Loudernet

Secret Banking Cabal Emerges From AIG Shadows: David Reilly

Commentary by David Reilly

Jan. 29 (Bloomberg) — The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny.

The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.

That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.’s own mid-September bankruptcy filing.

via Secret Banking Cabal Emerges From AIG Shadows: David Reilly – Bloomberg.com.

Bankers Get $4 Trillion Gift From Barney Frank: David Reilly

Commentary by David Reilly

Dec. 30 (Bloomberg) — To close out 2009, I decided to do something I bet no member of Congress has done — actually read from cover to cover one of the pieces of sweeping legislation bouncing around Capitol Hill.

Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this month by the House of Representatives. The Senate has yet to pass its own reform plan. The baby of Financial Services Committee Chairman Barney Frank, the House bill is meant to address everything from too-big-to-fail banks to asleep-at-the-switch credit-ratings companies to the protection of consumers from greedy lenders.

I quickly discovered why members of Congress rarely read legislation like this. At 1,279 pages, the “Wall Street Reform and Consumer Protection Act” is a real slog. And yes, I plowed through all those pages. (Memo to Chairman Frank: “ystem” at line 14, page 258 is missing the first “s”.)

The reading was especially painful since this reform sausage is stuffed with more gristle than meat. At least, that is, if you are a taxpayer hoping the bailout train is coming to a halt.

If you’re a banker, the bill is tastier. While banks opposed the legislation, they should cheer for its passage by the full Congress in the New Year: There are huge giveaways insuring the government will again rescue banks and Wall Street if the need arises.

Nuggets Gleaned

Here are some of the nuggets I gleaned from days spent reading Frank’s handiwork:

– For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery.

– Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.

– Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.

via Bankers Get $4 Trillion Gift From Barney Frank: David Reilly – Bloomberg.com.

Why the push to regulate the Fed more tightly, with Rep. Ron Paul (R-TX) and member of Financial Services Committee; James Reynolds, Loop Capital Markets; and CNBC’s Rick Santelli, Steve Liesman, Joe Kernen & Becky Quick.

Airtime:
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Mon. Nov. 23 2009 | 7:40 AM ET

http://www.cnbc.com/id/15840232?video=1339737581&play=1

A congressional plan to audit the Federal Reserve’s decision-making process poses a serious threat to the economy, former Fed official Frederic Mishkin said.

In a live interview on CNBC, Mishkin disagreed strongly with a plan being pushed by Rep. Ron Paul, a Texas Republican and leading Fed critic.

“This is I think the most serious attack that I’ve seen on the Federal Reserve in the many, many years that I’ve studied it as a scholar,” said Mishkin, an economist at Columbia Business School who was affiliated with the Fed in various capacities from 1994-2006. “This is really dangerous stuff.”

via Ron Paul’s Plan to Audit Fed a ‘Serious Attack’: Mishkin – Law and Regulation * US * News * Story – CNBC.com.