Bernanke’s 29 Trillion Dollar Fog of Deceit

Bill Totten's weblog carries the most recent article from University of Missouri at Kansas City (UMKC) economist L. Randall Wray, one of the handful of economists worth taking the time to listen to. Two graduate students at UMKC have completed an analysis of the documents pried out of the Federal Reserve's grasp by the Bloomburg Freedom of Information Act request, and found that the actual total amount of emergency lending and other assistance the Fed is actually four times larger than the already staggering figure of $7.77 trillion Bloomburg wrote about two weeks ago.

$29 trillion, if you're wondering. Twenty nine trillion, with a "tee" not a "bee" dollars. That's the entire USA gross domestic product for nearly two entire years.

Wray explains the chain of discovery that began with Sen. Bernie Sander's legislation that forced an audit on the Fed. Of course the Fed tried to provide as little information as possible in that audit. But there was enough information to give Bloomburg financial reporter Mark Pittman the specifics needed to file an FOIA request. (Pittman died soon after of "heart problems" at the age of 52). The Fed tried to make the information in its FOIA release as complicated and as incomprehensible as possible, but, as Wray writes, "Bloomberg helped enormously by putting the data into a usable format." That, in turn, allowed the two UMKC PhD students, Nicola Matthews and James Felkerson, to unzip the Fed's bag of secrets and look inside. Voila! $29 trillion!


About two thirds of the way into the article, Wray begins to address the people who have been defending the Fed by arguing that a cumulative total of Fed emergency lending to the banksters is misleading. One even questions Wray's competence because Wray never worked for - wait for it - the Fed or a Wall Street bankster! That is like arguing you can never understand drug money laundering until you've worked for a drug lord. It is really sweet to read Wray shred these jerks, especially one who stoops to calling the Fed's critics a "rabble" - a good insight into exactly how the one percent and their evil minions view us lowly peasants in the ninety-nine percent. It is useful to keep in mind that the Federal Reserve system has successfully corrupted almost the entire economics profession. That's one big reason why there's only a handful of economists worth listening to.

Last week, Fed chairman Ben Bernanke issued a statement attacking the Bloomburg findings, but did not sign it. That leads Wray to recall the time that former Fed chairman Alan Greenspan outright lied to House Banking Committee chairman Henry Gonzalez about whether or not the Fed's Open Market Committee (FOMC) meetings were tape recorded. They were, but Greenspan said they weren't.

Realizing that it is not a good idea to lie to Congress, he went back to the office, convened a conference phone call of Fed officials and warned them that they likely all would be called before Gonzalez’s committee. He said it would be up to them to decide to tell the truth, or to continue the charade.

You see, the Fed did tape every meeting and had been doing so since the days of Watergate; but the tapes were transcribed and then (supposedly) erased and used for subsequent recordings. In the end, the Fed decided to tell Congress the truth, and agreed to release edited transcripts within five years. So on some generous interpretation, Greenspan’s fib was not a lie.

You can now read them on-line. See the FOMC transcripts the period from October 1993 to May 1994 for discussions surrounding the wisdom of operating with greater openness – and for fascinating internal discussions about how to deal with Gonzalez and Congress; see also my article {3}.

However – and this is a real scandal – the Fed is routinely shredding all the original transcripts (only the edited versions are available). You see, the Fed claims that because it is “independent”, it is not subject to normal sunshine laws {4} that require maintaining government records. And its meetings that discuss monetary policy and bank supervision are also exempt from sunshine, according to the Fed.

It is worth reading the entirety of Wray's article, but I'll close here with Wray's wonderfully apt analogy he uses to dismiss the Fed defenders who argue it's misleading to look at the cumulative amount of loot used to save the banksters.

Say you’ve got six drunk bankers at the bar (named Goldman, Morgan, Stanley, Fargo, Citi, and BoA, for example). Each has a shot glass that Ben the bartender keeps filled. Bernanke would say that Ben the bar-keep has only provided six ounces of booze since there is never more than six full glasses at any point in time. Ben fills the glasses, oh, 29 trillion times over the course of three years. Still, Bernanke claims Ben never contributed to the drunkenness of bankers since he never provided more than six ounces of booze at a time.

Read the entire article: Bernanke’s 29 Trillion Dollar Fog of Deceit