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Fed Covers Up Financial Crisis

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Cliff Kincaid
Wednesday, Nov 12, 2008

Our “adversary” media have been extremely deferential toward those promoting the looting of the American taxpayers during the ongoing economic and financial crisis. However, Bloomberg News should be congratulated for filing suit against the Federal Reserve in an effort to disclose the securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks such as Goldman Sachs.

“The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News.

Another way that the media can begin to fix the blame for the financial meltdown is to cover the views of those who predicted the crisis and understand how it happened.

Consider watching this video of a debate that financial analyst Peter Schiff had with Arthur Laffer on CNBC back on August 29, 2006. Schiff predicted the deep recession that is now underway and made mention of China’s role in our unfolding economic troubles. Laffer’s talk about our economic policies “working beautifully” makes him look utterly ridiculous in today’s climate. “The United States economy has never been in better shape,” he declared.

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The China connection to Goldman Sachs figures prominently in the current crisis. Because China owned $376 billion of Freddie Mac and Fannie Mae paper, it played a big role in the financial crisis, and Treasury Secretary Henry Paulson, with his own personal and financial ties to China, admittedly tried to reassure the Chinese through this process that their investments would be protected. They are being “protected” in the sense that the American taxpayers are now on the hook for these government mortgage companies, which have been nationalized.

  • A d v e r t i s e m e n t

On top of this, Paulson, a former CEO of Goldman Sachs, made sure, as part of the bailout legislation, that he could bail out Chinese banks holding other troubled U.S. assets. 

Schiff, who blows the whistle on these schemes, is not very popular in the media, which have been telling us consistently that things would get better after Wall Street was bailed out. But Schiff was on Bloomberg on October 28 talking about how the problems will get worse if we continue to follow the current tax, spend and bailout policies. His basic message is that the U.S. is broke and that the situation will get worse under an Obama Administration because of its commitment to more federal interference and involvement in the economy.

Nevertheless, during this discussion, a week before the election, Schiff predicted an Obama victory because “nobody is going to vote for four more years of this” and voters “are going to grasp at straws and vote for anybody who promises change”. But the change is phony, he warned. Obama “will put several nails in the coffin,” he said. “We’re going to get more of the same, only worse.”

Leaving aside the $1.8 trillion cost of the bailout and other socialist-style schemes that have been undertaken in the current crisis, the Peter G. Peterson Foundation reports that the total federal burden on U.S. taxpayers is now approaching $54 trillion―a cost of $175,000 per person. The Peterson Foundation seeks to educate the public and the press about the U.S. financial situation. It’s fine to educate people. But what about prosecuting those federal officials who brought the U.S. to the brink of financial apocalypse?

During an October 13 Fox News discussion of the mismanaged companies now going bankrupt or seeking federal bailouts, the subject of prosecuting somebody actually came up. Host Jaime Colby asked, “Where are the criminal prosecutions because I think their pictures should be hanging up in the post office?” Schiff, a guest on the show, went beyond the corporate executives and urged the prosecution of former Federal Reserve Board chairman Alan Greenspan, the husband of NBC News correspondent Andrea Mitchell, who told the House Committee on Oversight and Government Reform on October 23 that he had “made a mistake” in his stewardship of the economy. This is after he received an $8.5 million advance on his 2007 memoir, The Age of Turbulence: Adventures in a New World.

This is quite an adventure.

In March, as the mortgage crisis was beginning to build, Newsbusters.org noted that Mitchell had done a story conveniently ignoring her husband’s role in the unfolding debacle. Greenspan and Mitchell are a Washington “power couple,” which means they have plenty of social contacts who help protect them from criticism or even scrutiny. This is how Washington works. 

This crisis has conflict of interest written all over it, not only in regard to media coverage but the role of current and former Goldman Sachs executives, including the Treasury Secretary Henry Paulson, who sparked the panic and has since authorized $10 billion in bailout money to his old firm. Neel Kashkari, a former Goldman Sachs banker, now runs the Troubled Asset Relief Program (TARP) authorized under the bailout plan.

As bad as it is, the situation could get far worse. At the House hearing, Rep. Jim Cooper, a more conservative Democrat from Tennessee, brandished a copy of the official Financial Report of the United States Government, which outlines the $54 trillion fiscal gap, primarily unfunded liabilities, that America faces if the government doesn’t change course. “Why is this document so hidden? Because it contains such bad news,” Cooper said. “On your watch,” he said to Greenspan and the other witnesses, “did you do anything to publicize this report, to make sure that everybody in America knew the real story about the real numbers for America?”

The answers were pathetic. Greenspan replied that he had tried to get the information inserted into the government’s “forecasting structure,” whatever that is. The “solutions,” of course, included much higher taxes, massive benefit cuts, the printing of more Federal Reserve paper money, or national bankruptcy. 

This article was posted: Wednesday, November 12, 2008 at 11:55 am

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