ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist&reg;.com: Putin Punishes Georgia</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style2 { font-size: large; font-weight: bold; font-family: Arial; } .style3 { height: 58px; } .style4 { font-size: x-large; font-weight: bold; } </style> </head> <body bgcolor="white" vlink="black"> <center> <table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr height="79"> <td width="133" height="118" rowspan="2" valign="top" align="left" xpos="0"><a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="7" height="118" rowspan="2"></td> <td width="482" height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="1" height="118" rowspan="2"></td> <td width="1" height="79"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td width="300" height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr> <td width="624" colspan="6" valign="top" align="left" xpos="0" class="style3"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#149; <a href="articlesindex.html">ARTICLES</a> &#149; <a href="books.html">BOOKS</a> &#149; <a href="teflon.html">THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#149; <a href="mailto:letters@onlinecolumnist.com">REACTIONS</a> &#149; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="2"> <td width="133" height="2">&nbsp;</td> <td width="489" height="2576" colspan="3" rowspan="2" align="left" xpos="133" content valign="top" csheight="2573"> <p class="style2">Fed&#39;s Money Tree</p> <p><b><font face="Arial,Geneva,Helvetica">by John M. Curtis</font></b><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b><a href="books.html"><br> </a></b></font><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b>(310) 204-8700</b></font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright September 18, 2008<br>All Rights Reserved. </i></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p> <p class="MsoNormal"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <span class="style4">R</span>escuing the current U.S. financial crisis, the Federal Reserve Board flexed its muscles, bailing out investment bank Bear Stearns March 15 for $30 billion, taking over mortgage giants Fannie Mae and Freddie Mac Sept. 7 for $200 billion, turning its back on Lehman Bros. Sept. 16 and saving AIG insurance from bankruptcy Sept. 17 for $85 billion, totally a whopping<span style="mso-spacerun: yes">&nbsp; </span>$315 billion, a staggering sum by anyone s standards.<span style="mso-spacerun: yes">&nbsp; </span>Yet the federal budget deficit remains around $440 billion, begging the question of how the Fed accounts for its extravagant purchases.<span style="mso-spacerun: yes">&nbsp; </span>Fed Chairman Ben S. Bernanke personifies former Fed Chairman Alan Greenspan s worry of  using the Fed as a magical piggy bank. <span style="mso-spacerun: yes">&nbsp; </span>Whether admitted to or not, Bernanke calls his buddy Treasury Secretary Hank Paulson, places his order at the Office of Printing and Engraving for whatever he wants and rescues the economy. </p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Some of the this mystery was unraveled Sept. 9, 2007 before the House Oversight and Government Reform Committee, when former U.S. civilian administrator L. Paul Bremer admitted under oath that he couldn t account for 360 tons or $12 billion of freshly printed C-notes.<span style="mso-spacerun: yes">&nbsp; </span>Bremer also didn t know whether the cash came from the Fed or out of the billions allocated by Congress for the Iraq War.<span style="mso-spacerun: yes">&nbsp; </span> Who in their right mind would send 360 tons of cash into a war zone?<span style="mso-spacerun: yes">&nbsp; </span>But that is exactly what our government did, said Chairman Rep. Henry Waxman (D-Beverly Hills) dumbfounded by the lack of accountability.<span style="mso-spacerun: yes">&nbsp; </span>Nobody knows today whether taxpayers, in fact, pay for Wall Street s bailouts or whether Bernanke simply asks Paulson to print money-on-demand.<span style="mso-spacerun: yes">&nbsp; </span>No one, including the Fed, admits where the money comes from or goes to subsidize the Fed s pet projects. </p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="mso-spacerun: yes">&nbsp;&nbsp; </span>Bernanke ordered Sept. 15 New York Fed president Timothy F. Geithner, vice chair of the Fed s Open Market Committee, to loan AIG $85 billion for a 79.9% stake in the company.<span style="mso-spacerun: yes">&nbsp; </span>No one really knows from which account the cash was drawn.<span style="mso-spacerun: yes">&nbsp; </span>There s real confusion whether the Fed orders cash directly from the U.S. Treasury or whether such cash bailouts come directly from the Office of Printing and Engraving before they re assigned to any account, public or private.<span style="mso-spacerun: yes">&nbsp; </span> The loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the economy, said the Fed statement, not accounting for whether the bailout would add to the expected $440 billion deficit.<span style="mso-spacerun: yes">&nbsp; </span>When Wall Street heard the news, the DOW sold-off 440 points, adding to recent losses.<span style="mso-spacerun: yes">&nbsp; </span>Fund managers can t figure out whether to buy or sell.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Greenspan worried about the Fed playing the nation s  magical piggy bank, bailing out the nation s ailing businesses.<span style="mso-spacerun: yes">&nbsp; </span>You can t blame AIG s losses on the mortgage meltdown that has decimated the investment banking industry.<span style="mso-spacerun: yes">&nbsp; </span>Trusted names like Bear Stearns, Lehman Bros and Merrill Lynch have been swept up in Wall s Street s latest tsunami now threatening the economy.<span style="mso-spacerun: yes">&nbsp; </span>When the Fed was formed in 1913, it was a consequence of the financial panic of 1907, attempting to introduce  elasticity and liquidity in the nation s banking system.<span style="mso-spacerun: yes">&nbsp; </span>While there are 12 branches across the U.S. with a total of $350 billion in assets, the Fed can expand its asset base at any time by ordering more currency from the Office of Printing and Engraving.<span style="mso-spacerun: yes">&nbsp; </span> Without maintaining the illusion of a tightly controlled lending system, U.S. currency would risk devaluation, causing runaway inflation.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Watching financial markets meltdown helped energize Sen. Barack Obama s (D-Il.) campaign, watching his bounce evaporate after the Democratic National Convention.<span style="mso-spacerun: yes">&nbsp; </span>Incumbent parties usually take the heat for troubled economic times.<span style="mso-spacerun: yes">&nbsp; </span>Sen. John McCain (R-Ariz.) faces stiff headwinds because of President George W. Bush s low approval ratings and sick economy.<span style="mso-spacerun: yes">&nbsp; </span> An $85 billion loan is a staggering sum and is just too enormous for the American people to bear the risk, Congress will demand answers to prevent this from happening again, said House Speaker Nancy Pelosi, unsure whether the Fed s loan would expand the deficit or the national debt.<span style="mso-spacerun: yes">&nbsp; </span>  Hearing these plans, you have to stop to catch your breath.<span style="mso-spacerun: yes">&nbsp; </span>But upon reflection, the alternatives were much worse, Sen. Chuck Schumer (D-N.Y.) head of the Senate Banking Committee, lauding the Fed s actions.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Fed s recent bailouts prove that there s no limit to the Treasury s printing presses, handing Bernanke whatever he wants.<span style="mso-spacerun: yes">&nbsp; </span>Past government bailouts during the 1980 s savings and loan crisis totaling $160 billion didn t result in devaluing the currency or massive inflation.<span style="mso-spacerun: yes">&nbsp; </span> Runaway inflation in the late 1970s had more to do with uncontrolled oil prices, something affecting today s economy.<span style="mso-spacerun: yes">&nbsp; </span>When Treasury Secretary Hank Paulson proposed reviving the Resolution Trust Corporation the agency that retired bad debt in the  80s the Dow rocked up 900 points in two days.<span style="mso-spacerun: yes">&nbsp; </span>After picking and choosing which companies would live or die, Bernanke s money tree proves that there s no real shortage of cash in the U.S. economy.<span style="mso-spacerun: yes">&nbsp; </span>No one really wants to know the Fed s secret behind the money supply:<span style="mso-spacerun: yes">&nbsp; </span>Order more cash from the Treasury s money tree and pretend it comes from taxpayers.</p> <p><b><u>About the Author</u></b><br> </p> <p><b>John M. Curtis </b>writes politically neutral commentary analyzing spin in national and global news. He&#x2019;s editor of OnlineColumnist.com and author of <a href="books.html">Dodging The Bullet</a> and <a href="books.html">Operation Charisma</a>.<br> </p> <p></p> </td> <td width="1" height="2576" rowspan="2"></td> <td width="1" height="2"><spacer type="block" width="1" height="2"></td> </tr> <tr height="2574"> <td width="133" height="2574" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="1" height="2574"><spacer type="block" width="1" height="2574"></td> </tr> <tr height="1" cntrlrow> <td width="133" height="1"><spacer type="block" width="133" height="1"></td> <td width="7" height="1"><spacer type="block" width="7" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="300" height="1"><spacer type="block" width="300" height="1"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>Home</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> || <a href="articlesindex.html">Articles</a> || <a href="books.html">Books</a> || <a href="teflon.html">The Teflon Report</a> || <a href="mailto:letters@onlinecolumnist.com">Reactions</a> || <a href="aboutdiscobolos.html">About Discobolos</a></strong></font> <div align="left"> <p><font size="1" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">This site designed, developed and hosted by the experts at</font><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"> <a href="http://www.cmeonline.net" target="_blank"><img height="30" width="138" src="images/cmelogoANIM.gif" border="0" align="absmiddle"></a></font></p> </div> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">&copy;1999-2005 <a href="aboutdiscobolos.html">Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>