George Will Is Wrong On The Fed

By Greg Hunter    Dec 11 2009 11:13AM usawatchdog.com

This week nationally syndicated columnist George Will wrote a piece called “Playing Politics with the Fed.” Mr. Will is squarely against Congressional legislation called the Federal Reserve Transparency Act of 2009. This bill will force the Federal Reserve to open its books for an audit. The bill, also known as “Audit the Fed,” has 317 co-sponsors in the House of Representatives alone, a more than two-thirds majority. There are 137 Democrats and 180 Republicans backing an audit, so it is very serious bi-partisan legislation. Mr. Will tries to make the case for objecting to an audit by saying, “Let such people begin managing the Fed and they will mandate low interest rates, regardless of circumstances. The currency will fail as a store of value. Is the Fed’s independence (de facto, not de jure) “undemocratic”? Somewhat. So what?” (For George Will’s complete commentary click here)

“So what?”  Mr. Will, if you do not understand the significance of why there is a movement to “Audit the Fed,” you should give back your Pulitzer Prize and retire.  Take, for example, Citibank: According to Congressman Alan Grayson, Citibank had $230 billion of toxic assets removed from its books and transferred to the Fed.   Now, the bailed out bank wants to pay back its TARP funds (a mere $45 billion) and go on its merry way.  Mr. Will, can’t you see the reason taxpayers should know why the Fed gave Citibank, just one company, this deal?  After all, taxpayers will be on the hook for $230 billion worth of bad decision making. On top of that, no one in the bank is being held accountable for it.  For that matter, not a single bailed out banker lost his job for bankrupting his institution.

Will goes on to say, “America is committed to democracy — and to circumscribing democracy’s scope in order to minimize the damage it can do by improvident responsiveness to untempered gusts of public passion.”  In other words, we need the Fed to save us from ourselves. Boy, that’s rich, Mr. Will, considering the Fed secretly gave foreign central banks $500 billion dollars to bail them out!  Why is the Fed saving foreign banks instead of the Americans that are footing the bill?  According to George Will, we shouldn’t know what the Central Bank is doing because it will hurt the Fed’s independent decision making and thus hurt us.  What a crock! George Will wraps himself in democracy while he champions the aristocracy. Simply put, Will’s commentary backs secret bailouts for the wealthy.

I am not a lone voice here!  According to Elizabeth Warren, the chair of the Congressional Oversight Panel charged with monitoring the TARP bank bailout, we only rescued the people at the top. Warren, a Harvard law professor, said recently, “This is sort of how we went about the rescue — we rescued at the top and we left the bottom to kind of fend for itself — and that’s showing up in the unemployment numbers.”  In Warren’s oversight capacity, she gets to examine the billions of dollars doled out by Congress to banks. But when it comes to Federal Reserve bailouts of financial institutions, there is no oversight.  It has been reported the Fed is hiding at least $9 trillion of toxic assets in off-book accounting. The Fed lives in a secret world where it gets to play favorites and decide who lives and who dies.  Just ask Lehman Brothers and Bear Stearns if they got a fair shake from the Fed.

A perfect example of playing favorites shows up in the treatment of Goldman Sachs.  The former investment bank received a $13 billion payout in the AIG bailout.  Goldman got all its money back. Why did the Fed pay Goldman 100 cents on the dollar when it forced other financial institutions to take big losses?  Who else is the Fed giving favorable treatment?  And why? Has the Fed taken toxic assets off the books of Goldman?  I suspect all the big banks had hundreds of billions of dollars of toxic assets transferred off their books, compliments of the Fed. Sound far fetched, you might say? Just this week, Treasury Secretary Tim Geithner said, “None of them would have survived” if the government did not bail them out. When it comes to the Federal Reserve, taxpayers don’t get to know what banks received money and why they were bailed out. It is an appropriate secret according to the Fed and George Will. 

George Will also says Fed Chief Ben Bernanke should be applauded for the job he is doing. Will writes, “If Time magazine has a lick of sense, Bernanke will be its Person of the Year because his leading role in stabilizing the financial system enabled the president to pursue other objectives.  He did not do it perfectly, but he prevented paralysis.” You think Bernanke should be “Person of the Year?”  Might I remind you Mr. Will, it was the Federal Reserve that was supposed to regulate the banks to control systemic risk. Instead, the Fed stood by and watched the banks take on massive risk and debt that caused the financial meltdown. I guess in your world of the privileged and wealthy Bernanke should also get some sort of medal for allowing Wall Street bankers to rake in huge bonuses while taking on insane risk!

Something else to consider Mr. Will, while you champion the cause of Federal Reserve secrecy, the Fed is not a federal institution at all, but a cartel of private banks.  The Fed is simply a subcontractor for U.S. monetary policy operating for profit.  With that in mind, we pay the Fed in Treasury Bills to print Federal Reserve Notes.  Think about that for a moment, the U.S. gives the Fed interest bearing bonds and gets Federal Reserve Notes in return.  Wouldn’t it be cheaper for Congress to allow the Treasury to print the money as the Constitution provides and save the interest payments to the Fed?  Congress should be in control of the money supply and not a subcontractor.

Thomas Jefferson, one of our founding fathers and framer of the Constitution, despised the idea of money not strictly backed by gold or silver.  Jefferson’s fear that banks could one day become too powerful is more relevant now than ever. “I sincerely believe… that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.” –Thomas Jefferson to John Taylor, 1816. 

In a modern way, I feel the country is being robbed by a Federal Reserve creating money without oversight or restriction. I talked about this phenomenon in a post called “Is The American Empire Being Looted?”  Mr. Will, the “Audit the Fed” bill is not about playing politics. It is about the welfare of the common man. Millions will end up losing their homes in the foreclosure crisis sweeping the country while bankers receive secret bailouts that you support. That, Mr. Will, is wrong for the common man and wrong for America!  I say, audit the Fed!

Greg Hunter

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Hunter joined ABC News in 1999 from WTSP-TV in Tampa. He has earned a “National Headliner Award," an International “Freddie Award” for health and medical reporting, as well as investigative reporting awards from both the “Society of Professional Journalists” and the “Radio Television News Directors Association.”