Eideard

Must I teach Economics 101 to these twerps?
Daylife/Reuters Pictures used by permission

Texas Governor Rick Perry has been on a Bernanke-bashing binge this week, demanding on Wednesday that the Federal Reserve “open their books up…”

But what books exactly does Perry want opened? The Federal Reserve already publishes its balance sheet online every Thursday for the entire world to see.

Not only that, it is audited regularly. Every year, an external accounting firm audits the financial statements of the Federal Reserve and all 12 of its regional banks. Last year, that firm was Deloitte and Touche, but PricewaterhouseCoopers and KPMG have also done it over the years.

Those financial statements are also posted online.

“Every aspect of the Fed’s financial dealings are wide open — wide open,” Bernanke remarked at the National Press Club in February. “There is no sense in which the Fed has secret financial dealings.”

Despite that public information, anti-Fed criticism seems to be the latest craze on the Republican campaign trail. On Tuesday, Rep. Michele Bachmann criticized the Federal Reserve for not being “subject to transparency.”

Those comments echo similar sentiments from Rep. Ron Paul, a renowned Fed critic in his own right, who over the years has repeatedly called for audits of the central bank and even a review of all the gold in Fort Knox…

“Now, what ‘audit the Fed’ means in the language that has been used by some members of Congress, is not about the financials of the Fed,” Bernanke said in February. “Rather, it’s about, quote, auditing monetary policy,” meaning Congress would evaluate the central bank’s decisions…

Congress already has some ability to examine the Fed through its own investigative arm, the Government Accountability Office…

What these fools want is exactly the opposite of what is well-reasoned law. They want the ability for Congress to set policy and procedures – day-by-day if they wish – for the central Federal Reserve Bank. Frankly, I think half the crap Congress manages is already scary enough.

Leave the appointees alone once they’ve gotten past the political crappola of Congressional confirmation to do their job. It falls within their area of expertise in the first place. Creeps like Paul or Perry or Bachmann – who can’t even get the definition of the word “audit” straight – are not the people we need establishing monetary policy.

Daylife/Reuters pictures used by permission

The American International Group has reached an agreement in principle to repay the Federal Reserve Bank of New York for the company’s 2008 rescue, and to gradually return the ownership of its stock to the public markets.

Robert Benmosche, chief executive of A.I.G., said the plan would allow the company to “remain on track to emerge with one of the largest, most diversified property and casualty companies in the world.”

The company and its rescuers in the federal government have been working intently in recent weeks to complete such a plan before the expiration of the Treasury’s Troubled Asset Relief Program on Oct. 3, and before the Fed’s bailout loan came due. The original terms called for A.I.G. to pay back the Fed within two years.

Under the plan, the Treasury Department will, for a time, own 92.1 percent of A.I.G. before it begins to sell its shares…

The company said it would use its own resources to pay back the $20 billion in loans, including the proceeds it expects to receive from the sale of a big overseas life insurance unit to MetLife. That sale, announced in March, should yield $6.8 billion in cash and $8.7 billion in MetLife stock, and close by the end of the year.

Still more money to repay the Fed is expected to come from an initial public offering of a second big foreign life insurance business on the Hong Kong exchange. The offering was delayed for several months while A.I.G. tried unsuccessfully to sell the unit to a British company, but A.I.G. now says the Hong Kong offering is back on. It did not provide a time frame.

In addition, the Treasury has agreed to help the Fed sever its ties with A.I.G., by providing the means for the company to redeem most of the Fed’s $26 billion in preferred interests. That money will come from the unused portion of an emergency assistance package that the Treasury made available to A.I.G. as its troubles reached a peak in early 2009…

Taking all of those steps will end the Fed’s role as a lender to A.I.G. and an investor in the company, a role that has never fit in well with the Fed’s duties as a central bank. The Treasury will come out of the transaction with a larger preferred stake in A.I.G., but expects the company to keep taking steps to pay it down, according to the new agreement in principle.

The range of fools, from hypocrites and sophists in the Republican Party to the just-plain-ignorant tea baggers who persist in whining about TARP confound reason. Whether your concern is history or economics, the truth remains self-evident. Not only did the TARP program keep a significant chunk of our economy from collapsing in the wake of the meltdown resulting from a decade or more of Free Market corruption, our Treasury and taxpayers continue to realize a profit from the payback.

It ain’t all over. But, the process is advanced enough that even the political losers and their obedient grunts should consider climbing on board and joining the move towards the future – instead of trying to turn back both time and progress.

Or we could turn complete control of the economy over to cronies like this
Daylife/AP Photo used by permission

The Federal Reserve made a profit of $52.1 billion in 2009, a rise of 47% over the previous year.

The sum allowed the central bank to pay a record $46.1 billion to the US Treasury last year. That was the largest amount ever paid by the central bank since its creation in 1914.

The record figure was largely thanks to its attempts to support the financial system throughout the ongoing financial crisis.

The Fed funds itself from its own operations and returns any profits to the Treasury department. The figures suggest that US taxpayers have, so far, gained money from the US government’s action in propping up the system…

The emergency lending programmes instituted by the central bank during the last year’s financial crisis helped swell the Fed’s balance sheet to more than $2 trillion…

The Fed also earned money from its emergency loans to banks and other firms, such as the giant carmakers. It charged both interest and fees on these.

That’s kind of brief, a snapshot, a precis of what the balance sheet looks like. Hopefully, it provides some clarity to folks who don’t usually pay attention to aspects of the U.S. economy that involve the Fed or its management.

Time magazine on Wednesday announced Federal Reserve Chairman Ben Bernanke as its 2009 Person of the Year. Bernanke will be featured on the cover of the magazine that hits stores Friday…

Time called Bernanke “the most powerful nerd on the planet.”

“The story of the year was a weak economy that could have been much, much weaker. Thank the man who runs the Federal Reserve, our mild-mannered economic overlord,” the article said.

Bernanke is considered a scholar of the Great Depression. A series of his writings were compiled into the book “Essays of the Great Depression.”

Michael Grunwald, who authored Time’s article, on Wednesday told NBC’s “Today” that “basically [Bernanke] saw what looked like another depression coming, and he decided he would do whatever it takes to forestall that. And basically, I think he did. It could have been a lot worse.”

Grunwald said, “There are things that he could have done better. One of his responsibilities is for full employment in society, and he hasn’t really stepped up on that, but basically in terms of influencing how the economy went this year, Bernanke was the guy…”

Bernanke was sworn in as Federal Reserve chairman in February 2006. He spent years in academia, as a professor at Princeton, Stanford and New York universities and the Massachusetts Institute of Technology…

Grunwald’s piece aims a little below the lowest common denominator. Even a few Republicans comprehend that Bernanke is not responsible for implementing programs to miraculously provide full employment overnight. Not that they will admit it during the coming mid-term elections.

Obama’s implementation is slow and steady as it should be. I doubt we’ll ever hit more than a small percentage of people [and bloggers] who understand that “full employment” means only about half the current number of unemployed – and has been so since the days of Eisenhower.

The U.S. Treasury and Federal Reserve have delayed the implementation date for a new Internet gambling payment ban for six months, a move that gives lawmakers time to overturn it or end confusion over illegal practices.

In a joint statement, the Treasury and Fed said the December 1 implementation date for the law passed in 2006 would not be achievable for some financial institutions. They set a new compliance deadline of June 1, 2010.

“Commentators expressed concern that the act and the final regulation do not provide a clear definition of ‘unlawful Internet gambling,’ which is central to compliance,” the two agencies said.

In addition, they said certain members of Congress have “expressed an intent to consider legislation that would allow problematic aspects of the act to be addressed.”

The 2006 law, which cost European Internet gambling companies billions of euros in lost market value, prohibits credit card, check, and electronic fund transfer payments by U.S.-regulated financial institutions in connection with “unlawful Internet gambling.”

But rather than define what types of gambling are illegal online, the bill relied on existing federal and state laws to answer that question.

Congress passed the anti-gambling legislation in 2006, when Republicans still controlled both the House and Senate. The final regulations issued to enforce the ban were issued by the Treasury and Fed just before former President George W. Bush left office in January.

In America you have the right to be stupid as long as it’s not immoral. You can vote for a moron but not play bingo online.

Teaching in a local school

When Bill Sparkman told retired trooper Gilbert Acciardo that he was going door-to-door collecting census data in rural Kentucky, the former cop drew on years of experience for a warning: “Be careful.”

The 51-year-old Sparkman was found this month hanged from a tree near a Kentucky cemetery with the word “fed” scrawled on his chest…and the FBI is investigating whether he was a victim of anti-government sentiment.

“Even though he was with the Census Bureau, sometimes people can view someone with any government agency as ‘the government.’ I just was afraid that he might meet the wrong character along the way up there,” said Acciardo, who directs an after-school program at an elementary school where Sparkman was a frequent substitute teacher.

The Census Bureau has suspended door-to-door interviews in rural Clay County, where the body was found, until the investigation is complete, an official said…

The Census Bureau has yet to begin door-to-door canvassing for the 2010 head count, but thousands of field workers are doing smaller surveys on various demographic topics on behalf of federal agencies. Next year, the Census Bureau will dispatch up to 1.2 million temporary employees.

No doubt the Beck/Limbaugh brigade will praise their God for the death of another ordinary human being who chose to work for his country.

Obviously part of the Socialist Conspiracy.

Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, says the Federal Reserve, a move that will fundamentally alter the landscape of Wall Street.

The move alters one of the models of modern Wall Street, the independent investment bank, soon after the federal government unveiled the biggest market intervention since the New Deal. It heralds new regulations and supervision of previously lightly regulated investment banks, as well as an end to the outsize paychecks that helped shape the image of the chest-thumping Wall Street banker.

It is also the latest signal by the Federal Reserve that it will not let Goldman or Morgan fail. The move comes after the bankruptcy of Lehman Brothers and the near collapses of Bear Stearns and Merrill Lynch…

Being a bank holding company would also give the two banks access to the discount window of the Federal Reserve. While they have had access to Fed lending facilities in recent months, regulators had planned to take away discount window access in January.

Should be an interesting morning in the world of bourses.

Looking for a new sponsorship deal?

In a stunning turn, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group, officials have announced.

The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) up to $85 billion. In return, the federal government will receive a 79.9% stake in the company…

The bailout marks the most dramatic turn yet in an expanding crisis that started more than a year ago in the mortgage meltdown. The resulting credit crunch is now toppling not only mainstay Wall Street players, but others in the wider financial industry .

The line of credit to AIG, which is available for two years, is designed to help the company meet its obligations, the Fed said. Interest will accrue at a steep rate of 3-month Libor plus 8.5%, which totals 11.31% at today’s rates. AIG will sell certain of its businesses with “the least possible disruption to the overall economy.”

Taxpayers will be protected, the Fed said, because the loan is backed by the assets of AIG and its subsidiaries. The loan is expected to be repaid from the proceeds of the asset sales.

Doesn’t it feel great to be so “protected”?

U.S. federal regulators, in a dramatic move highlighting the tenuous state of global credit markets, have outlined a takeover of Fannie Mae and Freddie Mac including giving control of the firms to their regulator and allowing the Treasury Department to purchase billions of dollars of the firms’ senior preferred stock.

The plan, offered jointly by the Treasury Department and Federal Housing Finance Agency, also gives the Treasury authority to purchase mortgage-backed securities from the firms in the open market and a lending facility through the Treasury from its general fund held at the Federal Reserve Bank of New York.

Treasury Secretary Paulson acknowledged that the radical proposal does pose risks for U.S. taxpayers, giving the U.S. government a “large stake in the future value of these entities.”

“In the end, the ultimate cost to the taxpayer will depend on the business results of the GSEs going forward,” Mr. Paulson said. “To that end, the steps we have taken…will together improve the housing market, the U.S. economy, and the GSEs’ business outlook.”

The takeover bounced Fannie’s CEO Daniel Mudd and Freddie Chairman CEO Richard Syron. A couple of winners whose combined take exceeds the GNP of most nations.
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