(How to) Bankrupting the FED (for Dummies)

Our system is rigged. Who pumped more than $2 trillion into suppressing interest rates to record lows?

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Wall Street has disproportionately benefited from the largesse of economic policymakers, from easy TARP terms to a long-stretch of largely free consumer deposits. Corporate profits are breaking records, thanks in no small part to the Federal Reserve—the wealthiest bank in the world.

The Dow would be 20 percent to 30 percent lower, absent the Fed’s finger on the scale. You cannot, understate its impact on corporate earnings.

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The Fed policy, known as quantitative easing and often abbreviated as QE3, has been buying $40 billion in mortgage-backed securities each month, creating a stock market bubble by keeping interest rates near zero. The price tag is the Fed’s bloated balance sheet already on its way to $5 trillion.

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That option isn’t available anymore

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Keep in mind that the only easing tools the Fed has left are forward guidance – its practice, through issuing forecasts of its policy intentions, of influencing market behavior – and more QE. It can’t run about ramping up money printing for every bump in the road.

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As the Federal Reserve has artificially expanded the money supply, it has set the economy up for rapid inflation in the future.

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QE3, the central bank did not use taxpayer money directly, to buy bonds. Rather, the FED electronically credits banks with more funds. Artificially expanding the U.S. money supply, creating a future tax burden on our children and on their children.

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The Fed has very little power to influence events because it is essentially out of ammo.

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There is no way the US will ever pay back $14 trillion.  So, go ahead raise the debt ceiling. What’s another trillion or two? Go ahead Moody — downgrade our credit rating.

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Are the underlying components of the NASDAQ really deserving of a multi-thousand point gain in just a short period of time? Of course not. This is a bubble.

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FINANCIAL BUBBLES

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A financial bubble occurs when prices for assets, such as stocks, rise far above their actual value. Such an economic cycle is usually characterized by rapid expansion followed by a contraction, or sharp decline in prices.

For banks, if their capital reserve holdings include large investments with unrealistic values due to bubbles, a shock to the bank will occur when the bubbles burst, causing a run on the bank, as infamously happened with Lehman Brothers.

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It is the direct result of policy choices made by Democrats and Republicans alike.

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Tax policy, financial deregulation, trade policy, anti-labor policy, etc., etc. There’s zero evidence that any of this has increased economic growth, it means that U.S. policy for the past 30 years has been aggressively dedicated to shifting income share away from the poor and middle class and into the pockets of the already rich.

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Frustration has run so high against the established parties that the Tea Party was born and then, we pitched tents in city parks during the Occupy movement to send a message, but the politicians wouldn’t hear us, because their ears were stuffed with Wall Street money.

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• In 2010, the top hedge fund manager earned as much in one HOUR as the average (median) family earned in 47 YEARS.

• The top 25 hedge fund managers in 2010 earned as much as 658,000 entry level teachers.

• In 1970 the top 100 CEOs made $40 for every dollar earned by the average worker.  By 2006, the CEOs received $1,723 for every worker dollar.

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As the administration and Congress argue over cuts in social programs, inequality in America grows more extreme each day. Even the great financial crash didn’t derail this trend. The richest 400 Americans, for example, increased their wealth by 54 percent between 2005 and 2010, while the median middle-class family saw its wealth decline by 35 percent.

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NO ACCIDENT

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It’s not the result of mysterious global forces, or technology, or China, or structural problems concerning the skills and education of our workforce.  Rather, it is the direct result of policy choices made by Democrats and Republicans alike.

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The bailouts resurrected high finance and the inequality it inevitably spawns. Instead of putting our foot back on the neck of finance, we’re talking about slashing social programs. Rather than dramatically increasing taxes on the super-rich through a wealth tax, we’re debating how to slash Social Security and Medicare benefits.

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Wall Street has spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from “virtually every state, district and territory in the United States.”

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The world’s most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.

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Lowering a bid by just one-100th of a percent, called a basis point, could cheat a town out of tens of thousands of dollars it would otherwise have earned on its bond deposits.

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HOW THE SCAM WORKS

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In 2001, CDR (brokers Chambers, Dunhill and Rubin) hired a consultant named Ron White, a Philadelphia bond attorney who happened to be the chief ­fundraiser for then-mayor John Street. CDR gave White two tickets to the 2003 Super Bowl in San Diego plus a limo – a gift worth $10,000. As his “guest,” White took Corey Kemp, the city treasurer for Philadelphia, who, 16 days later, awarded CDR a $150,000 contract to advise the city on swap deals. But that wasn’t the end of the gravy train: CDR doled out those swap deals to selected banks, who in return kicked back $515,000 to CDR for steering city business their way.

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So a mere $10,000 bribe to a politician – a couple of Super Bowl tickets and a limo – scored CDR a total of $665,000 of the public’s money. If you want to know why Wall Street has been enjoying record profits, here’s your answer: Corruption is a business model that brings in $66 for every dollar you invest.

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Doug Goldberg explained that while at CDR, he had routinely helped Wall Street rig bids on municipal bonds by letting them take a peek at other bids.

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Goldberg testified that he repeatedly rigged auctions, sometimes he gave them “last looks” so they could shave basis points off their winning bids; other times he asked them to intentionally submit losing offers – called cover bids – to allow other firms to win.

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WHAT TAXPAYERS DON’T KNOW HAS HURT THEM

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Our goal is to shut down the FED so we can restore a sound monetary system in this country. We the people have the power to take our country back and not wait for some politician to fix things.

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The U.S. was the largest creditor in the world. Now the debt is in the trillions of dollars. Trillions of dollars transferred from the worlds richest & most powerful country. This is a form of destructive economic management at a level of graft & corruption that has no parallel. There’s nothing comparable to that in history. Upcoming elections do us no good. Corruption has entered every institution.

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As things stand now, with federal taxes, state taxes, county tax, sales tax, property taxes, car tax, gas tax, phone taxes, etc., the government takes 4 months of our wages every year in taxes. For that kind of money we should have the best schools on the planet, right? But every year 30 to 50% of our kids get left behind. Let me repeat, taxes take 4 months of your wages away from you every year. That’s true under Republican or Democrats.

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The 10 most profitable U.S. companies paid an average federal tax rate of just 9 percent last year. The group includes heavyweights Exxon Mobil, Apple, Microsoft, JPMorgan Chase and General Electric.

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Instead of paying the 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the U.S. Treasury), totaling $21.8 billion. These companies’ “negative tax rates” mean that they made more after taxes than before taxes.

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In 2010, corporate giant GE made $14.2 billion profit but paid no taxes. If GE, and other corporations and banks paid their fair share, there would be no federal, state or county deficits/shortfalls. Instead, the government would have a surplus like they used to– roads, dams, hospitals and schools would not be in disrepair or overcrowded because the government would have plenty of money for all these things as they once did and would not be looking for ways to cut social security or other social programs.