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Federal Reserve

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Newsmax

Rep. Alan Grayson, D-Fla., is upset that Congress is in the dark about much of the Federal Reserve’s activity. He notes that he asked Fed Chairman Ben Bernanke what happened to $500 billion that the Fed extended in swaps to foreign countries, Grayson writes on the Naked Capitalism Web site. Bernanke’s response: He didn’t know. The $500 billion lent out should have been discussed by Congress, Grayson says. “That is how democracy is supposed to work — not through secret deliberations” of 12 unelected bankers, the members of the Federal Reserve.

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The Daily Bail

It's becoming more than occasionally appalling to watch the games played by Goldman Sachs as they run roughshod over Washington. First some background. Goldman applied and was quickly granted official status as a bank holding company during the crisis last September, with the result being immediate and unlimited access to the Federal Reserve's discount window. Ahhh, easy overnight cash, but at a stiff price you naturally assumed. Not so fast, this is Government Sachs we are discussing. Conversion to a bank holding company would normally require higher regulatory capital requirements, reduced leverage and less risk overall. But again, not if you're Goldman Sachs. In January, Blankfein requested an exemption from these pesky new requirements, and true to its capture, the Fed naturally granted the exemption, explained in this letter to Government Sachs dated February 5th.

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Washington;s Blog

In endorsing the bill to audit the Fed, PhD economist Dean Baker wrote last week: The country now has almost 25 million people who are unemployed or underemployed as a result of the Fed's disastrous policies. Millions of people are losing their homes and tens of millions are losing their life savings. The country is likely to lose more than $6 trillion in output ($20,000 per person) due to the Fed's inept job performance. He forgot trillions in unnecessary interest payments (and see this).

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The Market Ticker

Let's cut the crap here and now and talk macro economics and debt. I'm going to go back to this chart again: This shows total non-government debt going from 150% of GDP (approximately) in 1981 to 350% of GDP (approximately) last year. In 1981 GDP was $3.128 trillion, so the total amount of debt in the system (non-government again) was approximately $4.5 trillion. In the last year GDP was $14.264 trillion, so total debt in the system was approximately $50 trillion. This is an increase in the outstanding (not taken and paid-off) debt of roughly $45 trillion dollars.

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Cryptogon.com

Great followup to: Kucinich: The Federal Reserve Is Paying Banks NOT to Make Loans. The sound money set remains concerned that the Federal Reserve’s emergency actions to corral collapse could ignite hyperinflation. In particular, they point to the explosion of excess reserves inside the banking system, which they call dry tinder just waiting for the spark of recovery. Bill Dudley, president of the Federal Reserve Bank of New York, says this isn’t an issue because the Fed now pays interest on excess reserves. It’s a good argument, but only in the short run.

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Washington;s Blog

The New York Federal has just published a new report entitled "The Shadow Banking System: Implications for Financial Regulation". One of the main conclusions of the report is that leverage undermines financial instability: That is true. In fact, every independent economist has said that too much leverage was one of the main causes of the current economic crisis. However, notwithstanding the NY Fed's recommendations, the Federal Reserve and Treasury have, in fact, been encouraging massive leveraging.

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Newsweek

President Obama is expected to decide by autumn whether to give Ben Bernanke a second four-year term as Federal Reserve chairman. Obama's chief economic adviser, Larry Summers, has long been said to covet the job, while Bernanke has pushed back at the Obama administration on a couple of proposals, risking the president's displeasure. Bernanke says he doesn't agree with the need for a new Consumer Financial Protection Agency; the Fed has got a handle on that, he says, and in fact it has been announcing new rules for lending and meeting with consumer-advocacy groups regularly. Bernanke is also taking a somewhat different tack from Treasury Secretary Tim Geithner and Summers over whether the Fed should supervise "systemic risk" in the financial system. But Bernanke's performance during the financial crisis has been widely praised, making a move to replace him politically risky. Last week he silenced some critics in Congress by laying out an "exit strategy&q

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Reuters

Americans think the Federal Reserve is doing a worse job than even the much-maligned Internal Revenue Service. Only 30 percent of Americans think the Federal Reserve's Board of Governors is doing a good job despite the central bank's unprecedented efforts to battle a crippling recession, according to a Gallup Poll released on Monday. That makes the Fed the worst reviewed of nine key agencies -- including the tax-collecting IRS -- the Gallup poll of more than 1,000 Americans between July 10 and 12 showed. Twenty-two percent of Americans said the central bank was doing a poor job.

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Yahoo

Short-term Treasury prices fell Wednesday, sending their yields higher, after a disappointing auction of $39 billion in five-year notes. The auction's bid-to-cover ratio, a measure of demand, dropped to 1.92 percent from 2.58 percent at an auction of five-year notes in June. Indirect bids, an indication of foreign buying, tumbled to 37 percent of the total bids accepted, compared with 63 percent in June. "It's hard to describe it as anything but ugly," said Michael Pond, an interest rate strategist at Barclays Capital. "The market is beginning to choke on the increases in supply."

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MATTHEW JAFFE and DEVIN DWYER

"The total potential federal government support could reach up to $23.7 trillion," says Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, in a report released today on the government's efforts to fix the financial system.  Yes, $23.7 trillion.

"The potential financial commitment the American taxpayers could be responsible for is of a size and scope that isn't even imaginable," said Rep. Darrell Issa, R-Calif., ranking member on the House Oversight and Government Reform Committee.

"If you spent a million dollars a day going back to the birth of Christ, that wouldn't even come close to just $1 trillion -- $23.7 trillion is a staggering figure." To be sure, we aren't there yet.

The government has about 50 different programs to fight the current recession, including programs to bail out ailing banks and automakers, boost lending and beat back the housing crisis.

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Cryptogon.com

What would happen if the banks did lend out that money? Inflation would explode and the Chinese would spit the dummy: China’s government remains “concerned” about the value of its U.S. assets, a Finance Ministry official said on the first day of bilateral talks with his counterparts in Washington. “China has a huge amount of investment in the U.S., mainly in the form of Treasury bonds,” Assistant Finance Minister Zhu Guangyao said in a press briefing with reporters. “We are concerned about the security of our financial assets.” Zhu’s comments follow repeated public assurances by Treasury Secretary Timothy Geithner that the Obama administration is committed to reining in a record budget deficit once an economic recovery is secured. China is the largest foreign investor in U.S. government debt, and any drop in its demand could threaten higher borrowing costs It’s another week and that means another record U.S. debt offering. Let’s see how it goes. Video at site

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Reuters

Americans think the Federal Reserve is doing a worse job than even the much-maligned Internal Revenue Service.

Only 30 percent of Americans think the Federal Reserve's Board of Governors is doing a good job despite the central bank's unprecedented efforts to battle a crippling recession, according to a Gallup Poll released on Monday.

 

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The New York Times

Despite the apparent conflict with both bankers and bank regulators, the Financial Crisis Advisory Group included a number of people with experience in those fields. Among them were Gerry Corrigan, a former president of the Federal Reserve Bank of New York and now an official with Goldman Sachs; Nobuo Inaba, a former executive director of the Bank of Japan; Gene Ludwig, a former comptroller of the currency; and Klaus-Peter Müller, the chairman of the supervisory board of Commerzbank in Germany. This should be posted in the Humor Section!

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US Government

Did you even know there was such a thing? 262 pages of government productivity that reveals in part: TARP, as originally envisioned in the fall of 2008, would have involved the purchase, management, and sale of up to $700 billion of "toxic" assets, primarily troubled mortgages and mortgage-backed securities ("MBS"). That framework was soon shelved, however, and TARP funds are being used, or have been announced to be used, in connection with 12 separate programs that...involve a total (including TARP funds, loans and guarantees from other agencies, and private money) that could reach nearly $3 trillion." The report goes on to note that TARP is just a small part of the federal government's overall scheme to bailout the financial system, valued by SIGTARP at $23.7 trillion. Through June 30, 2009, SIGTARP has 35 ongoing criminal and civil investigations. These investigations include complex issues concerning suspected accounting fraud, securit

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