- In Washington, the more things change, the more they
stay the same, or usually get worse. It's true each election cycle, and
when Congress enacts "reform," watch out.
- Exhibit A:
- Obamacare: legislation that rations care and enriches
- Exhibit B:
- Financial reform, shaping up to be more business as usual,
masquerading as change, and leaving what's needed unaddressed and papered
- What Real Reform Looks Like - Abolish or Nationalize
- For many years, Ron Paul waged a lonely struggle to abolish
the Fed, trying and failing in the 106th, 107th, 108th, and 110th Congresses.
Numerous times he explained what he said on the House floor on September
10, 2002, namely:
- "Since the creation of the Federal Reserve, middle
and working-class Americans have been victimized by a boom-and-bust monetary
cycle. In addition, most Americans have suffered a steadily eroding purchasing
power because of the Federal Reserve's inflationary policies. This represents
a real, if hidden, tax imposed on the American people," a 1913 dollar
(when the Fed was created) today worth about a nickel and continues to
- Under the Fed, we've also had rising consumer debt; record
budget and trade deficits; an unsustainable national debt; a high level
of personal and business bankruptcies; millions of lost homes; high unemployment;
loss of the nation's manufacturing base; soaring poverty levels; an unprecedented
wealth gap between the rich and most others; and a hugely unstable economy
lurching from one crisis to another, the current one near-catastrophic
with years more pain and suffering ahead for growing millions.
- Yet the 1913 Federal Reserve Act violates the Constitution's
Article I, Section 8 giving Congress sole power to coin (create) money
and regulate the value thereof. In 1935, the Supreme Court ruled that Congress
can't constitutionally delegate it to another body.
- Yet, as financial writer Ellen Brown explains, Federal
Reserves Notes comprise about 3% of the money supply, the remainder created
by private banks through loans. When made, the money supply expands. When
repaid it contracts unless equal or greater loan amounts are made. Today,
they're not, so credit is contracting precipitously.
- The founders wanted gold and silver as legal tender,
not fiat money or a central bank, President Andrew Jackson calling the
Bank of the United States (the Fed's equivalent in his day) a "hydra-headed
- Under the Fed, America's monetary system combines money,
credit and debt into a dishonest system of empty promises in exchange for
future ones, new generations forced to pay increasingly greater amounts
for today's excesses, a process designed to suck maximum public wealth
into elitist private hands.
- Privatized money control is the single greatest threat
to democracy. Since 1913, Wall Street bankers have incrementally stolen
it in collusion with corrupted officials, modern day ones crafting fake
financial reform to end the little that's left and extract as much more
public wealth as possible.
- On July 8, 2009, the House introduced HR 3126: Consumer
Financial Protection Agency Act of 2009:
- "To establish the Consumer Financial Protection
Agency, and for other purposes."
- On October 22, 2009, it was reported to Committee but
- On December 2, 2009, the House introduced HR 4173: Wall
Street Reform and Consumer Protection Act of 2009:
- "To provide for financial regulatory reform, to
protect consumers and investors, to enhance Federal understanding of insurance
issues, to regulate the over-the-counter derivatives markets, and for other
- It was rushed through committees, then passed on December
- On December 16, 2009, the Senate introduced S. 2886:
Banking Integrity Act of 2009:
- "A bill to prohibit certain affiliations (between
commercial banking and investment banking companies), and for other purposes."
- It was referred to committed and not voted on.
- On March 15, the Senate introduced the Restoring American
Financial Stability Act of 2010:
- "To promote the financial stability of the United
States by improving accountability and transparency in the financial system,
to end 'too big to fail,' to protect American taxpayers by ending bailouts,
to protect consumers from abusive financial services practices, and for
- In a March 15 MSNBC The Ed Show interview, Congressman
Ron Paul said the following:
- -- House (and Senate bills) give "more power to
the Fed and (don't) do the job;"
- -- regulatory power "should be independent and out
of the Federal Reserve;" the Fed is the problem, not the solution;
- -- everything in House (and Senate bills) has loopholes,
so "won't do the job;"
- -- Paul supports "regulation of the Federal Reserve;"
- -- as the lender of last resort, it "causes moral
hazard," investors believing it "will be there to pick up the
pieces," but people end up getting stuck;
- -- "I'm sympathetic with the Volker rule,"
Paul said, requiring bank and nonbank financial institution regulatory
measures over their affiliates and holding companies, prohibiting proprietary
trading, investments in and sponsorship of hedge and private equity funds,
and limiting hedge fund - private equity fund relations;
- -- when banks get in trouble, "we shouldn't have
to have taxpayers liable to bail out all these people;"
- -- real financial reform involves changing the Fed; "when
you allow a secret bank like the Fed to create money out of thin air, you"
encourage irresponsibility; the House and Senate bills do precisely that
and won't work.
- They're essentially old wine in new bottles, masquerading
as reform. If enacted, the public again will be scammed.
- On March 22, the Senate Banking Committee passed the
Financial Stability Act 13 - 10 (along party lines), and sent it to the
floor for debate.
- Obama's "Financial Regulatory Reform, A New Foundation:
Rebuilding Financial Supervision and Regulation"
- Announced on June 17, 2009, it's a plan to create new
government agencies, more greatly empower the Fed, and address major problems
problems. Its objectives include:
- -- "promot(ing) robust supervision and regulation
of financial markets;
- -- establish(ing) comprehensive regulation of financial
- -- protect(ing) consumers and investors from financial
- -- provid(ing) the government with the tools it needs
to manage financial crises; (and)
- -- rais(ing) international regulatory standards and improv(ing)
- Its proposed reforms include:
- -- a new regulatory 'Financial Services Oversight Council;"
- -- more greatly empowering the Fed over "all firms
that could pose a threat to financial stability, even those that do not
own banks" like insurance companies;
- -- establish a new "National Bank Supervisor"
over all federally chartered banks;
- -- register hedge fund advisors;
- -- new regulation of securitization and derivatives markets;
- -- increased market transparency and more effective credit
- -- originators of securitized loans to retain some of
the credit risk;
- -- broker and loan originator compensation changes away
from income up front to spreading it over time and making it performance
- -- a new "Consumer Financial Protection Agency;"
- -- new ways to "resolve nonbank financial institutions
whose failure could have serious system effects;"
- -- establishing "wind down authority to take over
large financial firms like AIG, Fannie and Freddie;" and
- -- international reforms through G-20 cooperation.
- America has a legacy of failed public agencies as well
as regulatory and legislative reform for familiar reasons - no teeth or
real oversight, mostly because financial and other industries end up self-regulating,
consolidating, and growing at the expense of the public interest - smaller
firms then crowded out, bought up, or eliminated. Giving the Fed more power
lets banking giants make their own rules, decide how and whether to enforce
them, and operate the way they wish because no one in government dares
- It's no surprise why Obama's 2009 plan, House enacted
legislation, and what the Senate will now debate capitulate to Wall Street.
Their lawyer/lobbyists wrote the bills to give them more, not less, power,
masquerading as reform.
- If enacted, banks will get congressional cover to self-regulate,
continue past fraudulent practices, inflate new bubbles, transfer more
public wealth to themselves, crush competition, wreck the economy further,
and be bailed out again to buy more assets at cheap prices, then start
the whole process over again.
- On December 30, moneymorning.com's contributing editor
Shah Gilani put it this way:
- "in a testament to (Wall Street's) power, what's
on the table is what works for bankers and the Street. (Congressional legislation)
is nothing more than Wall Street's secret agenda to eliminate competition,
grow bigger profit engines and rely on the perception of a socialized system
to support cheap funding....the truth is not being told. Big banks are
leaning on legislators to facilitate and perpetuate the concentration of
banking interests (to let them) eliminate competition and fatten margins."
- House legislation especially props up failed banks, more
than ever empowers them, and insures the full faith and credit of Washington
to bail them out whenever needed.
- As for consumer protection, current and past agencies
serve bankers, not the public - notably the SEC, Commodities Futures Trading
Commission (CFTC), Financial Industry Regulatory Authority (FINRA), Office
of the Comptroller of the Currency (OCC), and the private banking cartel
Federal Reserve, wholly owned by its member banks, Wall Street giants holding
- The so-called credit rating agencies are part of the
scheme. Ones like Moody's, Standard & Poor's, Fitch and others bogusly
assessing toxic securitizations and other financial alchemy in return for
large fees and big profits. The House bill does nothing to correct this,
the final Senate one not likely to either. Instead, they'll give enforcement
power to the notoriously corrupt SEC, staffed with officials that move
to high-paying industry jobs, so refrain from future slapping hands that
may feed them.
- Other House (and likely Senate) bill problems include:
- -- failure to address "too-big-to-fail" (TBTF)
institutions that are too big to exist;
- -- numerous loopholes letting derivatives speculators
game the system without regulatory restraining authority;
- -- enacting no deterrent to securitization process abuses;
- -- not reforming government-sponsored enterprises (GSE)
like Fannie, Freddie, and others; and
- -- letting bankers self-regulate by keeping the Fed in
charge - the ultimate conflict of interest assuring no change in business
as usual, just cover to paper over flawed policy.
- If the final Senate bill resembles HR 4173 as appears
likely, Wall Street shenanigans will be green-lighted. A future greater
financial crisis is assured. Giant banks will get bigger. Trillions more
in public wealth will be looted. Current financial reform debate will be
revisited, but nothing will be resolved now or then unless grassroots outrage
- Dean Baker, Co-Director of the Center for Economic and
Policy Research, said the House bill:
- "does little to change the current structure of
the financial system. The 'too-big-to-fail' banks will be left in place,
even bigger and less accountable than before. There will be nothing done
to separate commercial and investment banking," so giants like Goldman
Sachs, JP Morgan Chase, Citigroup, and Bank of America will be able to
game the system for even greater profits.
- "The bottom line is that this bill is almost certain
to leave the taxpayers holding the bag for future bailouts."
- On March 25, writing for the National Legal and Policy
Center (NLPC - nlpc.org), Carl Horowitz called the Senate bill "the
equivalent of a revolving bailout for failing Wall Street and banking institutions."
- Its provisions still a work in progress, ones in it,
unless amended, include:
- -- greater than ever Fed empowerment;
- -- establishing a Fed-controlled Consumer Financial Protection
Agency (CFPA), putting bankers in charge of consumer protection;
- -- creating a Treasury-run Financial Stability Oversight
Council (FSOC) to include representatives of the Fed, the new CFPA, FDIC,
SEC, Commodity Futures Trading Commission (CFTC), FHA, and an official
- -- requiring over-the-counter derivatives be traded on
exchanges or clearinghouses but doing nothing to curtail speculative abuses;
- -- letting the Fed regulate bank holding companies with
$50 billion or more assets as well as "systemically important nonbank
- -- having smaller banks overseen by the Office of the
Comptroller of the Currency (OCC) or FDIC;
- -- letting shareholders vote on executive pay and nominate
directors, but with too few shares to matter;
- -- acknowledging Volker rule merits by only requiring
its implementation at some unspecified future time; and
- -- providing a revolving emergency loan fund (like TARP)
to assure more public wealth for giant banks.
- Both House and Senate bills empower existing authorities,
lets them run newly established ones, so reform amounts to old wine in
new bottles, leaving bankers in charge and the public as vulnerable as
before to a certain future crisis they'll have to pay for again. Shah Gilani's
December 30 moneymorning.com article explained it up nicely, saying:
- Proposed "financial reform (is) just camouflage
for Wall Street's latest power play," leaving ordinary people sitting
ducks to be scammed again with the full faith and blessing of Washington.
- Stephen Lendman lives in Chicago and can be reached at
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge
discussions with distinguished guests on the Progressive Radio News Hour
on the Progressive Radio Network Thursdays at 10AM US Central time and
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