Deception and Abuse at the Fed

Deception_fedBloomberg’s  Caroline Baum reviews the book Deception and Abuse at the Fed:

"Until the U.S. Federal Reserve took the unprecedented step of financing the purchase of Bear Stearns Cos. by JPMorgan Chase & Co. in March, criticism of the central bank was largely confined to its conduct of monetary policy.

The institution itself usually got a pass. Lone voices that dared to knock the Fed were drowned out by its supporters in the financial community — the very bankers the Fed regulates.

One of those lone voices, U.S. Representative Henry Gonzalez, came from the Lone Star State. Neither the power of the Fed nor the near-mythic status of its longtime chairman, Alan Greenspan, deterred the late Texas populist.

As chairman of the House Banking Committee from 1989 to 1994, he relentlessly pressed for public scrutiny of what he called a secretive agency wielding enormous power, writes Robert D. Auerbach in his convincing first-hand chronicle of Gonzalez’s battle, "Deception and Abuse at the Fed."

Auerbach details how the Federal Reserve is "the most
powerful peacetime bureaucracy in the federal government." While most of congress and Wall Street  were lauding the "genius" of the Maestro — FOMC chair Alan Greenspan — few seemed
to notice that Fed operated with almost no public
accountability. The singular exception: Henry B. Gonzalez (D-TX)—chairman of the U.S. House of Representatives
Financial Services (banking) Committee.

The author documents what he terms abuses at the Fed:

•  Blocking Congress and the public from holding powerful Fed officials accountable by falsely declaring—for 17 years—it had no transcripts of its meetings;

• Manipulating the stock and bond markets in 1994 under cover of a preemptive strike against inflation;

• Allowing $5.5 billion to be sent to Saddam Hussein from a small Atlanta branch of a foreign bank—the result of faulty bank examination practices by the Fed;

• Stonewalling Congressional investigations and misleading the Washington Post about the $6,300 found on the Watergate burglars.

I haven’t read this yet, but it certainly looks interesting . . .

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Sources:

Book:
Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank

Robert D. Auerbach
June 2008

Greenspan, `Master of Garblements,’ Fares Poorly in Book on Fed
Caroline Baum
Bloomberg, June 5 2008
http://www.bloomberg.com/apps/news?pid=20601088&sid=azJ3IDPrjLiE&

Category: Books, Federal Reserve

Trichet 3, Bernanke 0

Category: Commodities, Currency, Energy, Federal Reserve

Gasparino vs Einhorn, Kohn & Ritholtz

We have a rugby scrum! ProBanks, ProLehman:  Dick Fuld (Lehman CEO), Charlie Gasparino (CNBC), Doug Kass (Seabreeze Partners), Thomas Brown (Bankstocks.com) Anti-Banks Anti-Lehman:  Donald Kohn (FOMC), John Roque (Natixis), David Einhorn (Greenlight Capital), Jim Rogers, Yves Smith (Naked Capital), and little ole me. > Fear vs. Facts on Lehman click for video Note: We have…Read More

Category: Corporate Management, Credit, Derivatives

Lacker: The Fed Risks Moral Hazard

From today’s WSJ, we see this critique about the Bear Stearns Bailout from an insider: Federal Reserve Bank of Richmond Jeffrey Lacker’s, made in a
speech in London on Thursday. Lacker, along with former Fed Chairman Paul Volcker and others, have
raised concerns about the Fed’s rescue of the
Bear Stearns. 

The WSJ described it as a "striking insider’s critique."

"The danger is that the effect of recent credit extension on the
incentives of financial market participants might induce greater risk
taking, which in turn could give
rise to more frequent crises, in which case it might be difficult to
resist further expanding the scope of central bank lending."

-Federal Reserve Bank of Richmond Jeffrey Lacker

It is unusual for a sitting Federal Reserve policymaker to critique the lending programs of the central bank.

The moral hazard of the extraordinary steps the Fed has taken is "distort private markets, encourage risky behavior, and could
endanger the Fed’s independence."

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Sources:
Lacker Speech on Financial Stability
June 5, 2008 11:00 a.m.
http://online.wsj.com/article/SB121267597764948549.html

Fed’s Lacker Raises Concerns About Deal to Rescue Bear
GREG IP
WSJ, June 5, 2008 11:17 a.m.
http://online.wsj.com/article/SB121267589442648547.html

Text of the full speech after the jump

Read More

Category: Federal Reserve

TheStreet.com Goes Flash Video

Bogof_flyer1Kudos to TSCM for moving to flash, rather than that crappy WMP video, they used to use. (Hey Bloomberg! How about you?)

I’m told that’s been running a couple of months, which shows you how often I’m at that part of the site.

Let’s pull a random, video to show — hey, how about this one? We showed you the ad for "Buy One House, Get One Free" on Tuesday; Later that day, TheStreet.com had an interview with my friend, Paul Kedrosky — who not only is a Real Estate guru (WTF?!) but loves the smell of Napalm in the morning !

Aside from that slight shift in title (from college professor and VC to love guru, here’s the accompanying video:

Previously:
California: Buy One House, Get One Free (June 03, 2008 | 09:00 AM)    http://bigpicture.typepad.com/comments/2008/06/california-buy.html

Source:
Two Homes for the Price of One?

Brittany Umar
& Paul Kedrosky
TheStreet.com, Tue 06/03/08 17:42 PM EST
http://www.thestreet.com/video/index.html#1577987862

Category: Financial Press, Real Estate, Video

ISM Prices (May 2008)

Category: Economy, Inflation

Moody’s to Cut Ambac, MBIA AAA Rating

Category: Credit, Derivatives

Dirty Tricks at Lehman?

Category: Corporate Management, Legal, Short Selling

US Agriculture Secy: Food Inflation to Hit 43%

Category: Commodities, Inflation

Sweetheart Deal for Rating Firms

Category: Credit, Derivatives, Legal