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What Is The Federal Reserve Doing?!?!

Posted by George Regal Categories: Editorials, US Economy

When economist Milton Friedman celebrated his 90th birthday, Ben Bernanke, the current Federal Reserve Chairman, said the following:

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

We did it!  Quite an admission isn’t it?  Well, they did it again!  Anatomy of a Crisis highlighted the policies and practices that lead to the housing bubble, and in this column I’ll discuss how it was the Federal Reserve (the FED) that made the bubble possible in the first place. The FED doesn’t manipulate the money supply directly,at least not very often, they do it by setting interest rates, altering reserve requirements (the amount of money banks must keep on deposit with the FED), and serving as a safety net for the fractional reserve banking system that I briefly discussed in “Big Trouble in Little Washington”. A fractional reserve system that couldn’t expand deposits to the extent that they do without the FED.

 

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Big Trouble in Little Washington

Posted by George Regal Categories: Editorials, Law, Site Features, US Economy, Wall Street

According to President Bush this bailout is a good deal for Main Street.  He assures us that the tax dollars invested will pay for themselves and then some.  Oh really?  That’s the definition of a good investment. Well, if this is such a good investment why aren’t private investors rushing in to snap up these assets and companies at bargain prices?  Hint: Because they aren’t good investments!

Adding the $700 billion to the rest of the actions taken recently (Bear Stearns, AIG, Fannie Mae and Freddie Mac, FHA rescue bill, and the rest) the total balloons to a whopping $1.8 trillion, and counting!  Where is this money coming from?  Unfortunately for us, it’s coming out of thin air!  Anytime the government spends more than it receives in tax revenue, they engage in deficit spending. This is accomplished by the Treasury Department auctioning Treasury Securities on the open market. These are the same securities that China has purchased to the tune of $2.2 trillion. With me so far?

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Anatomy of a Crisis

Posted by George Regal Categories: US Economy, Wall Street

In the late 90’s the Clinton Administration put pressure on lenders to offer riskier loans (sub-prime) to the poor, and those with poor credit, to increase home ownership. This was accomplished by lifting restrictions on Fannie Mae and Freddie Mac, allowing them to buy these risky mortgages on, what is called, the secondary market. By expanding the loans that Fannie and Freddie could buy, banks were able to extend more of these loans since they knew they could slough them off on Fannie and Freddie.

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Do People Give Ron Paul Enough Credit?

Posted by Sal Traina Categories: US Economy, Videos, Wall Street

He predicted this mess we’re in now in 2003, almost three years before John McCain predicted it. Ron Paul is not my first choice for President, but he deserves way more credit than he gets. His strong suit is economics, and he could mop the floor with McCain and Obama on this subject.

On Sept. 10, 2003, U.S. Rep. Ron Paul, R-Texas, testified before House Financial Services Committee, which was holding hearings regarding special privileges extended to government sponsored enterprises (GSEs). Think Fannie Mae and Freddie Mac. In his testimony. Paul criticized such privileges in general and warned of the potential for disaster posed by government involvement with Fannie and Freddie specifically.

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