A mainstream argument against the Federal Reserve system

Dismantling the Temple
By William Greider

July 15, 2009

“1. It rewards failure. Like the largest banks that have been bailed out, the Fed was a co-author of the destruction. During the past twenty-five years, it failed to protect the country against reckless banking and finance adventures. It also failed in its most basic function–moderating the expansion of credit to keep it in balance with economic growth.

2. Cumulatively, Fed policy was a central force in destabilizing the US economy. Its extreme swings in monetary policy, combined with utter disregard for timely regulatory enforcement, steadily shifted economic rewards away from the real economy of production, work and wages and toward the financial realm, where profits and incomes were wildly inflated by false valuations. Abandoning its role as neutral arbitrator, the Fed tilted in favor of capital over labor.

3. The Fed cannot possibly examine “systemic risk” objectively because it helped to create the very structural flaws that led to breakdown. The Fed served as midwife to Citigroup, the failed conglomerate now on government life support. Greenspan unilaterally authorized this new financial/banking combine in the 1990s–even before Congress had repealed the Glass-Steagall Act, which prohibited such mergers.

4. The Fed can’t be trusted to defend the public in its private deal-making with bank executives. The numerous revelations of collusion have shocked the public, and more scandals are certain if Congress conducts a thorough investigation.

5. Instead of disowning the notorious policy of “too big to fail,” the Fed will be bound to embrace the doctrine more explicitly as “systemic risk” regulator. A new superclass of forty or fifty financial giants will emerge as the born-again “money trust” that citizens railed against 100 years ago. But this time, it will be armed with a permanent line of credit from Washington.

6. This road leads to the corporate state–a fusion of private and public power, a privileged club that dominates everything else from the top down. This will likely foster even greater concentration of financial power, since any large company left out of the protected class will want to join by growing larger and acquiring the banking elements needed to qualify.”

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1 Comment »

  1. sbarrkum said

    OT:

    Thanks for the WHEN PIGS FLY–AND SCOLD: BRITS LECTURING SRI LANKA! link on the calculatedrisk site. Was going to give the Kudos on the CalculatedRisk, but it seemed we were out sync lately.

    In case you are interested this scorched earth warfare was a reprisal for the “Uva Wellasa” rebellion in 1918. One more little detail that was not in the article. The Brits cut off the the chief rebel/freedom fighters head and had it preserved in London.


    After his death his skull was taken to Britain and placed in the Phrenological Society of Edinburgh. When Sri Lanka gained independence from the British in 1948, Keppetipola was declared a national hero of Sri Lanka, because he’d fought to free the country from foreign rule. In 1954 at the request of the Sri Lankan Government his skull was returned home, and is now kept in Kandy.

    [edit]

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