Senate votes 96-0 to audit the Fed

This momentum to audit the Federal Reserve is long-overdue, after months of debate. If our election system involved public financing, the debate would have lasted five minutes. Now it's time to reconcile the House and Senate bills, then let the sun shine in. It's time to shine an especially bright light on the recipients of the the Fed's largess, and this will information must be produced pursuant to the Senate bill. Let's just hope that the audit is meaningful and thorough. Speaking of which, it's time to turn a sharp eye to the roll the Wall Street bond rating companies played in the meltdown. After all, how could it be that so many sub-prime mortgage-backed securities were so highly rated, despite strong evidence to the contrary? We're now seeing good momentum to reform the practices of these bond raters too:

A critical amendment to the Wall Street reform bill being debated in the Senate this week picked up a key Republican backer Tuesday. The amendment, sponsored by Sen. Al Franken (D-Minn.), would end the practice of banks choosing which credit rating agency they hire to rate a particular offering. Often, banks will ask raters for a preliminary review, allowing them to pick the rater most likely to look favorably on whatever bundle of products the bank wants to sell to investors.

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How you own the Red Roof Inn and why we need to audit the Federal Reserve

Representative Alan Grayson explains how it is that the American public now owns the Red Roof Inn and why we desperately need to audit the Federal Reserve. These are closely related questions, as Grayson dramatically details. The Federal Reserve Bank needs to be audited because it excels at magically "make money out of nothing," just by making notations on its books. We have no way of knowing how it is that the Federal Reserve assumed liability for other large chains of hotels too. The Fed has also put up half a trillion dollars in mortgage-backed securities. Therefore, we, the People, are "owners" of massive amounts of real estate, which means that the Fed owns our homes when the mortgages go bad. This is "stealth" socialism, says Grayson, because we don't audit the Federal Reserve. Grayson, a progressive, is thus calling on conservatives to join in the call to audit the Fed "before it all comes crashing down on us." Every time the Fed creates money out of thin air, "they're taking that dollar that's in your pocket and they're making it cheaper--worth less."

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To the woman who answered the phone at Senator Kit Bond’s office today

Today I saw this post at Huffington, indicating that Kit Bond is not a "yes" for any proposal to audit the Federal Reserve. I believe that the secret workings of the Fed need to be exposed. Where did all of the TARP money go? Who knows? Let's find out. I called the Washington DC Office of U.S. Senator Kit Bond [phone number: (202) 224-5721] to determine Bond's position. A woman answered the phone. "May I help you?" "Yes, I'd like to know Kit Bond's position on the current proposals to audit the Fed. I read in the Huffington Post that he has expressed support to audit the Fed." "Oh, well THAT ought to tell you something. What a ridiculous website . . ." "Hold on . . . That's a huge website with legitimate news. What is Kit Bond's position?" "He's in favor of auditing the Fed." "I don't see his position in writing anywhere. It's not on his website. How do I know that he's in favor of auditing the Fed. It's a huge secret society needs to be examined closely because it controls national monetary policy without any accountability." "I'm with you on that." "I need to know Kit Bond's Position and I'd like to see it in writing." "I will relay that." [end of call] Note: I've shortened the call a bit, but this was the substance of the conversation. My bet? She wrote nothing down at all, and that Bond is against an audit of the Fed. We'll see . . . BTW, you will rarely see such vapid platitudes of policy as you will see on Bond's website. It really makes you wonder whether Bond knows much of anything about the real world. It's also clear that Bond has never seen a war that he's against. Thank goodness he's retiring soon.

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The death of free market fundamentalism?

Richard Eskow is more optimistic than me about the "death" of free market fundamentalism. Here's part of what he had to say at Huffpo:

We're . . . seeing the death struggle of a dying ideology. This ideology provided intellectual cover to business and political elites for decades, but events have proved conclusively that it doesn't work. What's more, people are beginning to see that it's inconsistent with the country's traditional values of competition and free enterprise. . . . While the theories and rationalizations varied wildly, the conclusions were always the same: Deregulation was always the right approach, even (especially) for the most concentrated and rapacious businesses. Consumer regulations should be avoided because they hurt everybody, especially (somehow) consumers. And cutting taxes for the rich magically made things better for everybody else. The arguments changed but the results were consistent: greater upward distribution of wealth, and more concentration of power, delivered by those the special interests funded and placed into positions of influence. . . . Now the ideology lies in ruins.
I am sold by Eskow's description of why free market fundamentalism should be publicly discredited. But I think Eskow is over-optimistic about the "death" of that idea: In modern times, ideas get their legs from a combination of truth and power. We might have truth on our side, but we don't have the power. There's still too much money to be had by too many big business by promulgating fair market fundamentalism. Lack of regulation and lack of transparency simply makes too much big money for many big businesses, many of whom have bought substantial control of the media, as well as having bought Congress. I don't think free market fundamentalism will die until there is real debate, but that won't happen without campaign finance reform and media reform. If the "merits" of free market fundamentalism were ever freely debated in the media, it would shrivel and die, but have a long way to go before that pernicious idea is fairly and freely debated.

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Obama Administration continues Bush tradition of free market fundamentalism

William Black was a guest on Bill Moyers Journal yesterday. The conversation was lively and informative, including detailed discussion regarding "liar's loans" (In a liar's loan, the mortgage company doesn't require any verified information from the borrower about the borrower's income, employment, job history or assets). Black indicates that even after all that has come to light regarding the financial collapse, our politicians refuse to use the "F word," fraud. Why? Because too many politicians (and businesses) simply don't believe in fraud. That is the hallmark of free market fundamentalism. To make matters worse, Barack Obama refuses to utter the word "fraud" from his bully pulpit. Nor does Eric Holder or anyone from the Obama Administration:

WILLIAM K. BLACK They can't even get themselves to use the word "fraud."

There's a huge part that is economic ideology. And neoclassical economists don't believe that fraud can exist. I mean, they just flat out -- the leading textbook in corporate law from law and economics perspective by Easterbrook and Fischel, says -- I'll get pretty close to exact quotation. "A rule against fraud is neither necessary nor particularly important." Right?

Notice how extreme that statement is. We don't need laws. We don't need an FBI. We don't need a justice department. We don't even need rules like the SEC. The markets cleanse themselves automatically and prevent all frauds. This is a spectacularly naïve thing. There is enormous ideological content. And it fits with class. And it fits with political contributions.

Do you want to look at these seemingly respectable huge financial institutions, which are your leading political contributors as crooks?

But can't we insist that suspect businesses be audited to determining whether they are committing fraud? Not based on a long sordid track record regarding prestigious accounting firms:

BILL MOYERS: Isn't the accounting firm supposed to report this, once they learn from somebody like him that there's fraud going on?

WILLIAM K. BLACK Yes, they're supposed to be the most important gatekeeper. They're supposed to be independent. They're supposed to be ultra-professional. But they have an enormous problem, and it's compensation. And that is, the way you rise to power within one of these big four accounting firms is by being a rainmaker, bringing in the big clients.

And so, every single one of these major frauds we call control frauds in the financial sphere has been-- their weapon of choice has been accounting. And every single one, for many years, was able to get what we call clean opinions from one of the most prestigious audit firms in the world, while they were massively fraudulent and deeply insolvent.

BILL MOYERS: I read an essay last night where you describe what you call a criminogenic environment. What is a criminogenic environment?

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