The "Independent" Fed Admits The Truth

The Market Ticker ^ | 1/22/2011 | Karl Denninger

[FromLori]

It is not independent, it is an arm of Treasury.

Everything you were told was a scam and a lie - yet another time for

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

Got it?

Independent monetary authority my ass.

Function follows form. Anyone who believes that The Fed is independent after this charade, which incidentally it did on its own (and that, by itself, is cute - The Fed's "balance sheets" would never have passed examination under GAAP) has rocks in their head.

The simple fact of the matter is this - The Fed is out of bullets and they know it. They've driven rates to zero but still can't get beyond the premium demanded for loans, and the fact that cash flow is insufficient to meet service requirements. This is why the shift has taken place to the Government, which (thus far) has been able to keep borrowing and borrowing, since nobody is (yet) questioning whether the government will be able to meet the cash flow.

The key there is "yet."

Treasury, for its part, is worried too. They should be.

In his January 6, 2011 letter urging that Congress act to protect America’s creditworthiness by increasing the statutory debt limit, Secretary Geithner made clear that any default on legal debt obligations of the U.S. would be unthinkable. In response, Members of Congress of both parties have indicated agreement that the United States must honor its obligations. However, Treasury disagrees with suggestions by some that Congress could somehow evade this responsibility by passing legislation to “prioritize” payments on the national debt above other legal obligations of the United States.

Uh huh.

Guess what Timmy? Most of what The United States spends money on is not a legal obligation.

Oh sure, some of it is. Salaries for our servicemembers, for example. They worked, they're owed. Legally. That's a legal obligation. Debt service (interest) is a legal obligation.

Social Security and Medicare are not. Nor are farm subsidies, Department of Education meddling, and, incidentally, while your salary Timmy is for work you've already done, Congress can de-fund your position and reduce your salary for future work to one penny.

If they did, you'd be overpaid.

The simple solution to the "Debt Ceiling" is to spend only what you take in via taxes.

That means no more debt is required.

And yes, I'm well-aware that it also means a 43% (roughly) immediate cut in Federal Spending.

I assert that such a cut can be made without impinging on one dollar of actual legal obligation of The United States.

Stop lying Neal, and tell your boss Timmy that we know he's lying too.

[Toddsterpatriot]

Running away without proving your claim again? Shocking.

[The Comedian]

I proved my claim by citing the law that brought the Fed into existence via member banks purchasing of shares (12 USCA 282). The Fed is a private enterprise, operating as a monopoly under color of government (the board of governors). It should be RICO'd.

You failed to answer my Fed-defines-Fed challenge, running away into irrelevancy.

Because you can't read, perhaps you can get one of your sycophantic finger puppets to narrate it for you.

I don't teach elementary logic to simpletons, and I don't narrate for fools. So I won't be proving a negative, or restating my obvious point for you no matter how many times you ask me to waste my time doing so.

And as for you, do you exhibit this sort of blind, creepy loyalty to any other governmental or monopolistic enterprise? Or do you limit your supine slobbering to your soulmates in the Fed?

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[TruthConquers]

“..without the authorization of Congress.”

Just what I thought. You agree that the FED should be allowed to do what ever they want WITHOUT THE AUTHORIZTION OF CONGRESS.”

Oh, and your kindergarten teacher says its time for your nap.

And you need your bib changed. The one you are wearing is quite covered in slobber now.

[Mase]

You truly are a Comedian.....in addition to being a foul mouthed lout who would have simply "run away" if someone hadn't called out your cowardice.

Every fact needed to prove you have no idea what you're talking about is contained in that link -- your obfuscation and feeble attempt to redirect the discussion notwithstanding.

You hurl insults because, having been outed for the empty vessel you are, you've got nothing left to offer. I came along to simply point that fact out. Tough if you don't like it. Perhaps you should grow a little skin if you're going to lecture your superiors about the intricacies of effective debating techniques.

Or not.

[Toddsterpatriot]

I proved my claim by citing the law that brought the Fed into existence via member banks purchasing of shares (12 USCA 282). The Fed is a private enterprise, operating as a monopoly under color of government (the board of governors).

A law brought them into existence? How many private entities can make that claim? Why can't the "private owners" buy, sell or pledge their shares for loans? Why don't the "private owners" get a share of the Fed's profits?

How many other private enterprises have a .gov URL? Why don't you get one? That will show that you don't have to be a government entity to get one.

The Federal Reserve Banks' 2010 net income was derived primarily from $76.2 billion in income on securities acquired through open market operations (federal agency and government-sponsored enterprise (GSE) mortgage-backed securities, U.S. Treasury securities, and GSE debt securities); $7.1 billion in net income from consolidated limited liability companies (LLCs), which were created in response to the financial crisis; $2.1 billion in interest income from credit extended to American International Group, Inc.; $1.3 billion of dividends on preferred interests in AIA Aurora LLC and ALICO Holdings LLC; and $0.8 billion in interest income on loans extended under the Term Asset-Backed Securities Loan Facility (TALF) and loans to depository institutions. Additional earnings were derived primarily from revenue of $0.6 billion from the provision of priced services to depository institutions. The Reserve Banks had interest expense of $2.7 billion on depository institutions' reserve balances and term deposits.

Operating expenses of the Reserve Banks, net of amounts reimbursed by the U.S. Treasury and other entities for services the Reserve Banks provided as fiscal agents, totaled $4.3 billion in 2010. The Reserve Banks' operating expenses included assessments of $1.0 billion for Board expenditures and the cost of new currency. In 2010, statutory dividends totaled $1.6 billion and approximately $0.6 billion of net income was used to equate surplus to paid-in capital.

Hmmmmm...the "private owners" received $1.6 billion but the Treasury received $78.4 billion.

[Toddsterpatriot]

Just what I thought.

When did you think?

[TruthConquers]

“You agree that the FED should be allowed to do what ever they want WITHOUT THE AUTHORIZTION OF CONGRESS.”

[Toddsterpatriot]

Where did you imagine I said that?

[TruthConquers]

“You agree that the FED should be allowed to do what ever they want WITHOUT THE AUTHORIZTION OF CONGRESS.”

[The Comedian]

My, you really get upset when someone outs your boyfriend todders. Sad news for you though: Your little tantrums won't make him love you any more.

You're just another disposable sidekick with a thin coat of conservative paint and delusions of enlightenment and competence that nobody listens to, or ever will. You aren't even worthy of being personally insulted. But I'll do it just this once. Revel in the attention you never got as a child.

Daddy failed.

Now get back to fellating each other in the Fed-supporting zombie squad, lab rat.

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[1rudeboy]

Even his personal attacks are tired. You’d think he’d be good at one or the other (debating or insults).

[Mase]

You’d think he’d be good at one or the other (debating or insults).

You'd think. Maybe that's why he's such an angry guy. It sucks when you suck. It must also be frustrating trying to convince anyone who cares that you're an academician, with a high IQ, when you spend most of your time here getting your butt kicked while looking up at the curb.

[1rudeboy]

During my first run-in with this clown, I learned that he is "used to having no competition on the debate field." As if his debate coach had him practising against deafmutes.

[MichaelCorleone]

In the early ‘90’s I had a professor who used to work for the San Francisco Fed (don’t know in what capacity and I don’t know what years he worked there).

I distinctly remember he told the class that the Fed had long since lost it’s ‘independence’.

The reality is that the Fed takes it’s direction from the Treasury, who in turn gets their marching orders from the President.

Those are his words and almost an exact quote.

[Oatka]

FR down yesterday whenever I logged on.

What if they never do? If they hold their bonds long enough, they all mature at face value.
That's the flip side of the "no-profits" coin. What's the quality of the bonds? The govt has bought so much crap, the actual value might be nowhere near the face value, let alone what this escalating inflation will do to the value after being held "long enough".
My problem is that these guys are playing "Whack-A-Mole" with the liability and some in the financial community breathe a sigh of relief when it pops up in someone else's hole, not that the liability is paid off.

[Toddsterpatriot]

What's the quality of the bonds?

US Treasuries and MBS guaranteed by the government.

The govt has bought so much crap,

That's the meme, it's also incorrect.

[Oatka]

The govt has bought so much crap,
That's the meme, it's also incorrect.

I hope that's the case. Maybe I'm just painting them with a Fannie Mae brush. Do you have a source? Not being confrontational, just interested.

[Toddsterpatriot]

http://www.federalreserve.gov/releases/h41/Current/