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December 23rd marks the 100th anniversary of the Federal Reserve. Dissatisfaction with its track record has prompted calls to audit the Fed and end the Fed.  At the least, Congress needs to amend the Fed, modifying the Federal Reserve Act to give the central bank the tools necessary to carry out its mandates. The Federal Reserve is the only central bank with a dual mandate. It is charged not only with maintaining low, stable inflation but with promoting maximum sustainable employment. Yet unemployment remains stubbornly high, despite four years of radical tinkering with interest rates and quantitative easing (creating money on the Fed’s books). After pushing interest rates as low as they can go, the Fed has admitted that it has run out of tools. At an IMF conference on November 8, 2013, former Treasury Secretary Larry Summers suggested that since near-zero interest rates were not adequately promoting people to borrow and spend, it might now be necessary to set interest at below zero. This idea was lauded and expanded upon by other ivory-tower inside-the-box thinkers, including Paul Krugman. Negative interest would mean that banks would charge the depositor for holding his deposits rather than paying interest on them. Runs on the banks would no doubt follow, but the pundits have a solution for that: move to a cashless society, in which all money would be electronic. “This would make it impossible to hoard cash outside the bank,” wrote Danny Vinik in Business Insider, “allowing the Fed to cut interest rates to below zero, spurring people to spend more.”

Business Week quotes Douglas Holtz-Eakin, a former director of the Congressional Budget Office: “We’ve had four years of extraordinarily loose monetary policy without satisfactory results, and the only thing they come up with is we need more?” Paul Craig Roberts, former Assistant Secretary of the Treasury, calls the idea “harebrained.” He is equally skeptical of quantitative easing, the Fed’s other tool for stimulating the economy. Roberts points to Andrew Huszar’s explosive November 11th Wall Street Journal article titled “Confessions of a Quantitative Easer,” in which Huszar says that QE was always intended to serve Wall Street, not Main Street.  Huszar’s assignment at the Fed was to manage the purchase of $1.25 trillion in mortgages with dollars created on a computer screen. He says he resigned when he realized that the real purpose of the policy was to drive up the prices of the banks’ holdings of debt instruments, to provide the banks with trillions of dollars at zero cost with which to lend and speculate, and to provide the banks with “fat commissions from brokering most of the Fed’s QE transactions.”

Bernanke created debt-free money and bought government debt with it, returning the interest to the Treasury. The result was interest-free credit, a good deal for the government. But the problem, says Lounsbury, is that: The helicopters dropped all the money into a hole in the ground (excess reserve accounts) and very little made its way into the economy.  It was essentially a rearrangement of the balance sheets of the creditor nation with little impact on the debtor nation. . . . The fatal flaw of QE is that it delivers money to the accounts of the creditors and does nothing for the accounts of the debtors. Bad debts remain unserviced and the debt crisis continues.

First, we should have a balanced budget amendment.

Next, we need a constitutional amendment that ensures sound money.

Finally... we need a logical way to put a stop to the narrowing of the tax base.

A move to shift power away from the New York Federal Reserve Bank is finding some powerful friends in Congress amid lingering worries that a key part of the central bank is too cozy with Wall Street. Two Republicans running the banking committees have both said they plan to explore proposals from the outspoken, former Dallas Federal Reserve Bank President Richard Fisher that would roll back a long-standing provision that gives the president of the New York Federal Reserve Bank an automatic position as vice chairman of a powerful committee and weaken New York’s oversight of Wall Street banks. Story Continued Below The politics may be ripe for chipping away at the power of the Federal Reserve, uniting liberals who want to crack down on Wall Street, Republicans who don’t like the Fed’s easy money policies and libertarians who are suspicious of the Fed altogether.

Fisher, who retired Thursday after 10 years at the Dallas Fed, wants to yank the New York Fed’s permanent position as vice chair of the all-powerful Federal Open Market Committee, the panel charged with making monetary policy decisions, which met Wednesday. While the New York Fed president could still participate in monetary policy discussions, he or she would no longer always get a vote. Fisher suggested the job should rotate among the regional Federal Reserve Banks every two years.

The move would upend the current structure, as the New York Fed has had a lock on that spot since 1936, thanks largely to its role as the infrastructure, which supplies the trading desk that carries out the Fed’s monetary policy decisions. Fisher is also proposing that other regional Fed banks oversee some of the Wall Street giants in a move aimed at addressing criticism the New York Fed missed warning signs of the financial crisis, is too soft on Wall Street and holds too much power and influence at the Fed. “The greatest concern appears to be the problem of regulatory capture by the largest and most powerful institutions,” Fisher said in a February speech in New York laying out his plan. Wall Street critics have been suspicious of the New York Fed since it and its then leader, Timothy Geithner, played a key role in responding to the 2008 financial crisis and the bailouts that entailed.

We assume it is a coincidence that on the day in which we demonstrate China's relentless appetite for gold, driven by what we and many others believe is the country's desire to have a call option on a gold-backed reserve currency when the time comes, just posted in China's official press agency, Xinhua, is an op-ed by writer Liu Chang in which he decries the "US fiscal failure which warrants a de-Americanized world" and flatly states that the world should consider a new reserve currency "that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States." Of course, if China were serious, and if the world were to voluntarily engage in such a (r)evolutionary reserve currency transition, then all Magic Money Tree theories that the only thing better than near infinite debt is beyond infinite debt, would promptly be relegated to the historic dust heap of idiotic theories where they belong. Some of China's (which as a reminder is the single largest offshore holder of US Treasury paper, and the second largest of all only second naturally to the Federal Reserve whose $85 billion in monthly monetizing "flow" is what is keeping rates from exploding higher) thoughts as captured in the Xinhua Op-ed:

Reform of the world’s financial system should include the introduction of a new internatonal reserve currency to replace the U.S. dollar The international community could thus permanently stay away from the spillover of intensifying domestic political turmoil in the U.S. Fiscal impasse in the U.S. is a good time for “befuddled world” to start considering building a “de-Americanized world” Impasse has left many nations’ dollar assets in jeopardy and the international community agonized Other cornerstones should be laid to underpin a de-Americanized world, including respect for sovereignty, recognizing authority of UN in handling global hotspot issues and giving developing and emerging market economies more say in major international financial institutions Purpose of such changes is not to “completely toss the United States aside,” rather to encourage Washington to play a much more constructive role in addressing global affairs Of course, if and when the day comes that the USD is no longer the reserve currency, kiss America's superpower, or any power, status, which is now based purely on the USD's reserve currency status, and the ability to fund half the US budget deficit with debt promptly monetized by the Fed, goodbye.

Democratic presidential contender Bernie Sanders warned on Wednesday that if he wins the White House he will “fix” the Federal Reserve by throwing bankers off its boards and increasing transparency and regulation as a way of reining in Wall Street. Sanders criticized the pivotal decision by America’s central bank a week ago to raise interest rates for the first time in almost a decade. He declared that the move was “the latest example of the rigged economic system”, in an opinion article for the New York Times on Wednesday. “Wall Street is still out of control,” he said in the article.

WASHINGTON -- In a rare moment of bipartisanship, the House overwhelmingly passed a bill by Rep. Ron Paul (R-Texas) to audit the Federal Reserve. The bill, which has 270 co-sponsors, passed 327 to 98. All but one Republican -- Rep. Bob Turner of New York -- voted for it, along with 89 Democrats. Paul teamed up with former Rep. Alan Grayson (D-Fla.) in 2010 to pass similar legislation that became part of the final Wall Street reform bill. But Paul has said new audit legislation is needed because the 2010 bill didn't go far enough. Specifically, he states on his website that the audit called for in the 2010 bill only focused on emergency credit programs and procedural issues, rather than on the substantive details of the lending transactions. The 2012 bill doesn't limit the focus of the audit.

"The Fed creates trillions of dollars out of nothing and gives it to banks. Congress is in the dark. The Fed sets the stage for the subprime meltdown. Congress is in the dark. The Fed takes a dive on LIBOR. Congress is in the dark. The Fed doesn’t tell regulators what is going on. Congress is in the dark," Kucinich shouted on the House floor, just before the vote. "It is time for us to bring the Fed into the sunshine of accountability," he said.

Wells Fargo WFC -9.22%Wells FargoWFC$58.16$-5.91(-9.22%)As of 02/06/2018, 01:01am EST is facing far more than a fine for its fake accounts scandal, in which employees at the lender's branches across the country opened over a million fraudulent checking and credit card accounts to hit their numbers. Late on Friday, the Federal Reserve decided to restrict growth at America's third-largest bank by assets until its risk and governance is improved. The order, which also called for a revamp of Wells Fargo's board of directors, sent the bank reeling in early trading Monday. Wells Fargo shares plunged 9% lower in Monday trading, erasing most of its gains over the past 12 months. For its top shareholder, Warren Buffett's Berkshire Hathaway, the Fed-inspired stock slide meant its Wells Fargo holdings lost over $2.7 billion in value. "We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again," said chair Janet L. Yellen on Friday. The order was her last as head of the Federal Reserve. On Monday, successor Jerome Powell was sworn in. Added Yellen, "the enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers." In September 2016, Wells Fargo paid a $185 million fine to the Consumer Financial Protection Bureau after the agency found branch bankers had opened well over a million fake accounts, which generated millions of dollars in fees to the lender. When the scandal, which occurred over almost a decade, was first revealed, Wells Fargo and its board didn't immediately overhaul their leadership, or sanction top executives in the divisions where fake accounts were created. Only after significant public outcry, in addition to a widening scope of the scandal, did Wells Fargo begin a revamp, firing CEO John Stumpf and clawing back bonuses for numerous executives. Backer Warren Buffett later said in an appearance on CNBC the bank and its leadership had misjudged the severity of the problem.

In addition to harsh words, the Fed is ordering a sanction of almost unprecedented severity. It will restrict the bank's growth until its governance and risk management improve, though it will allow Wells to continue current operations from taking deposits to offering loans.

Three Wells Fargo long-standing board directors, John Chen, Lloyd Dean and Enrique Hernandez, will likely retire at the firm's annual meeting as part of the Fed's additional order for a refreshment of four board directors. Analysts did not brush off the Fed's move, as they have large fines coming out of the crisis.

It is alleged that some of the bail money that released Sturgis and the other Watergate burglars was drug money from the CIA asset turned drug trafficker, Manuel Artime, and delivered by Artime’s money-launderer, Ramón Milián Rodríguez. After the Iran-Contra scandal went public, Milián Rodríguez was investigated by a congressional committee – not for Watergate, but because, in support of the Contras, he had managed two Costa Rican seafood companies, Frigorificos and Ocean Hunter, that laundered drug money.6

In the 1950s Wall Street was a dominating complex. It included not just banks and other financial institutions but also the oil majors whose cartel arrangements were successfully defended against the U.S. Government by the Wall Street law firm Sullivan and Cromwell, home to the Dulles brothers. The inclusion of Wall Street conforms with Franklin Roosevelt’s observation in 1933 to his friend Col. E.M. House that “The real truth … is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson.”18 FDR’s insight is well illustrated by the efficiency with which a group of Wall Street bankers (including Nelson Rockefeller’s grandfather Nelson Aldrich) were able in a highly secret meeting in 1910 to establish the Federal Reserve System – a system which in effect reserved oversight of the nation’s currency supply and of all America’s banks in the not impartial hands of its largest.19 The political clout of the quasi-governmental Federal Reserve Board was clearly demonstrated in 2008, when Fed leadership secured instant support from two successive administrations for public money to rescue the reckless management of Wall Street banks: banks Too Big To Fail, and of course far Too Big To Jail, but not Too Big To Bail.20

since its outset, the CIA has always had access to large amounts of off-the books or offshore funds to support its activities. Indeed, the power of the purse has usually worked in an opposite sense, since those in control of deep state offshore funds supporting CIA activities have for decades also funded members of Congress and of the executive – not vice versa. The last six decades provide a coherent and continuous picture of historical direction being provided by this deep state power of the purse, trumping and sometimes reversing the conventional state. Let us resume some of the CIA’s sources of offshore and off-the-books funding for its activities. The CIA’s first covert operation was the use of “over $10 million in captured Axis funds to influence the [Italian] election [of 1948].”25 (The fundraising had begun at the wealthy Brook Club in New York; but Allen Dulles, then still a Wall Street lawyer, persuaded Washington, which at first had preferred a private funding campaign, to authorize the operation through the National Security Council and the CIA.)26 Dulles, together with George Kennan and James Forrestal, then found a way to provide a legal source for off-the-books CIA funding, under the cover of the Marshall Plan. The three men “helped devise a secret codicil [to the Marshall Plan] that gave the CIA the capability to conduct political warfare. It let the agency skim millions of dollars from the plan.”27

In a landmark infrastructure bill passed in December, Congress finally penetrated the Fed’s “independence” by tapping its reserves and bank dividends for infrastructure funding. The bill was a start. But some experts, including Congressional candidate Tim Canova, say Congress should go further and authorize funds to be issued for infrastructure directly. For at least a decade, think tanks, commissions and other stakeholders have fought to get Congress to address the staggering backlog of maintenance, upkeep and improvements required to bring the nation’s infrastructure into the 21st century. Countries with less in the way of assets have overtaken the US in innovation and efficiency, while our dysfunctional Congress has battled endlessly over the fiscal cliff, tax reform, entitlement reform, and deficit reduction. Both houses and both political parties agree that something must be done, but they have been unable to agree on where to find the funds. Republicans aren’t willing to raise taxes on the rich, and Democrats aren’t willing to cut social services for the poor.

In December 2015, however, a compromise was finally reached. On December 4, the last day the Department of Transportation was authorized to cut checks for highway and transit projects, President Obama signed a 1,300-page $305-billion transportation infrastructure bill that renewed existing highway and transit programs. According to America’s civil engineers, the sum was not nearly enough for all the work that needs to be done. But the bill was nevertheless considered a landmark achievement, because Congress has not been able to agree on how to fund a long-term highway and transit bill since 2005. That was one of its landmark achievements. Less publicized was where Congress would get the money: largely from the Federal Reserve and Wall Street megabanks. The deal was summarized in a December 1st Bloomberg article titled “Highway Bill Compromise Would Take Money from US Banks”: The highway measure would be financed in part by a one-time use of Federal Reserve surplus funds and by a reduction in the 6 percent dividend that national banks receive from the Fed. . . . Banks with $10 billion or less in assets would be exempt from the cut. The Fed’s surplus capital comes from the 12 reserve banks. The highway bill would allow for a one-time draw of $19 billion from the surplus, which totaled $29.3 billion as of Nov. 25. . . . Banks vigorously fought the dividend cut, which was estimated to generate about $17 billion over 10 years for the highway trust fund.

When one transfers the learned behavior of selfishness to the world of economics, it is east to see how we got to the world of adjustable rate mortgages, thirty-to-one leverage, credit default swaps, and thirty year hedge fund workers acting as is million dollar paychecks was an otherwise normal entitlement.  If it felt good, it was therefore right – and by all means, don’t rock the boat.  And what we are witnessing today in Washington and Wall Street in response to our economic crisis is nothing but a conscious and willing decision to pass off to the next generation the cost of our mistakes.

the fundamental principles of capitalism – namely that bad actors need to fail.

First and most foremost, the Congress needs to institute a modernized version of Glass-Stegall and separate commercial banking from investment banking activities. What we have seen in the abolishment Glass-Stegall (please thank Mr. Rubin formerly of Goldman Sachs) is the creation of federally subsidize casinos masquerading as publicly traded financial institutions.  They kept profits from over-leveraged bets and were kind enough to pass their losses onto the taxpayers.  Second, Congress needs to repeal legislation (Gramm-Leach) that allowed financial institutions not only to leverage in ways previously not permitted, but which also granted banks and financial situations exemption from federal gambling laws. Third, and this is where moral outrage hits home to those on Wall Street, we cannot live in a country in which any company is allowed to manipulate the levers of government in such a way as to make itself obscenely rich at the expense of the public.

Since 2006, the US dollar has experienced a one-quarter to one-third drop in value to the Chinese yuan, depending on the choice of base.   Now China is going to let the dollar decline further in value.  China also says it is considering undermining the petrodollar by pricing oil futures on the Shanghai Futures Exchange in yuan. This on top of the growing avoidance of the dollar to settle trade imbalances means that the dollar’s role as reserve currency is coming to an end, which means the termination of the US as financial bully and financial imperialist.  This blow to the dollar in addition to the blows delivered by jobs offshoring and the uncovered bets in the gambling casino created by financial deregulation means that the US economy as we knew it is coming to an end. The US economy is already in shambles, with bond and stock markets propped up by massive and historically unprecedented Fed money printing pouring liquidity into financial asset prices.  This month at the IMF annual conference, former Treasury Secretary Larry Summers said that to achieve full employment in the US economy would require negative real interest rates.  Negative real interest rates could only be achieved by eliminating cash, moving to digital money that can only be kept in banks, and penalizing people for saving. The future is developing precisely as I have been predicting. As the dollar enters its death throes, the lawless Federal Reserve and the Wall Street criminals will increase their shorting of gold in the paper futures market, thereby driving the remnants of the West’s gold into Asian hands.

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policymakers will rein in dollar purchases that limit the yuan’s appreciation. “It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting.