in my 20 year-old Honda for a new one (probably built in the US anyway).
    (g) It helps current borrowers who can no longer afford their home payments. $50k will help many of them with payments. And, for those that want to sell anyway, I’ll spend half of my $50k on a downpayment for a home.
    (h) It is — by comparison — TRIVIAL TO ADMINISTER. No alphabet soup of government programs to dole out the money. No Congressional hearings to argue over transparency. No multi-year hand-wringing in the media and around water coolers. Less social unrest.
    (i) By obviating the need for so much of the government administration just mentioned, it avoids turning America into a command economy — which is what we’re quickly becoming. Surely, after all that’s been written of the USSR’s demise, it’s sad and ironic that among the proposed solutions Americans discuss is the government appointment of a “auto czar” to direct the production of consumers goods.

    Problems with this plan? One that I have thought of thus far: our international creditors. Foreign creditors will be angry with the currency depreciation generated by “printing money”. (I believe the credit creation must be done without creating offsetting liabilities. Americans collectively have too much debt. We wouldn’t be “repairing our balance sheets” if we offset the credit with debt.) But, many of them are so hurting for dollars, in fear of national bankruptcy, and so desperate themselves to avoid a depression within their own economies that they *must* be willing to bargain with us: a little USD depreciation in return for saving the global economy. This part of the solution requires more conceptualization, a lot more work, and eventually high-level negotiations between the USG and creditor nations. But, at least, you’ll get the domestic side right.

    So, my questions for the Fed or anyone else in government are:
    - Has anyone at the Fed (or elsewhere) researched such a scheme?
    - What are the best ways to implement this?
    - Who are our international state and private creditors and what would we have to give them to persuade them “buy in”? (USD? Grain? Carbon credits?) By cutting the average American in on the deal, we’ll also be a little less angry over the programs which so far have been in part giving money to foreigners.

  50. wunsacon says:

    Wow, Barry. I’m sorry if that’s long and arguably offtopic.

  51. vaughn says:

    congressman ask your weasley Fed witnesses what they think of THESE reform ideas……

    Refuse to authorize the remaining $350 billion in the EESA/TARP. That bill was an act of outright theft, it could not have worked in its original form, it definitely didn’t work in its modified form, and there is no defense for continuing the charade.

    Force, either by demand or if ignored by regulation, the full disclosure of all Federal Reserve “assets”, from where they came, the prices paid, and the terms, and demand that all “in extremis” programs end ninety days hence. If the Fed doesn’t like this de-authorize The Federal Reserve Act and replace them. I am well-aware that this will cause the collapse of a significant number of banks. We will deal with that momentarily.

    Withdraw all debt-based support from the general economy. It is necessary that the over-encumbered go under. We have a means of dealing with this – it is called bankruptcy. Do it and get it over with. There is no alternative and stretching this out just makes it worse. If you have cancer the longer you wait the worse it is, and if you wait too long it spreads and you die. We are very close to having the economy die; there is no time for more delay.

    Repeal the “Bankruptcy Reform” act. That was a monstrous travesty demanded by the banking lobby to enslave Americans they knew couldn’t pay! Revoke that – now – so Americans can use bankruptcy – the process for those who are over-encumbered in the general public – as well.

    Dedicate the other $350 billion that was formerly in the second half of the TARP to capitalizing new banks. We need a banking system, but we don’t need the existing banks. Provide the seed capital for new banks. At a 10% reserve ratio this will provide three and one half trillion dollars of lending capacity, all unencumbered. There are competing ideas for the bank’s structure; “co-ops” (much like a credit union, perhaps hundreds of new banks) sound interesting as does just setting up ten new large banks.

    Demand that all banks return to a 10% reserve ratio here and now. No ifs, ands or buts. Period. No more sweep accounts, no more games, no more “variable reserves” set by Ben in his “sole judgment”, nothing of the kind. This strictly limits bank leverage to 10:1 – as it should. Write into the law that violations of this reserve ratio are bank fraud, a felony, and that each and every officer of said bank is personally responsible for violations. Any existing bank unable or unwilling is closed immediately by the FDIC.

    Make all bank examinations public. We back the banks with FDIC deposit insurance, we have a right to know what they’re doing, how healthy they are, and what they’re holding. If you want to see the cockroaches scurry shine a bright light in the room. We need lots of bright light.

    Force all credit-default swaps and other instruments – all of them – onto a regulated exchange. Strictly limit leverage to no more than 10:1, just as is done for banks. No exceptions, with mark-to-market being required daily. We have computers; this can easily be done and must. At the same time, end all “dark pools” and other similar gimmicks. If you want to trade it you must publish your bids and offers, print the last trade price, and do it where everyone can see it. Again – only the threat of discovery through full public transparency works to keep the crooks at bay.

    Bring all financial firms, including insurance companies, hedge funds and others, under the 10:1 leverage limits. All firms that want to do business in the United States must comply – period. No exceptions for “special” asset classes are permitted. This instantly ends the game of “infinite earnings via infinite leverage” in the Treasury Bill market, which is currently distorting that marketplace beyond all reason.
    End all off-balance-sheet games. All assets and liabilities must be carried, valued at the market, and disclosed on-balance sheet. No exceptions. Period.

    We must restore confidence in the financial system and we must do it now. It cannot happen until the bad debt is forced into the open and defaulted, leverage limits are known and enforced, and reserve requirements are mandated and supervised.

    Any government agency unwilling to do this job on an immediate and comprehensive basis must be relieved of its duties and replaced, without exception. This includes but is not limited to The Federal Reserve, SEC, OTS, OCC and Treasury.
    http://market-ticker.denninger.net/

  52. David Merkel says:

    I’ll keep this short. If you want more, you can read me at the Aleph Blog, particularly this post:

    http://alephblog.com/2008/11/25/the-more-things-change-the-more-they-remain-the-same/

    My question to Ben Bernanke is this: we are pushing banks to lend, but their balance sheets are impaired by even more than the monies allocated to the TARP, if we measure the impairment at fair value, rather than market value. We are pushing citizens to expand consumption, but most of them are too deep in debt to do that.

    Monetary policy only works when it encourages a healthy part of the economy to take on more debt, and expand activity. There are no healthy areas of the economy now, including the government, which is taking on a prodigious amount of debt in order to bail out private financial interests.

    Why is this fair to the average American? Why indebt us and our grandchildren in order to bail out institutions that took too much risk, or were otherwise imprudently managed?

    Further, why will this course of policy work? The Austrian School thinks you are dead wrong, so would Hyman Minsky. As for me, my studies of nonlinear dynamics indicates that economic systems with high levels of debt, and high levels of debt complexity are inherently unstable, and prone to large booms and busts. What are you doing to reduce debt levels and complexity in our economy?

  53. emmanuel117 says:

    Question: What is the upper limit on the AIG bailout? $250 billion? $500 billion? At what point do we stop trying to prop up a zombie bank?

    (OT: As one of your constituents who voted for you in the last election, I must say I am pleased by your performance so far. Keep it up and represent us well!

    Also, HLS did you some good.)

  54. Dow says:

    1. If you had free rein, what would be the first thing you’d like to try?

  55. Zan Ozimek says:

    I have a question for both Congressman Grayson and Dr. Kohn.

    CONGRESSMAN GRAYSON
    My friends and I have made a bet and want you to settle it. Is the suit you’re wearing in the YouTube video from the Men’s Warehouse or JCPenney?

    DR. KOHN
    You’re doing good work, Koko, don’t let the peasants get you down. However, you sounded like you were on a double-dose of valium when Grayson was doing his figure skating routine in the FS committee hearing – what gives?

  56. Gabriel says:

    This whole business between the Fed and the Congress was done behind closed doors. The general public does not know the terms on which they both settled. We can scream all we want about transparency, size of funds, beneficiaries of funds, timeline of disbursements, effectiveness of disbursements and whatever else we can dream about. The reality is that it is really a power play. If Grayson has not been privy to that covert arrangement, then he can question all he wants, all he will get will be more of the same BS, resulting in a good dog and pony show – good for our catharsis. If Grayson has been privy to that covert arrangement, then the dog and pony show is even worse, morally speaking, but government and morals are diagonally opposite concepts, anyway. In either case, it appears to be all set for a good show – a roman tradition to keep the people happy with the games in the colosseum – an effective technique to vent their anger and hostility, while they’re being screwed politically. Cynical perhaps, but that goes to show how at least one citizen is disappointed in the peoples’ representatives, and the results of this show Grayson v Kohn will probably prove the point.

  57. Zan Ozimek says:

    bread and circuses, Gabe … if the peasants have a hero they’ll focus their energy on constructive idolation instead of destructive despair — Al wants to play the role of Jean Lamarque this month, that’s fine, as long as he never does more than grandstand a few questions … and he won’t

  58. union says:

    at some point all this is discounted
    rally will have legs soon
    do not get too negative

  59. skardin says:

    1) Let’s forget how much TARP money is spent, how are we paying it back? Really!

    2) It’s been mention before, if companies are too big, make them smaller “stupid”! Not so easy? Let them go into bankruptcy and reorganize! But this hurts our “citizens” with job loss? Well, if you amputate our left foot, stab our right foot, and then inform us we’ll still be okay… this is suppose to make everyone feel better and sing kumbaya? We know better and so do you… keep it up and we’ll see civil unrest soon at this pace. Unrest not of the unemployed but of the injustice/poor public/economic policies that is coming from Washington.

    3) Where’s my bailout now that every bank on the planet got their share and won’t tell the public how they are using the “public” money?

  60. Greg0658 says:

    ditto the dittos “open up the TARP books”

    Frank Ruscica do you think or know if Wikipedia is one of those offshoots?

    cfish asks for: Entity 1: $100billion in loans
    (sorta like our Gov Blago press release)

    Mike in Nola Says “The American people at large were not investors in these banks”
    Chase would get me for 18.24% asof May07 if I bought somethiing beyond the transfer rate of 3.99%

    “many of us are livid — LIVID” and “Carbon credits” hate it – something else please

    vaughn sounds good

    back to the dog and pony show of my life in someother thread and outside in the -20 degrees F and “YA – wheres my bailout money – promise – I’ll spend it”

  61. Greg0658 says:

    as Mark frowns and Erin smiles onto commercial break with Shella Blair on the return for her fix suggestions

  62. Greg0658 says:

    an fyi in an active thread (sorta releted via my post of January 15th, 2009 at 10:21 pm) on HDDTV – I went down to the cable office today

    from wiki:
    In North American digital video, a QAM tuner is a device present in some digital televisions and similar devices which enables direct reception of digital cable channels without the use of a set-top box. QAM stands for “quadrature amplitude modulation” the format by which digital cable channels are encoded and transmitted via cable. The law does not require the cable provider to advertise their availability.

    http://en.wikipedia.org/wiki/QAM_tuner

  63. Harrybusch says:

    From Wikipedia, Federal Reseve-purpose:
    “Preventing asset bubbles
    The board of directors of each Federal Reserve Bank District also have regulatory and supervisory responsibilities. For example, a member bank (private bank) is not permitted to give out too many loans to people who cannot pay them back. This is because too many defaults on loans will lead to a bank run. If the board of directors has judged that a member bank is performing or behaving poorly, it will report this to the Board of Governors. This policy is described in United States Code:[24]”

    The Federal Reserve policy of easy money contributed greatly to the housing bubble, and the Fed was apparently unaware or unwilling to act on the obvious great multitude of bad loans being made, thus failing to perform an important stated purpose. The result has been the tanking of the US. and world economy. After this display of ignorance and incompetence, how could a reasonable person expect that you would know how to repair this damage?

  64. Wrath of God says:

    question:

    what could the Fed have done in the last 10 years that would have made the current situation worse?

    (everybody can come up with 100 things the Fed actually did that made this situation as bad as it is, but maybe (highly unlikely) the Fed/Bernanke is able to come up with proposals that would have made it even worse?

    The question should make you think about why we have the Fed)