The Sovereign Society Offshore A-Letter Monday, June 8, 2009 Fed Brings on an âOld Friendâ Dear A-Letter Reader, Oh, boy! Have we got a juicy one for you today! Apparently the Federal Reserve is hiring a new lobbyist. Wait a tick, you say, isnât that absurd? Isnât it almost like the FDIC hiring their own lobbyist? Whatâs the point? Well first; itâs not like that at all⦠Because the FDICâs actually a government agency, and the Federal Reserve isnât⦠In reality, itâs neither Federal nor an actual Reserve per sé. Instead, itâs a cartel of Americaâs most powerful banks â along the same lines as OPEC, for example. Sure, the Chairman of the Board of Governors (currently Ben Bernanke) is obligated to speak before Congress at least twice a year, but weâve all seen how well that works⦠What about the $2.2Trillion in undisclosed loans from last year? Bernanke wonât say peep. What about detailsâ¦results from the âStress Testsâ? Heâll tell you what you want to hear⦠But apparently even that is too much restraint for the Federal Reserve. Apparently congressional concerns are chafing the seemingly endless power of the worldâs most overstretched Central Bank. So theyâre bringing in a familiar face to smooth things overâ¦and as soon as I heard her name, I stopped dead in my tracks⦠The Handiwork of Enronâs Linda Robertson The Devilâs always in the details, isnât it? I mean; on the surface, itâs pretty unnerving that the Fed is hiring a lobbyist. But only when you dig in â only when you pick through her track record â does it become borderline criminal. Let me explain⦠Weâve spoken in the past about the Commodity Futures Modernization Act (CFMA) of 2000. If you're one of our business-history junkies, then that particular piece of legislation probably rings a bell. Because this was the act that gave us the "Enron Loophole," which took specific types of energy trading outside the regulatory authorities' reach. But beyond setting the stage for Enronâs spectacular failure, this piece of legislation had immense repercussions for the Credit Default Swap (CDS) market. Remember that a CDS is basically insurance on a bond. The bond defaults, you still get your money back. But unlike insurance, there arenât any capital requirementsâ¦no safeguards or regulations. Remember, theyâre just obscure swap agreements. And thanks to the CFMA, they were kept out of reach for regulatorsâ¦until it was too late. At the time, the market for CDS was only three years old but quickly growing. But then the market for CDS simply exploded. With some US$900 Billion in total contracts before the act, there were trillions of dollars in CDS contracts by 2003...and then the market expanded 10 times over between 2003 and 2007. I don't think I have to tell you why⦠Every financial institution in the world was running with the pedal-to-the-metal, piling on questionable subprime mortgages in an all-out race to bring in the most fees...all the while offsetting their risk with CDS insurance. But â as mentioned above â there wasnât anything behind the CDS insurance. Nothing to pay claims with. Turns out the CDS market was one of empty promisesâ¦and a means for inflating everyoneâs books in what was quite possibly the greatest Ponzi scheme the world has ever seen. Oh, the tangled web we weave. But now weâre paying the price⦠AIG is âtoo big to fail,â so we throw a few hundred billion dollars at âem. Why? To fulfill their CDS contracts. They never had the cash to pay up on these contractsâ¦but if they fail to pay, then the rest of the system â JP Morgan, Goldman, etc. â will be at risk. A brilliant business strategy for them, but one thatâs costing the U.S. government trillions upon trillions of dollars. All thanks to one little act â the CFMA. One little sheet of paperâ¦one legally-bribed Phil Grammâ¦and a handful of Enron lobbyists (the lobbyists actually wrote the billâs language) created hundreds of trillions in liabilities that would fall on generations of American taxpayers and dollar-holders. And spearheading this effort? The lobbyist in charge of Enronâs Washington office? You guessed it; none other than Linda freaking Robertson. The Fedâs Mad Grab for Power They canât be serious! I thinkâ¦but of course, they are⦠In reality, the blame for todayâs crisis falls squarely on the Federal Reserve. You can attribute it to any of a hundred different causes, but most of them trace their roots back to the âeasy moneyâ policy of the Fed and the lowering of reserve ratios that happened in the '90s and '00s. Now, today, the Fed is turning its greatest long-term blunder into a mad grab for power. Their balance sheet has ballooned by trillions, and yet theyâre as obscure as everâ¦theyâre seeking greater authority over U.S. non-financial institutions, but they havenât truly âsavedâ anyone just yetâ¦and they hold themselves out to be one of the only institutions truly capable of stopping the systemic failure they helped bring about. But alas, they canât do it alone. Benâs already got his hands full with Congressional hearings. And Lindaâs already proven her worth to the cause; pulling a fast one on the slow crowd in Washington back in 2000. Sheâs proven that sheâs capable of getting esoteric, potentially disastrous legislation through the horse-traders in Congress, and thatâs just the kind of qualification the Fed was looking for. Yours in Personal Sovereignty, MATTHEW COLLINS, A-Letter Editor
Nice of the Fed to confirm that they indeed need auditing. This is like Madoff hiring someone to stop the SEC from looking in to his books.