Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Bernanke Is Stuttering, Stammering, Panicking

Politics / Credit Crisis 2009 Aug 02, 2009 - 08:59 AM GMT

By: LewRockwell

Politics

Diamond Rated - Best Financial Markets Analysis ArticleGary North writes: Bernanke video: He stutters; he stammers; he is in visible panic mode over Ron Paul's bill to audit the Federal Reserve. Watch it. You'll love it! Then send it to your friends.

Usually, when Ben Bernanke is interviewed, he has the demeanor of a college professor in the presence of freshman students. Of course, as a full professor, he did not have to teach freshmen. That is for untenured assistant professors to do. Stammering and stuttering are therefore a real departure for him. There is a reason for this.


For the first time since 1914, there is a public debate in Congress over the Federal Reserve's power. Never before has a majority of the House of Representatives called for what should always have existed: Congressional scrutiny over the FED's money. Bernanke says that Ron Paul's bill to audit the Federal Reserve is a bill to audit Federal Reserve policy. Yet the bill says nothing about auditing policy. So, what is he talking about?

Bernanke says that Congress can have access to an audit at any time. Sure it can – an audit vetted and sanitized by the FED, where no one knows which banks got what bailout money. This is an audit in the way a CIA audit is an audit. The main differences are these: (1) the CIA legally operates only outside the borders of the United States; (2) the CIA can assassinate any uncooperative Congressman who insists on a full audit. The FED does not have the second power, but it is not limited by the first restriction.

What has Bernanke panicked is this: the Federal Reserve has bailed out the biggest banks and has let almost 100 little ones die. This is crony capitalism at its most notorious.

The threat is that Congress will discover what should be obvious: the biggest banks last October almost went bankrupt. Bernanke and Paulson admitted this to Congressional leaders. This is how they got the leaders to authorize the Treasury bailout. This is why the FED swapped marketable Treasury debt for unmarketable toxic debt at face value with the biggest banks.

Which banks? The FED refuses to say.

This is the heart of the matter. This is what has Bernanke in a panic. If Congress compels a full audit – a real audit, not a FED-controlled audit – individual members of Congress will discover that the American financial system is a house of cards. A few of them will release the results of the audit to the public. This will include Website publishers, who will go over the audit, line by line. The mainstream media will face being scooped by newsletter writers, so they will try to publish first.

The public will find out which banks are not safe. This is what has Bernanke in panic mode.

The public will pull deposits out of the biggest, least safe banks and open new accounts at banks that look safer. That will bust some very big banks.

There is no way that the FDIC could cover the losses of even one of these giant banks. It is down to $12 billion in assets, mostly T-bills. It would have to come to Congress for the line of credit that Congress has extended: $500 billion.

The banking cartel would face a breakdown. Why? Because the public would finally learn which big banks got how much money, how much Treasury debt for toxic assets, and on what terms.

KEEPING DEPOSITORS IN THE DARK

Bernanke says this bill is all about criticizing Federal Reserve policy. Not really. It is all about exposing policy to the public, and letting them decide where to deposit their money.

This thought of depositors finding out which banks are at risk is what the Federal Reserve was created in 1913 to prevent. The banking cartel must prevent bank runs from spreading. If the public had explicit information on what the FED did and why, the public would be in a position to pull their money out of illiquid, economically insolvent large banks.

Bernanke feigns a fear of Congress setting policy. What he is afraid of is depositors setting policy. He does not want depositors to see which banks are at risk.

The bankers live in fear of their depositors. Depositors can bust a bank in a matter of days. All they need to do is write a check or send a bank wire transfer from their present bank to a different bank. If too many depositors pull money out of Bank A to send to Banks B, C, or D, Bank A goes under. The FDIC has to have a Friday afternoon emergency session where it absorbs the bad assets of Bank A and opens bidding for the good assets.

The big banks love this when they are not the targets of the bank run. They can buy up millions of dollars of good assets, while palming off the bad assets to the FDIC. If the FDIC can't cover the losses, then Congress picks up the tab. A sweet deal for the surviving banks!

But what if the surviving banks are being held together with accounting gimmicks. Example: the FED "lends" Treasury bills (marketable) at face value to big banks that are sitting on a hundred billion dollars in unmarketable assets: bad real estate loans. The receiving banks list the Treasury bills as their capital. The government auditors are then instructed to evaluate the solvency of the banks in terms of the quality of their loans – in this case, T-bills. No problem!

But these assets are borrowed from the FED. In theory, the FED can force the banks to swap back at face value. At that point, the banks are technically bankrupt. These assets have no liquid market.

The solvency of the American banking system rests on smoke and mirrors. Bernanke knows this. Congress is ignorant. Congress thinks things are probably OK. But a majority of House members want to be safe. They don't want the folks back home to believe that they are asleep at the wheel, which Congress has been since 1914 with respect to the Federal Reserve. So, a majority of House members co-sponsored Ron Paul's bill to audit the FED.

Barney Frank understands the threat. He has bottled the bill up in committee. This way, members who support the bill can tell the folks back home that it's not their fault. If they are asked about this, they can say, one by one, "I am really sorry. I did my best, but the bill is bottled up in committee. There is nothing I can do."

Of course there is something they can do. They can vote to bring the bill to the floor for a vote. There, they will be exposed to the folks back home. Did they vote "yes" to audit the FED? By co-sponsoring the bill, they can tell the folks back home, "I'm with you on this." By letting Frank bottle it up in committee, they can plead powerlessness. Nice.

It's all smoke and mirrors. It's all about not letting depositors find out how their banks are doing.

BERNANKE IS CONTEMPTUOUS OF CONGRESS

Bernanke said this on-camera: "The public does not want Congress to set monetary policy." If that really is the case, then it is odd what the United States Constitution says about this. Consider Article 1.

Section 1. All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.

Then Article 8 spells out the powers of Congress. These include:

To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

To provide for the punishment of counterfeiting the securities and current coin of the United States.

That surely appears as though Congress does have lawful power over money. That in turn seems as though the public can ask Congress to fulfill its duties. That seems as though Congress has the legal right to audit or set policy for the private agency – the Federal Reserve Bank of New York – that executes the monetary policy of the government agency, the Board of Governors of the Federal Reserve System.

The way that the public kept both Congress and the commercial banks under control was through the silver standard, up until about 1815, and then by the international gold coin standard until late 1913, when the Senate rushed through the Federal Reserve Act when most members had gone home for the Christmas recess. President Wilson signed the bill into law that evening: a very fast track.

When Dr. Bernanke showed contempt for Congress in the name of the American people, he forgot to mention an alternative to both the Federal Reserve and Congress: the gold coin standard. That system lodged the power of the veto in the hands of the public. That was why commercial bankers, central bankers, and politicians joined forces to ridicule both the gold standard and the earlier silver standard.

A precious metal coin standard – coins payable at a government-fixed price on demand for paper money – gives the public too much authority over monetary policy. This gives them too much authority over government tax policy: no inflation tax.

The Federal Reserve Act transferred legally sovereign power over money from Congress to the Board of Governors of the FED. The Board of Governors labored under the restraint of the gold coin standard domestically until Roosevelt unilaterally abolished it in 1933. Then Nixon unilaterally abolished the last remaining traces of the international gold standard in 1971. That left the Federal Reserve System with nearly uncontested power over money, with only the infamous and much-denigrated "bond vigilantes" possessing an independent veto over FED policy.

Bernanke is adamant: any attempt by Congress to monitor the activities of the FED is an assault on Federal Reserve sovereignty. The Constitution lodges such sovereignty in Congress, but Congress delegated this sovereignty to the not-yet operational Federal Reserve in late 1913.

Ron Paul's bill is the first bill ever to gain widespread support in the House to transfer the right to audit the FED to Congress. This is the first time since 1914 that any Congressman has persuaded a majority of his colleagues to assert the legal sovereignty that the Constitution delegates to Congress with respect to money. This is why Bernanke is in panic mode.

This is the first chink in the FED's armor since 1914. This bill is a nightmare for the FED. Yet the FED's staffers are going to get paid their above-market salaries and keep their fully vested pensions, with or without an audit by Congress.

PANIC IN THE BOARDROOMS

The real panic is in the boardrooms of the largest banks. This bill will allow Congress to see the specifics of the sweetheart arrangement that big banks have had with the FED. Congress will get the statistical facts, and newsletter writers will interpret them for subscribers – rich subscribers.

The big bankers know that their banks would be insolvent without Federal Reserve bailouts, Treasury Department bailouts, and smoke-and-mirrors accounting. They know that any light thrown on the system's smoke-and-mirrors accounting will reveal the insolvency of the biggest banks.

The directors of these banks do not want the public to be able to get access to these facts by means of a full-scale audit of the Federal Reserve System. The paper trail, meaning the digital money trail, leads to their banks. This terrifies them. It should.

The big bank bankers are now in full defensive mode. They see the threat. They dare not go public with warnings about letting the public gain access to full information about the bailouts since last September. This would appear to be self-serving, which it would unquestionably be. So, they let Bernanke be their spokesman, as if Bernanke and the Board of Governors were not enforcers of the fractional reserve banking cartel.

This puts Bernanke on the spot. He dares not tell his interviewers that the United States Constitution lodges in Congress legal sovereignty over the money of the United Stares. He does not want to remind the public of this Constitutional fact. So, he denigrates Congress as incompetent to set monetary policy. He is therefore contemptuous of the Constitution, but he dares not let this slip out. That would not be prudent.

If Ron Paul's bill is kept bottled up, this will be grist for the mill of a growing number of Americans who have only recently learned about the existence of the Federal Reserve System. From the beginning, the Federal Reserve was designed to be a mystery to the public. This strategy succeeded for over 90 years. But Ron Paul's Presidential campaign at long last began to gain attention for the FED. The campaign took place in 2008. That was the year of the crash and the desperation bailouts. This was bad timing for the FED. This bad timing led this year to widespread member support in the House of Representatives for an audit of the FED. Worse yet, the bill was sponsored by Ron Paul – the FED's greatest Congressional opponent in this generation. This is very bad news for the banking cartel. It took place on Bernanke's watch. He is in panic mode.

CONCLUSION

The Federal Reserve has lost a lot of its legitimacy. It has also lost a lot of its secrecy. By opposing the audit, Bernanke is positioning himself as an anti-democratic representative of the Wall Street banks. Of course, this is what every FED chairman has been. But this is the first time since 1914 that any FED chairman (or his equivalent) has had to adopt this positioning in full public view.

This is bad news for the Federal Reserve. When the economy gets worse, as it will, the FED will receive its share of the blame, which is considerable. Bernanke is the primary visible agent of the FED. He will no longer get a free ride. The critics are at long last getting a hearing by the informed public – the people with lots of money deposited in large banks. This is why he has been going on television to present his case. No other FED chairman in history has been forced to do this. This is a sign of the degree of panic in the boardrooms.

The more often Bernanke goes on TV, the more people will think: "Methinks he doth protest too much."

This is a very good thing.

    Gary North [send him mail ] is the author of Mises on Money . Visit http://www.garynorth.com . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .

    http://www.lewrockwell.com

    © 2009 Copyright Gary North / LewRockwell.com - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

rudya
02 Aug 09, 11:16
softball questions

I found it very disappointing listening to the softball questions given to the Chairman of the Fed.

Why were there no questions on why the American people should pay interest on money the Fed prints?

Why were there no questions on why the Fed is responsible for protecting the monetary system and yet it has failed because the dollar has lost 95% of its purchasing power since the Feds creation in 1913?

Why were there no questions on why the Fed is responsible for protecting the monetary system and yet we have had dozens of recessions and a great depression since the Feds creation in 1913?

Why were there no questions on how the Fed can reconcile the conflict of interest in having the banks as shareholders in the Fed and having to protect consumers from these same banks?

Why were there no questions on why the Fed failed to see this ecenomic mess coming and why we should believe it is capable of fulfilling its mandate now?

Why were there no questions on why the nation's gold supply has not been independly audited since the Eisenhower years?

I can only assume that PBS filtered them to "protect" the Fed chairman from having to defend an abysmal Fed record and the dubious necessity of this PRIVATE cartel.


christian
02 Aug 09, 18:31
neither would would be morally competent or responsible

Gary the fed panders to big banks and the economy is in a mess ...yes this is clear to a third grader......

However don't be foolish enough to think the dollar would be any safer under congressional oversight (heck no....they would Literally print money ...not credit iou's and debt gaurantee's) but print money to get re-elected term after term the inflation would be historical and the dollar would never have survived as long as it has.

The real issue is a lack of regulators without a conflict of interest or just being toothless. With the fed and wall street intrests in charge credit will likely be withheld and the dollar in a stronger position for LONGER....with congress .....gee they would put the banks out of business and probably bury the dollar....let us not forget how nearly everyone of them is bought with lobbyist money and would print hand over fist to get elected every two years.....

what we need is some sort of Miracle ...perhaps a more independent media .....perhaps a meteor shower ...and start from scratch......perhaps a DEBT JUBILEE.....


Aaron
03 Aug 09, 04:46
Hospital pass coming?

Is it me or does it look like ben is setting congress up to take the fall on impending inflation? Last time things were bad for inflation in the 1970s we reduced congress involvement in monetary policy and we bought inflation down.... i.e. if congress gets involved now inflation will go up... then again it might just be headed up regardless so what better time for some consitutional over sight and then cry its not the Feds fault if you had just let us operate secretly (giving money to the big banks) this wouldn't have happened.


Mercurian
09 Aug 09, 23:37
The questions I will ask my congressional rep next week

I plan on giving my congressional representative, staunch defender of constitutional rectitude Sheila Jackson Lee (irony alert), a chance to break from all those raucous and troubling questions about health care reform when I attend her town hall meeting in my district this month. I will instead ask her why she does not co-sponsor this bill, why she supports a private banking cartel, why the institution chartered to control credit--the lifeblood of our economy--should escape an audit that every every mom and pop storefront in American is liable for through the IRS, and a host of other entertaining and laughter-filled quires. I intend to leave that meeting with everyone understanding the Fed is NOT part of the government, has never been examined like this, is owned by international equity holders and is run for the benefit of bankers, not the American People. I hope she is wearing her no-run makeup, because I want to see her sweat. I suggest others do the same to their representative, too. They've had a free ride to long. Time to explain why they put the good of the financial elites ahead of the voters...I think we know why, but let them speak for themselves.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules