WASHINGTON, DC - Yesterday Congressman Ron Paul's bill to complete a full audit of the Federal Reserve for the first time in 96-year history has narrowly avoided total defeat. The Federal Reserve is a quasi-private banking cartel owned by the banks with its Chairman nominated by the President that controls interest rates and the money supply. HR 1207, a very short 342-word bill, has a majority in the House with 313 co-sponsors. Its companion bill in the Senate, S 604, has 30 co-sponsors. HR 1207 has been blocked from a full House voteby the Chairman of the House Committee on Financial Services, Barney Frank.
Instead Paul and Congressman Alan Grayson successfully added in the FED audit as amendment 69B to Frank's monstrous HR 3996, the Financial Stability Improvement Act of 2009. (Draft text here and PDFbelow.) While Frank proclaims the bill supposedly protects the taxpayer from bailing out Wall Street, the truth is Congress intends to grant the Federal Reserve even more powers to mishandle and crash the economy as they did with their money-printing, excess credit, and low interests rates to cause the last bubbles, residential and commercial real estate, to form and then collapse.
Possibly the worst part of the bill is what I term the "Emergency Bailout Authorization," or per Section 1109, officially known as the Emergency Financial Stabilization.
"Upon the written approval of the Board of Governors of the Federal Reserve System... and the Board of Directors of the Corporation [Author's Note: This the FDIC.]... and with the written consent of the Secretary of the Treasury (after consulting with the President), the Corporation may extend credit to or guarantee obligations of solvent insured depository institutions or other solvent companies that are predominantly engaged in activities that are financial in nature, if necessary to prevent financial instability during times of severe economic distress. There shall be available to the Corporation to carry out this section amounts in the Treasury not otherwise appropriated, including for the payment of reasonable administrative expenses." (pages 43-44/253)
HR 3996 will also formalize the today's President's Working Group on Financial Markets, or the "Plunge Protection Team" formed after the 1987 stock market crash to perform interventions in the financial markets and lead Presidents to make misleading statements like "the financial markets are strong and solid... This economy of ours is on a solid foundation... core inflation is low" from January 2008. The new group will be named the Financial Services Oversight Council and consist of economic central planners Treasury Secretary Timothy "Turbo Tax" Geithner, FED Chairman Ben Bernanke, FDIC Chairwoman Sheila Bair, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Director of the Federal Housing Finance Agency, the SEC Chairman, NCUA Chairman, and the CFTC Chairman. (pages 5-7/253)
HR 3996 will cede power to the FED to force companies to obey the FED's orders if the company's actions or size pose a threat to their own "safety and soundness" or to the "financial stability of the United States," which are both incredibly vague and undefined terms.
"If the Board determines, after notice and an opportunity for hearing, that the size of an identified financial holding company or the scope or nature of activities directly or indirectly conducted by an identified financial holding companyposes a threat to the safety and soundness of such company or to the financial stability of the United States, the Board may require the identified financial holding company to sell or otherwise transfer assets or off-balance sheet items to unaffiliated firms, to terminate one or more activities, or to impose conditions on the manner in which the identified financial holding company conducts one or more activities." (page 19/253)
When financial holding companies are identified as "undercapitalized" they "shall not, directly or indirectly, acquire any interest in any company or insured depository institution, or engage in any new line of business [without permission of the Council.]" (page 30/253)
Section 1105 gives the FED the power to force financial holding companies into bankruptcy: "an involuntary case may be commenced by the Board of Governors of the Federal Reserve System against an identified financial holding company." (page 38/253)
Section 1701 gives the FED "in unusual and exigent circumstances" power to authorize immediate bailouts and assistance to any "individual, partnership, or corporation." (page 253/253) This enables the FED to neatly bypass Congress when the next crisis occurs.
HR 3996 will be a colossal failure. There is simply no way a centralized body of bureaucrats like the newly formed Financial Services Oversight Council can adequately oversee every major corporation in the United States. Far from guaranteeing the taxpayer will not be robbed to pay failed Wall Street businesses, the bill secures "automatic bailouts" for the banksters and powerful corporations. While some may seem the regulations and control as helpful preventative actions to prevent economic strife, "too big to fail" is an outright lie. An orderly bankruptcy process of debt liquidation and asset reevaluation sold by the insolvent firms and bought by solvent, stronger firms results in the quickest possible recovery.
We must realize that much of the government-sponsored regulations merely serve to increase the size of government bureaucracy, which increases the end cost to the consumer, prevents competition from smaller firms, and creates a higher barrier of entry for new businesses. By their very nature, bureaucratic regulatory agencies are doomed to inefficiency and failures, and can do nothing than a series of private, competing accreditation firms cannot do both profitably and far better.
Many, including our Congress, have forgotten that the free market is the most just, most humane, and most prosperous economic system the world has ever known. The current false economy is primarily due to the counterfeiting, plundering and meddling of the central bank, the Federal Reserve. Read more about my thoughts on bailouts and corporatism here. If for some reason HR 3996 does not pass, it is my humble opinion that Congressman Paul should move for a discharge petition for HR 1207. Any co-sponsor that chooses to not sign the petition is, in my mind, a traitor to transparent government and the Republic.
For anyone in the area of Philadelphia, I invite you to join myself and many others in a rally this Sunday, November 22, at the Federal Reserve Bank of Philadelphia or at your closest FED. Following a march and speech in front of the FED, I will be giving a talk "END THE FED... Then What? - The Transition to Sound Money" in the Independence Hall Visitors Center.
Disclosure: No positions
"A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history."
- Mohandas Gandhi