Kevin Lamson

The Fed and the Banking System

For anyone who doesn't understand what the Federal Reserve has done let me try to simplify it. The Large Banks and Investment Banks were all insolvent. (Liabilities exceeded assets) Rather then going simply going bankrupt the Federal Reserve decided to loan these insolvent Banks twice as much money as they had already loaned to them. They claimed that this was needed to fix the "credit squeeze" so banks would start loaning money to other banks. In other words the insolvent banks were not lending money to other banks. So the Federal Reserve agreed to flood these insolvent institutions with more money. They have now loaned more than twice as much money to Large Banks, and former Investment Banks than they owed seven (7) weeks ago. But many of these banks are simply hoarding these new funds, and still not lending to other banks.

Why not loan money to Americans who are upside down on their home loans. Why not loan them twice as much as they already owe. This would certianly spike the economy!

This whole "bailout" is nothing more than a ruse to cover up the fact that the Federal Reserve and our entire banking system is for all intents and purposes bankrupt. Unfortunately the cost of this ruse will be laid upon the American taxpayer. Wall Street bankers will continue to mismanage their banks as long as they continue to get paid millions in salaries and wages and are not taken to task for bankrupting these institutions. America wake up!