House Panel 'Yes' On Dismantling Financial Firms

that pose a risk to the economy.

The House Financial Services Committee (chair: Barney Frank) has approved the legislation, by 31-27, that would give the government the power to dismantle financial firms that it thinks pose a risk to the economy, even if they are healthy. It will also force big financial firms to pay the fees upfront for dismantling.

The question here is: WHO IS TO DECIDE, AND HOW? HOW IS 'RISK' DEFINED? BY WHOM?

By Timmy Geithner and Ben Bernanke, who didn't see anything bad coming their way? Or Barney Frank who insisted Fannie Mae and Freddie Mac were sound businesses? Or Chris Dodd who was a "friend of Angelo"? Or another Presidential Task Force headed by an ex-banker supported by ex-campaign staff?

As this is part of so-called financial overhaul attempt by the government, it also contains the audit of the Federal Reserve.

Panel OKs key regulatory measure; House vote next
(12/2/09 AP via Yahoo Finance) [emphasis is mine]

"WASHINGTON (AP) -- A key House panel voted Wednesday to slap new restraints on big Wall Street institutions and to demand greater openness from the nation's central bank, clearing a significant hurdle in the drive for a sweeping financial regulations overhaul.

"Motivated by the crisis that caused a near collapse in financial markets, the House Financial Services Committee approved legislation 31-27 that would give the government the right to dismantle financial firms that pose a risk to the economy, even if they are healthy.

"The legislation also would require a detailed congressional audit of the privacy-shrouded Federal Reserve and would assess fees up front on large financial institutions to pay for the failure of their competitors.

"The action sets the stage for a full House vote next week on comprehensive regulatory changes meant as a response to the financial sector's meltdown more than a year ago. That package, set to go to the House floor on Wednesday, would include the creation of a new consumer finance protection agency, restrictions on complex financial instruments blamed for feeding last year's panic and restrictions on Wall Street compensation."

Why don't we, citizens, have the right to dismantle institutions that pose a risk to the economy? The first on my list would be the Federal Reserve, IRS next, and then dismantle the entire federal government, as the biggest risk to the economy and liberty and welfare of the citizens.

Read the post on 30-day makeover of the U.S. by Lew Rockwell.

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Paul: Audit the Fed Bill Totally "Gutted"

by Mel Watt (D, NC). What a surprise.

Federal Reserve Policy Audit Legislation ‘Gutted,’ Paul Says
(Bob Ivry, 10/30/09 Bloomberg) [emphasis is mine]

"Oct. 30 (Bloomberg) -- Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.

"The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.

"“There’s nothing left, it’s been gutted,” he said in a telephone interview. “This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that.” "

"Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee."

"Paul said he intends to introduce an amendment to the bill when it comes to the House floor for a vote restoring the legislation’s original language."

Mr. Watt's district includes Charlotte, NC, where Bank of America, the largest lender in the U.S., is headquartered, as noted by the article.

If you are in Mr. Watt's district, or Chairman Frank's district and want to know what on earth the Federal Reserve has been doing with your money and a whole lot of others, PLEASE write to them and tell them they must restore the original bill as introduced by Ron Paul.

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Entire Hearing on H.R. 1207 in House Finance Committee

on September 25, 2009. Historic, as Barney Frank says.

Here's the link to yesterday's entire full-committee hearing of H.R. 1207 in House Financial Services Committee.

http://www.house.gov/apps/list/hearing/financialsvcs_dem/fchr_092509.shtml

I was impressed with the disciplined way that Chairman Barney Frank ran his committee when I was watching part of the hearing, but I now have some respect for him (which it hardly existed in me before) after hearing his opening remark. I missed it yesterday, as I caught only the last hour or so of the hearing.

Barney Frank started off by saying "This is a historic hearing." He noted that Ron Paul first filed this bill for the first time in 1983, and 12 years that the Republican Party control the agenda of the Committee they found no time for the hearing . He was pleased, in the show of bipartisanship, to be the one to give this important piece of legislation its first hearing ever.

Frank went on to state that the openness and transparency issue with the Federal Reserve was a bipartisan issue, and was not new; in fact, under Chairman Gonzales in 1983, the Committee succeeded in making the Federal Reserve more open. At that time, the meetings of FOMC were kept secret. The Federal Reserve denied even the existence of the minutes of the meetings, which happened to be found later in a drawer, Frank remarked.

Also (and that's where he gained my respect), he said in 2003 Ron Paul had been slated to be the chairman of the Domestic Monetary Policy Subcommittee, and that subcommittee immediately disappeared. It was merged into the International Monetary Policy Subcommittee. "There were people who wanted to shield the Federal Reserve from Mr. Paul's influence," Frank said.

Before he yielded to Ron Paul for his opening remarks, Frank expressed his concerns in proceeding with the legislation, which he had already expressed previously; that he didn't want to make the disclosure of the audit results interfere with the market in any way, and wouldn't want to allow any party from profiting from the Fed's moves (buying and selling in the financial market).

Well, many think that's been happening already anyway for quite a long time. He doesn't need to worry about that aspect, because that's what many large, influential financial institutions have already been successful in anticipating the Fed's moves and profiting from it, with or without insider knowledge.

I would love to know (on top of my head, for no particular order):

• Where did the money go and how much, and how was it used, in foreign currency swaps;
• Fed's relationship with primary dealers in stock, bond, and commodity markets
• Detailed accounting for the TARP money that the Fed administered
• What exactly is in the Maiden Lane portfolio and how they are valued
• Physical gold audit (why is it priced at $42, anyway?)
• Mark to market value of its assets (agency bonds, MBS, and all the "assets" that the Fed got in exchange for the various loans)
• What are the "Other assets" on their balance sheet
• Why they stopped disclosing M3
• Detailed accounting of the ownership of the Fed (who exactly are the shareholders?)

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Audit the Fed

Ron Paul's H.R. 1207 is being heard in the House Committee on Financial Services, thanks to Barney Frank. It's a historical day, regardless of whether the bill will pass. 96 years after the Federal Reserve System came into being, Congress is finally debating whether to audit the institution that wields enormous power over the nation's financial and economic policies. It's about time.

You can watch the hearings on the Committee's website.

(By the way, the member of the Federal Reserve Board, who wrote the op-ed piece for Wall Street Journal to coincide with this occasion, was a member of the Working Group on Financial Markets , aka the Plunge Protection Team.)

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Barney Frank Says Ron Paul's Audit the Fed Bill Will Pass In October

That's the bill H.R. 1207, which now has 282 co-sponsors in the House. Barney Frank, answering the question in his townhall meeting, says he wants to curtail the power of the Federal Reserve, and that the bill will probably pass in October.

The video was posted on Mish's Global Economic Analysis. (Transcription is probably by Mish.)

Barney Frank:

I have been pushing for more openness from the Fed. I want to restrict the powers of the Federal Reserve. First of all, the Fed will be the major losers of power if we are successful, as I believe we will be, setting up a financial product protection commission.

The Federal Reserve is now charged with protecting consumers. They were supposed to do subprime mortgage restrictions.

Congress in 1994 gave the Fed powers to ban subprime mortgages. Alan Greenspan refused to do it. They had the power to ban credit card abuses. Under Greenspan they did nothing. Under Bernanke they started but only after Congress acted.

That's one of the reasons why in the new consumer protection agency, we will take away from the Federal reserve the power to go consumer protection.

Secondly, they have has since 1932 a right under Herbert Hoover to intervene in the economy whenever they could. Last September, the Federal Reserve they were going to advance $82 billion to AIG.

I was kind of surprised and said Mr Bernanke do you have $82 billion? Mr. Bernanke replied I have $800 billion and under section 13.3 of the Federal Reserve Act they can lend anything they want.

We are going to curtail that lending power. We are going to put some restrictions on it.

Finally we will subject them to a complete audit. I have been working with Ron Paul, who is the main sponsor of that bill. He agrees that we don't want to have the audit appear as if influences monetary policy as that would be inflationary.

One of the things the audit will show you is what the Federal Reserve buys itself. And that will be made public, but not instantly because if it was made instantly people would be trading off it, so the data would be released after a time period of several months, enough time so it will not be market sensitive.

This will probably pass in October.

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