Change You Can Believe In:

Obama Wants Fed to Have Even More Power

Below is an article that appeared on bloomberg.com June 17. The text that looks like this is from the article. [I have provided editorial commentary in text that looks like this.]

But first . . .

A financial system based on sound money does not need much regulation. A system based on “debt money” — our current system — is destined to fail, no matter how much regulation is in place. Okay, so here’s the article . . .

 Obama Lays Out ‘Sweeping Overhaul’ of Financial Rules

June 17 (Bloomberg) — President Barack Obama proposed the most sweeping overhaul of the U.S. financial regulatory system in 75 years, seeking to correct a “cascade of mistakes” that toppled major securities firms, froze credit markets and destroyed $26.4 trillion in stock market value around the world.

[Precisely. The “cascade of mistakes” started with the passage of the Federal Reserve Act in 1913 and eventually left us with fiat money that has lost more than 95 percent of its value. They’re robbing us blind, and now that we’re on to them, they pretend that they have just been making “mistakes” all these years. That’s like a gang breaking into your house, loading 95 percent of your stuff into a moving van, and convincing the cops that  it was all a “mistake.”]

The proposal, much of which will be subject to approval by Congress, adds an additional layer of regulation for the biggest financial firms.

[Now there’s a great idea. If only we had more regulation, all would be well. Problem is, the system is inherently fraudulent and rotten to the core, and no amount of tinkering by bureaucrats is going to fix it.]

It would create an agency for monitoring consumer financial products, make the Federal Reserve the overseer of companies deemed too big to fail, and bring hedge and private equity funds under federal scrutiny.

[Just what we need: Another agency, and the Federal Reserve overseeing our largest companies. Who will oversee the Federal Reserve? Who will guard the guards?]

“This was a failure of the entire system,” Obama said at a White House event that included the leaders of the Treasury, the Fed and other regulatory agencies. “An absence of oversight engendered systematic, and systemic, abuse.”

[Yes, the entire system indeed failed. But not because of an absence of oversight. While strict oversight could have prolonged the failure (which may have ultimately made it even worse), all the oversight in the world can’t maintain a rotten system forever. The collapse of this house of cards was inevitable, as is the collapse of the next one they slap together. The Federal Reserve was created in 1913, ostensibly due to a systemic failure. In 1933, FDR was forced to confiscate much of the country’s gold because of a systemic failure. In 1945 they gave us Bretton Woods, because of a systemic failure. In 1971, Bretton Woods failed. In 2008, the current version failed. In 2020 . . . ]

The announcement marks the beginning of what promises to be a political battle that’s likely to alter the president’s plan, with Republicans criticizing it as an expansion of government power over the economy.

[The Republicans are right to be concerned about the expansion of government power over the economy, but they have done nothing over the years to rid us of the root of the problem: the Federal Reserve, fractional-reserve banking, and the legal-tender laws  that  force us to use those ridiculous Federal Reserve Notes. It’s hard to take the Republicans’ complaint seriously.]

Obama, who has called the “sweeping overhaul” of regulations one of his top domestic priorities, said he wants to sign legislation by the end of the year.

[You want “sweeping overhaul”? Then sign a bill that abolishes the Federal Reserve, outlaws fractional-reserve banking, and repeals the legal-tender laws. Anything short of this will surely fail (see above).]

The administration’s proposal comes after a year of shocks on Wall Street and a credit crunch that contributed to the worst U.S. recession in half a century. Since September, the government has been forced to spend billions of dollars bailing out such firms as Citigroup Inc., Bank of America Corp., American International Group Inc., General Motors Corp. and housing finance companies Fannie Mae and Freddie Mac.

[“(T)he government has been forced to spend billions of dollars bailing out” these failed companies? FORCED? No, the government CHOSE to bail them out. It was We the People who are forced to pay for it.]

OTS Eliminated

While lax government regulation helped lead to the crisis, Obama suggested the changes he’s proposing don’t fully reshape U.S. oversight. Aside from eliminating one banking agency, the Office of Thrift Supervision, it leaves much of the current system in place — a nod to the difficulties of getting a law passed amid congressional and interagency turf battles.

[“(L)ax government regulation” did not help “lead to the crisis.” This crisis, or calamity, or catastrophe, or collapse — pick your ‘C’ word — was inevitable. More regulation may have forestalled the ‘C’ word, which may have made it even worse. What led to the ‘C’ word was a rotten, fraudulent foundation.]

“More can and should be done in the future,” a White Paper laying out the details of the plan said. “We focus here on what is essential: to address the causes of the current crisis, to create a more stable financial system that is fair for consumers and to help prevent and contain potential crises in the future.”

[Yes! Finally!! If they’re truly going to “address the causes of the current crisis” and “create a more stable financial system that is fair for consumers and to help prevent and contain potential crises in the future,” it can only mean that the Federal Reserve will be stripped of its powers, legal-tender laws will be repealed, and fractional-reserve banking will be outlawed. We’re saved! Um, except White Papers have been known to lie.]

Edward Yingling, president of the American Bankers Association, said his group has some “real concerns” about the consumer protection measures.

[Don’t worry about it, Ed. You and your bankster cronies will still have your incredible superpower that lets you create money out of someone else’s debt!]

Regulatory ‘Burden’

“For community banks that had nothing to do with this crisis, this will be massive regulation that will burden them with new costs,” Yingling said as he arrived at the White House for the announcement.

[Um, Ed? Any bank that creates money out of someone else’s debt (and ALL banks do that) has contributed to this crises. ALL banks practice fractional-reserve banking, so NO bank “had nothing to do with this crisis.”]

David Hirschmann, president of the U.S. Chamber of Commerce’s capital markets center, said the largest American business lobby group is disappointed with the plan.

“While the administration has made several positive recommendations, we’re concerned that overall, the proposal simply adds to the layering of the system without addressing the underlying and fundamental problems,” he said. “We can’t simply insert new regulatory agencies and hope that we’ve covered our bases.”

[Right on, Dave! Every word of it is right on! But how would you propose we address “the underlying and fundamental problems”? How many of the Federal Reserve’s powers would you take away? How loudly will you scream to outlaw fractional-reserve banking? How hard will you lobby for the repeal of the legal-tender laws?]

Finishing Legislation

Democratic Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee, said the proposal is an “important step” toward revamping the regulatory system and that Congress will get the legislation to the president’s desk before the end of the year.

[I feel much better already, knowing that the federal government is going to take an “important step.” Congress has an excellent record in taking just the right steps, doesn’t it?]

Frank said lawmakers may make some changes. “Not every specific will come out the same way but I think the fundamental purposes that he is seeking to accomplish will be embodied in the bill,” he said outside the White House after Obama spoke.

[That’s the spirit! Let’s give the American people some good old-fashioned bipartisan compromise. It’s what we’ve always done, and the country is in great shape as a result! What could possibly go wrong?]

The finance panel has already begun work on some elements of the plan and should be ready to mark up legislation next month, Frank said.

[Isn’t it comforting to know that we have bureaucrats working on a “plan” that will dramatically affect our lives?]

Republican Representative Scott Garrett of New Jersey said the president’s plan “stays at square one on the big issues. It creates a cycle of more bailouts.”

“It perpetuates what we’ve had in the past,” said Garrett, a member of the Financial Services committee.

[Great, Scott! Nice to hear that you don’t want to perpetuate what we’ve had in the past. So when will we see your name on legislation to abolish the Federal Reserve, outlaw fractional-reserve banking, and repeal the legal-tender laws?]

The new Consumer Financial Protection Agency would oversee products from mortgages to credit cards. It would have authority to ban “unfair terms and practices,” punish companies for violations with fines and penalties and write rules to set higher standards for banks and non-bank companies.

[The most unfair practice of all is the creation of money out of someone else’s debt. The most unfair terms of all are charging interest on money created on the spot, and forcing everyone to accept these ridiculous Federal Reserve Notes as money. I wonder if the new Consumer Financial Protection Agency will start there. Um, probably not.]

A re-named regulator, known as the National Bank Supervisor, would watch over federally chartered lenders. It would assume the duties of the OTS and Office of the Comptroller of the Currency.

[A re-named regulator! Now there’s change you can believe in!]

Fed’s Role

The central bank would get responsibility to oversee all systemically risky financial firms, a move that aims to eliminate gaps in oversight that contributed to the collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc. last year. The Fed would monitor not only banks but large financial companies, such as insurers or hedge funds, whose interconnections in the financial industry mean their failure would endanger the system.

[Ingenious solution: Give even more power to the very people who got us into this mess. It comes as no surprise, though. In fact, probably everyone with a decent understanding of the history of the Federal Reserve saw this coming. In every crisis, it seems the Fed has always been granted more power despite a deplorable track record.]

“These firms should not be able to escape oversight of their risky activities by manipulating their legal structure,” the White Paper said. Through higher capital requirements and stronger regulatory scrutiny “our proposals would compel these firms to internalize the costs they could impose on society in the event of failure.”

[Blah, blah, blah. These firms wouldn’t need so much oversight and regulatory scrutiny if the system were based on a sound currency. Why doesn’t Mr. White Paper argue for that?]

Emergency Lending

The Fed, while gaining a bigger role as the systemic regulator, would have some of its emergency lending power curbed. The plan calls for the Treasury secretary to approve in writing any emergency funding.

[Ah, yes. More power to the Fed. Has a nice ring to it, doesn’t it: “systemic regulator.” And here’s yet more change you can believe in: The Treasury secretary will absorb some of the Fed’s emergency-lending powers. Changing bureaucrats like that is like changing your underwear with your neighbor.]

The central bank must also conduct a study of its structure under the administration’s plan. The Treasury and outside experts “should have substantial input into the review and the resulting report” on the Fed’s governance study, the paper said.

The Treasury can propose changes to the central bank’s structure “to improve its accountability and its capacity to achieve its statutory responsibilities.”

[Maybe I’m reading too much into this, but it seems to be an attempt to derail the bills to audit the Federal Reserve (H.R.1207 and S.604), or at least provide some talking points to those who will oppose those bills.]

Treasury Secretary Timothy Geithner said he sees “no plausible alternative” to having the Fed oversee institutions that pose system-wide risk. “We’re redrawing the boundaries of authority,” he said.

[By saying he can’t see a “plausible alternative” to this ridiculous plan, Timmy has confessed to being utterly clueless. Sounds like a good name for a band: Utterly Clueless Timmy.]