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Bankers lobbied secretly to keep derivatives under Federal Reserve ‘oversight’ and away from real scrutiny
Aaron Dykes
Jones Report
June 2, 2009
“The banks run the place,” Rep. Collin Peterson cried out this week. The New York Times reports that he has a bill that would specifically ban derivatives from trading in a clearinghouse regulated by the New York Federal Reserve, which Peterson blasted as “a tool of the big banks.”
A “tool” because the nine biggest banks in the derivatives market– including JP Morgan Chase, Goldman Sachs, Citigroup and Bank of America– all met secretly to discuss how to use the lax regulation and institutional secrecy of the NY Fed to shield their credit-default swaps business from prying eyes and attempts at regulation, as the Times reports:
As the financial crisis entered one of its darkest phases in October, a handful of the nation’s largest banks began holding daily telephone sessions. Murmurs were already emanating from Washington about the need for a wide-ranging regulatory overhaul, and Wall Street executives girded for a fight.
Atop the agenda during their calls: how to counter an expected attempt to rein in credit-default swaps and other derivatives — the sophisticated and profitable financial instruments that were intended to limit risk but instead had helped take the economy to the brink of disaster.
What’s more, the banks formed a lobby– the CDS Dealers Consortium– only weeks after accepting TARP funds in October 2008 to protect its interests. Heading this effort is Edward Rosen, who previously helped fend off derivatives regulation. Rosen wrote and circulated a “confidential memo” to the ‘Treasury Department and leaders on Capital Hill’ making their agenda clear, the Times reported.
Rosen and his backers propose that derivatives be “traded in privately managed clearinghouses, with less disclosure,” according to the Times. The clearinghouse of choice for the big banks in Rosen’s CDS Consortium is ICE U.S. Trust, which is in turned regulated only by the Federal Reserve system.
Mr. Rosen’s confidential memo, dated Feb. 10 and obtained by The New York Times, recommended that the biggest participants in the derivatives market should continue to be overseen by the Federal Reserve Board. Critics say the Fed has been an overly friendly regulator, which is why big banks favor it.
Ironically, the Times notes, Treasury Secretary Tim Geithner, former president of the New York Federal Reserve, submitted a plan similar to Rosen’s, although Treasury officials stated the proposal was “independent.” Although Geithner vowed to make derivatives “more accountable”, critics say the emphasis on clearinghouses in the plan is a “major loophole” because ‘little disclosure would be required’ for any ‘customized’ swap.
It is clear that banks, who wanted their credit swaps to remain private, counted on the lack of transparency over Federal Reserve affairs to keep derivative affairs in the dark, thus enhancing their profit potential. It is further clear that Treasury Secretary Geithner intended to help them in that aim.
Senator Tom Harkin said the loophole “could be worth trillions and trillions of swaps,” blasting it as “a loophole big enough to drive a truck through.”
Derivatives are the bulk of the “toxic assets” TARP was set up to fight– and total an astounding $1.5 quadrillion in estimate.
REGULATING THE FEDERAL RESERVE
Bloomberg reported Friday that the “Fed’s Role in AIG May Be First Target of GAO Audit.” President Obama signed into law on May 20 a “Fed clause” giving the Government Accounting Office (GAO) the “power to examine the Federal Reserve’s emergency aid to specific companies, such as AIG, Bank of America Corp. and Citigroup Inc.”
The new law is designed to give the GAO access to records and people at the Fed’s Board of Governors in Washington as well as the 12 district banks, such as the New York Fed, which has been the government’s lead day-to-day supervisor of AIG.
Under what Bloomberg has called “war powers”, the Fed has issued “an unprecedented expansion of credit to nonbank financial firms… invoking emergency powers and doubling its assets the past year.”
The authority is notably only a half-measure. Bloomberg notes that it “doesn’t remove limits from a 1978 law that prohibits the GAO from peering into Fed activities involving monetary policy or discount-window loans to banks.”
- A d v e r t i s e m e n t
Fed chairman Ben Bernanke stated he would have no objections to audits, so long as there was no examination of monetary policy. He stated clearly, “I certainly would resist any attempt to dictate to the Federal Reserve how to make monetary policy.”
Bloomberg makes a distinction from the “more intrusive” legislation introduced in the House by Ron Paul and in the Senate by Bernie Sanders. Those bills now have well over a hundred sponsors. Sanders was rebuffed by Ben Bernanke previously during TARP hearings after he demanded to know who the Fed lent money to and was told frankly, “No.”
Those bills, which haven’t made it past the initial stage of being introduced in Congress, would remove limits on GAO audits of the Fed and direct the agency to issue a report on the central bank by the end of next year.
Nevertheless, information about the meeting of the big banks shows that there is a desire to keep the Federal Reserve and its dealings quiet at a time when interest in the Fed’s actions is at an all-time high. Any move to bring accountability to that institution is positive, even if insufficient.
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24 Responses to “Bankers lobbied secretly to keep derivatives under Federal Reserve ‘oversight’ and away from real scrutiny”
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June 2nd, 2009 at 10:24 am
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- Jason Bermas:New “Cyber Czar” End of Internet Freedom!
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Tex Hexman Reply:
June 2nd, 2009 at 10:36 am
Can it get any more obvious that there needs to be severe financial reform in these Divided States of ‘merica?
(click my name for tunes in the key of conspiracy)
Social Viability Reply:
June 2nd, 2009 at 2:00 pm
Financial reform?
Reform implies fixing the existing system – changing the rules so as to cure the corruption. Asking these bankers (that own the legislators) to kindly stop fleecing us and our future generations would be like politely asking a vulture to become vegetarian.
No, complete dissolution of the existing financial system is the only chance we have.
Only when we stop using their money and switch to alternative currencies and leave these low-life criminals out of the picture altogether can we can fix these problems.
Don’t fight the system:
Replace it
http://socialviability.com/
Jim Lunsford Reply:
June 2nd, 2009 at 3:00 pm
And I grow ever more sure that a stateless society is the only long-term viable solution. Anarchy has worked before, and with far less corruption and violence. It worked in the old west, and in Iceland (for 300 years there). It’s the next logical step from libertarian party.
David Reply:
June 2nd, 2009 at 9:40 pm
I agree with Jim Lunsford. There’s no problem with going back to old-west style self-government. As long as I leave you and your property along, I won’t get shot, and that’s fine with me. Obviously a lot of MTV-watchers would die at first, so this may not be a good idea until such a time when it be right.
June 2nd, 2009 at 10:26 am
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Scene from the upcoming documentary called “The Alex Jones Deception”. Coming out on 9/5/09.
Alex Jones finally gets exposed.
http://www.youtube.com/watch?v=linCmhBcc0o
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Jim Lunsford Reply:
June 2nd, 2009 at 9:22 pm
You owe me the seven minutes of my life that video wasted.
June 2nd, 2009 at 1:24 pm
Since Rep. Petersen is suddenly well aware of who’s ‘in charge’, why is he not pushing legislation that would do some good? Like ending the Fed? Ending the irs? Why hasn’t he thrown his support in for Paul’s bills? What P.A.C. was pandering him for votes? Agri-business perhaps?
Sounds like another rat is jumping ship. I say we should let them drown by voting for anything BUT republicrat or demublican! We have to replace these people with term limits of our choosing! Don’t give up the vote!! (Give up the electronic voting machines!)
Jim Lunsford Reply:
June 2nd, 2009 at 9:23 pm
How about voting with .308 and .223 and hemp rope nooses?
June 2nd, 2009 at 2:14 pm
ALL economic TRUTH SEEKERS you must visit this economic website immediately.
http://www.avaresearch.com/
Mike Stathis of AVA Research runs a highly respected economic intelligence website that provides uncensored economic truth. Most of the information on this site is FREE of charge and provides insightful information that NO corporate media site will speak about.
http://www.avaresearch.com/
Mike Stathis is one of a few economic figures who speaks the TRUTH. Anyone frustrated with the economic bail-outs or has lost money in the stock market needs to visit this website NOW.
http://www.avaresearch.com/
Mike Stathis has been blackballed by the mainstream media due to his highly accurate financial forecasts. He is not allowed on the air at CNBC or FOX Business. The corporate media wants Stathis censored BIG-TIME because he speaks the TRUTH.
Stathis has written volumes about what is happening today, especially the seminal book “America’s Financial Apocalypse” written in 2006. His books are readily available on Amazon.com.
Please do your financial future a favor and check out:
http://www.avaresearch.com/
June 2nd, 2009 at 4:35 pm
[...] Read more… [...]
June 2nd, 2009 at 7:30 pm
In a democracy the people have real power and we still have some remnents of Democracy left in our countries.
People, People, let us join our forces and save ourselves form the present hostage situation by extensively using the internet / electronic media in fighting these monsters.
Mars Reply:
June 3rd, 2009 at 1:19 am
No democratic country ever had democracy, it is just an illusion, no such thing
June 2nd, 2009 at 8:23 pm
You know they say the eyes are the windows to the soul.
When I look at the eyes of Bernanke and Geitner, it’s so fucking obvious to me that these guys are so full of shit, it’s even boggling their minds that they are getting away with so much fucking lying.
June 2nd, 2009 at 8:58 pm
click on my name if you wish to remain a free American
June 2nd, 2009 at 9:55 pm
As Americas lie dying and bleeding to death in foreign lands you would think that scum in DC
would have a least one shred of decency and stop fucking everybody. it just makes you puke.
Mary P Reply:
June 3rd, 2009 at 10:44 pm
Much Agreed, these guys are heartless and ruthless scum that are thieving the American people and should be punished for TREASON!!
June 2nd, 2009 at 9:56 pm
and they all smile and act like its a big fucking party. sorry assholes you did not get a bailout
you got fucked. yea one day …………………….
June 2nd, 2009 at 9:58 pm
Let them eat from the Dumpster where they belong their brave sold out asses should be eating from a dumpster and not a good one.
June 2nd, 2009 at 10:02 pm
I know its just a pipe dream. Remember the USS Liberty was left to rot for 12 hours they
were going to save them but an aircraft carrier got the recall so they let them rot. Oh yea
The Uss The Sullivans almost got blown up and a couple of months later our leaders
sent in the USS Cole. The Brave assholes in DC are really something hiding in those bunkers.
have a martini and a big yacht. yea
June 2nd, 2009 at 11:56 pm
My god – read this!
http://www.asianews.it/index.p.....amp;size=A
This sober pedestrian news report spells out in no uncertain terms who controls the world’s money.
If you will – who are the men behind the curtain.
No theory. No conspiracy. No innuendo. No whispers. The straight facts. The name is Rothschild.
The genie is out of the bottle. Now that they are being unmasked, I fear they’ll get vicious. As is their true nature.
The does not bode well for the immediate future.
Shame Alex Jones refuses to acknowledge the ‘Z’ and ‘J’ words. Zionist and Jews.
Jim Tucker knows, MIchael Collins Piper knows, Mike Rivero knows, Jeff Rense knows, John Stadtmiller knows, Rick Adams knows. Daryl Bradford Smith knows it, and sadly Arron Russo knew it.
All these patriots. Many don’t even like each other, but they all agree on one thing. The ‘Z’ and the ‘J’ control the Fed, Bank of England, and therefore the world’s money machine.
Follow the money people. It will lead you straight to the NWO who are throwing your freedom into their global control meat grinder.
The only ones who want to hide the master of the universe are Jones and Burmas. Shills, shills, shills – both of them.
Prisonplanet.tv – bullshit. It’s Talmudvision. Alex, time to get your revolution back on the rails. At the very least it will restore some modicum of credibility who have gone being awakened, are now informed and are asking questions.
June 3rd, 2009 at 6:46 am
All these banking fuchs should be lined up against a wall and executed.
June 3rd, 2009 at 4:35 pm
“Only when we stop using their money and switch to alternative currencies and leave these low-life criminals out of the picture altogether can we can fix these problems.”
Jct: Right you are. Why represent our wealth with their chips for a fee when we can represent our wealth with our chips for free?
When the local currency is pegged to the Time Standard of Money (how many dollars/hour child labor) Hours earned locally can be intertraded with other timebanks globally!
In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See my banking systems engineering analysis at http://youtube.com/kingofthepaupers
June 16th, 2009 at 3:47 pm
[...] we reported earlier this month, heads of nine of the biggest banks in the derivatives market, including JP Morgan Chase, Goldman [...]