Skip to comments.Who Owns The Federal Reserve?
Posted on 02/09/2014 7:58:51 AM PST by Errant
The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JPMorgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JPMorgan, sits on the board of the New York Fed and participated in the secret weekend negotiations.1 In September 2008, the Federal Reserve did something even more unprecedented, when it bought the worlds largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a government takeover, but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency. Also unprecedented was the way the deal was funded. The Associated Press reported:
The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs.2
This is extraordinary. Why is the Treasury issuing U.S. government bonds (or debt) to fund the Fed, which is itself supposedly the lender of last resort created to fund the banks and the federal government? Yahoo Finance reported on September 17:
The Treasury is setting up a temporary financing program at the Feds request. The program will auction Treasury bills to raise cash for the Feds use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.
(Excerpt) Read more at marketoracle.co.uk ...
What is their budget. Can we get by without it as Ron Paul said?
The Creature From Jekyl Island is taking its last chomps out of the Republic before the golden goose is dead.
The Federal Reserve CREATES money (actually, debt) out of thin air. They’ve done this under Obama to the tune of $85 Billion Dollars per MONTH for over 4 years. They recently backed this off to $75 Billion per month, but it comes to over a Trillion Dollars a year, created out of thin air.
They take this money and essentially buy T-bills that helps to legitimize the US Debt, and they spend the other ~half on Mortgage Backed Securities (the stock market).
They recently blasted out a brag to the world that they have a $4.3 Trillion Dollar Surplus! Oh Goody! Guess where that $4 trillion came from and what it is comprised of? Yep, the same crap they bought with the money they created out of thin air. They are, in fact, as broke as I am, most of us are.
I’m thinking more “Island of Dr. Moreau”
You don’t need no steenking budget when you can create money out of thin air.
It is owned by the biggest enemies to America.
I have a cousin who works for JP Morgan. The Fed did something like that to them back in 2007, loaned them money they didn’t want or need and required them to buy a few failing banks. It’s seems to be the Fed’s way to absorb failing financial institutions before they publically crash and burn. One of the banks JP had to buy back then they bought for cents on the dollar and it was still way too much, that’s how bad of shape the bank was in - and the public had no clue. It was the same type of weekend assessment - JP went in on a Friday by Sunday they knew it was worth about $2 per share. They acquired it on Monday morning for $12 per share - which was still way below what it was trading at. So JP looks like a vulture to the public that don’t know what went on behind the curtain.
Yes, but I was thinking more of the social experiment gone awry that we are witnessing now.
A lot of people should have went to prison that didn’t. They got massive amounts of money from the government instead. The worse affect of this is the message it sends to the people. When huge bailouts like this happen as a result of a corrupt system, it reduces or removes any inclination your average person may have against taking government handouts or lying here and there to ‘get theirs’.
That’s the REAL ‘moral hazard’ in this. When banking executives and politicians are getting away with it, many folks won’t think twice about doing such things themselves. It’s a downward spiral. When our country loses the ‘Rule of Law’ and the morality of doing the right thing, eventually everything else will go with it.
The Bear Stearns deal might have been the one he was telling me about. The Fed drove it - not JP. Other healthy financial institutions had to do the same thing, absorb failing banks - all at the Fed’s directive.
You’d think the US government could cancel the “debt owed to the Federal Reserve”. Then the feds could stop the quantitative easing and our tangental spiral to financial collapse. Or else it’s debt curve, have we got an asymptote in store for you.
You’d think that, but those T-Bills can’t just be ‘liquidated’. What would other T-Bill holders, many foreign, say? As for the MBSs, well, remember the big bubble and all of those ‘credit derivatives?”
Frankly, touting that $4 Trillion like it is an asset is evil, IMO, especially since it was nothing but unbacked, unsecured credit to begin with.
Ellen is funny. I guess this pays better than her alternative health scam.
Who created the FED? Government. What do you think? Pretty simple answer. Government.
Lol, thanks for chiming in. I was actually trying to remember you handle in order to ping you! ;)
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Who created Government???
This is what happens when a clown, Ellen, does a google search instead of doing original research.
The Fed opened a line of credit for AIG, but the Treasury, through TARP, ended up buying the stock, not the Fed.
Not debt, just money.
They recently blasted out a brag to the world that they have a $4.3 Trillion Dollar Surplus!
No they didn't.
Separating the Fed from Treasury, or Wall Street Banksters, for that matter, is like trying to scrape gum off the bottom of your shoe. lolol
That was Bear Stearns, trading at $2, bought for $10 a share.
That is all that is going on: sensible, normal transactions that are not easy to explain or understand without an understanding of how financial markets and the US government work.
As for the Fed being privately owned, that is a legal fiction and is not the equivalent of the Fed being a profit making private bank. Fed member banks are simply not proprietary shareholders who get dividend payments. In substance, the Fed is a government controlled entity with a high degree of independence as to monetary policy.
Experience in the US and around the world shows that such independence for central banks works best because the alternative -- putting politicians in charge -- too often means giving venal, ambitious, and stupid people control of the financial system.
The better criticism is that, with Obama's economic policy being so bad, the Fed has taken up the slack using its interest rate and monetary powers. In order to alleviate financial stress by creating and issuing new money, the Fed lent great sums to Wall Street and to the banking industry and made vast purchases of not just government debt but also debt issued by corporations.
The result was a flood of money and credit that helped to keep the recession from getting worse -- and also gave people with wealth the ability to become wealthier by borrowing and buying up assets that are at historically low valuations. The stock market boomed and real estate prices stabilized and sales have ticked up. This policy of cash and credit for the wealthy was supported by Obama and his Treasury Department.
That is the real scandal: Obama's economic policies have helped the rich get richer. The Republican alternative -- letting markets clear, tax cuts, and spending restraint -- would have worked better to combat recession and would have generated widespread gains in employment and wealth at all levels. That is what happened under Reagan, with widespread prosperity instead of the Obama recovery for the rich.
I agree, Ellen’s articles are like old gum.
In order to alleviate financial stress by creating and issuing new money, the Fed lent great sums to Wall Street and to the banking industry and made vast purchases of not just government debt but also debt issued by corporations.
The only debt they bought, besides Treasuries, were guaranteed MBS.
Yep, her pieces do have a way of sticking.
And full of silly errors.
Tell us, please.
Just buying the bills citizens wont buy.
Lasted traded March 14, 2008 at $30, deal was agreed to and announced at $2, revised about a week later at about $10.
Imagine every time you got a big credit card bill an application for a no fee, no interest transfer credit card came in the mail with it. Imagine that application was pre-approved and immediately available (even with checks in your name included!). That’s this.
He thinks banks dont want you to repay your loan.
He thinks that when you default on a loan, the bank doesnt care, because they created the money out of thin air.
He thinks a bank with a $100 deposit can make a $900 loan.
“That is all that is going on: sensible, normal transactions ...” So long as you can get the sheeple to continue believing that lie, the Ponzi scheme continues until the globalist decide to crash the system for a reset. There is no money in circulation, only currency, and that system is the Ponzi which builds wealth for the banking powers, not the people.
True enough, but not a refutation of my point. A further complication is that during the crisis of 2008, the Fed issued an $85 billion line of credit to keep AIG afloat and secured that line of credit by warrants for just under 80% of the company’s stock. In a pinch, the Fed will do as it thinks necessary and Congress is unlikely to countermand its decisions.
I was told (by a JPM Vice President) that Treasury Secretary Paulson called Dimon on the weekend, asking him to buy the bank, I forget which one. Dimon told Paulson he did not want to buy the bank, and that he was at a family function, and hung up on the Secretary. By Monday morning, though, the ink was dry on the contract.
JP went through the books over a weekend and valued it way low but paid more because they and the Fed were afraid what the public’s perception would be.
That’s basically the way my cousin described it, but he didn’t know about the family function. JP sent around 50 people in over the weekend to value it - it was in horrible shape - which was why the initial offer was so low compared to the price it was trading at.
The point is that the Fed pretty much ordered JP to buy Bear Stearns - and JP didn’t want to. The Fed got their way - JP paid back all of the loan the Fed forced them to take.
I think you are finally hearing the rest of the story - why that chart looks like it does.
The Treasury (TARP) got the stock, not the Fed.
Finally? LOL! I knew it real time.
I think that the Federal Reserve Bank of New York held the government’s interest in AIG.
Getting even deeper into the weeds, the NY Fed Bank website details a series of transactions. Initially, the NY Fed holdings of AIG assets pledged as collateral were held in a trust for the benefit of the US Treasury, with later transactions having the NY Fed gradually turn them over to the Treasury or otherwise releasing them back to AIG and its successors. In any event, the economic reality is that the Fed provided the cash and structured the transactions for its convenience.
The Fed lent, the Treasury bought stock.