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Tuesday, April 8, 2008

Astonishing Fact Reported by CCTV

According to one's local community-access cable TV station, the Federal Reserve Board is a private corporation ! Yeah. The Fed. Not part of the US government ! The entity that sets interest rates and controls the money supply, i.e. the printing of money, and therefore has an enormous effect on the economy and the lives of every wage-earner in it is not an institution democratically administered in the public interest, if this broadcast has the facts right. Why wasn't I taught this in high school? How could I as a newspaper-consuming adult not be aware of this? (And I'll hazard a guess that the network of Federal Reserve banks, which I always assumed was part of the federal government, consists of private institutions as well.) Is it appropriate in a democracy that the central banking institution in the country is not the accountable to the electorate? The central banking institution in a democracy should first and foremost serve the public interest, not private interests. In all the coverage of the Bear Stearns bailout that I've read, not once was the fact that the Fed is a private entity (and could therefore have an agenda other than promoting the public good, since it is not accountable to the voting public) mentioned. The increase in the bailout price from $2 to $10 a share had ramifications measured in the millions for Bear holders, its management not excluded. Did the public have a say in this little detail? Is a minimally regulated investment bank such as Bear entitled to the kind of federal protection that a highly regulated commercial bank is? Did the public have a say in this? Would bankruptcy by Bear have sent a corrective and beneficial message to other investment banks with respect to leveraging their assets rather than causing a market panic and systemic disintegration, as the Fed maintained? Did the public, or the public's elected representatives, have a chance to weigh in on this? And one last point--why is it called the securities industry? Where's the security? Friday's NYTimes reported (p.C5) that during its precipitous decline Bear lost $10 billion in a single day. Why isn't it called the risk industry? Why does Wall Street start misleading people at step A, the name of the enterprise? A knowledgeable reader of this weblog has questioned the factual basis of the CCTV broadcast and as soon as current pressures allow one will look into this.

Bush Sr.'s father, one Prescott Bush, was a New York banker who colluded with the Nazis during WWII and was caught, creating a front-page scandal, according to the same TV show.


Patty McNally Doherty said...

Names of things are often used to help sell them. Instead of calling something the Inheritance Tax, it was called the Death Tax. Instead of calling something the Lose Your Liberties Act, it was called the Patriot Act.

What's in a name, you ask? Much more than meets the eye. These days, if I like the sound of something, I stop myself and wonder why.

Patty McNally Doherty said...

Oh and also, the Fed is part government, part private sector. Here's a good explanation:


Anonymous said...

The Federal Reserve notes in your pocket do seem more like government issue than private obligations.

Richard McNally said...

Hmmm ... could my community-access cable channel be wrong on the facts? I'll check your link tomorrow Patty, or rather later today. Thanks for the tip.