_____  

From: bangla-vis...@yahoogroups.com [mailto:bangla-vis...@yahoogroups.com] On Behalf Of
Dick Eastman
Sent: Wednesday, April 02, 2008 6:28 AM
To: Undisclosed-Recipient:;
Subject: [bangla-vision] Gary North: The FED's End Run

Issue 741                                     April 1, 2008

 THE FED'S END RUN

by Gary North

    Beginning late Friday evening, March 29, we have been
in the midst of an end run by the Federal Reserve System
around Congress.  The FED is about to be given authority to
regulate the nation's largest non-commercial financial
institutions, including stocks and commodities.  

    The goal of the FED, as with all central banks, is
three-fold: (1) to protect the largest commercial banks
from their depositors, who occasionally exercise their
contractual right to withdraw currency (the ungrateful
cads); (2) to control entry of newcomers into the bankers'
cartel (interlopers); (3) to keep the stock market from
collapsing in a panic, thereby persuading depositors to
withdraw currency.

    The FED has always been the representative agency of
the largest commercial banks.  Ever since 1787, it has been
the goal of the large banks to gain control over the entire
financial sector.  

    After President Jackson's defeat of the Second Bank of
the United States in 1832, commercial bankers have sought
to get a third bank.  This campaign escalated in 1896, in
response to the Presidential campaign of William Jennings
Bryan.  The decade-old movement to create a national
central bank escalated even higher in 1907.  The immediate
setting for this was the so-called bankers' panic of 1907.
It was a recession.  Stock prices fell like a stone.  J. P.
Morgan personally and corporately intervened to prop up
stock prices, but the panic was too strong.  The stock
market fell.  The economy went into a recession.

    The Morgan banking interests and the Rockefeller
banking interests joined forces to persuade Americans to
accept the creation of a central bank.  They knew the
voters were opposed to this, so they created a central bank
that was disguised as a series of regional banks, which,
apart from the New York Federal Reserve Bank, have had no
real decision-making authority.  The organizers called this
central bank the Federal Reserve System.  The ploy worked,
although it took over six years and a new President to pull
it off.  It also took the recession of 1913-14.  

    The ploy worked so well that Bryan lobbied Congressmen
to vote for it.  He later said this was the greatest
mistake of his political career.  This was an exaggeration.
His greatest mistake was giving his "Cross of Gold" speech
at the Democratic National Convention in 1896.  He
personally destroyed the limited-government position of the
Democratic Party, moving it sharply leftward, just as he
was.

    This story of the origins of the Federal Reserve
System has long been available to the American public, but
it has never been told by the mainstream media or the
schools.  A comprehensive summary, with full documentation,
was written by economist-historian Murray Rothbard, and was
published posthumously in 1999.  You can download it here:

            http://GaryNorth.com/snip/526.htm

    So, what we are being told about the absolute
necessity of transferring regulatory control over the
securities industry to the FED is merely an extension of a
program that is well over a century old.  Same tune, new
lyrics.

    The Secretary of the Treasury, Henry Paulson, is the
front man for this centralization of regulatory power under
the FED.  He is the former chairman of Goldman Sachs, one
of the largest investment banks in the world.  He saw a
competitor, Bear Stearns, collapse within a one-week
period, March 11 to March 17.  

    Investment banks do not take deposits.  They do not
have the degree of economic protection from bankruptcy
which commercial banks possess.  The trade-off to get such
protection is surrender of control.  In hard times,
entrepreneurs who are facing bankruptcy are willing to
surrender autonomy for protection.

WEAK OPPOSITION

    In a story run on Bloomberg on March 31, we read of
the opposition to this end run by John Reich, director of
the Office of Thrift Supervision.  This organization was
created by Congress in 1989, after the collapse of the
Savings & Loan industry in the mid-1980's.  It was one more
example of locking the barn door after the horses had
escaped.  Reich is now fighting to retain independence for
his bureaucracy.  Reich has pointed out to reporters that
this is not the first time that regulatory centralization
has been attempted.

    A dozen similar efforts by presidents,
    legislators and others over the last 60 years
    never "became reality," Reich wrote. His office
    distributed the letter to reporters on the
    weekend.

            http://GaryNorth.com/snip/527.htm

    Despite his opposition, the proposed legislation is
likely to pass this time.  Congress and the voters have
been told for months that the subprime mortgage crisis
threatens to topple the financial structure.  In other
words, the horses are again out of the barn.  The new
regulatory system will not get them back.  

    The insiders have always used stock market declines to
scare Congress into surrounding power to the FED.  The FED
is presented as a seemingly neutral third party -- beyond
politics and beyond the money-grubbing ways of Wall Street.
The Treasury Secretary is once again reinforcing the FED's
insistence that it needs more power.

    The FED created the housing bubble under Greenspan.
Then Bernanke's tight-money policy popped that bubble.  The
FED now claims that it needs more power to oversee who does
what with the fiat money it creates.

    In this debate over whether to transfer regulatory
power to the FED, one word will not be uttered: "cartel."
The FED has always functioned as the screening agency for
the bankers' cartel.  Now the largest commercial banks and
investment banks are clamoring for extending this control
over the entire non-banking sector of the economy.

    There will be very little opposition to this inside
the Washington Beltway.  There will be none outside the
Beltway.  The public has been frightened into submission.
The head of the Security Exchange Commission has already
capitulated.

    The central bank's response to the credit freeze
    and the near bankruptcy of Bear Stearns shows how
    the role of regulators is being redefined by
    events, regardless of Paulson's review, which
    began nine months ago. SEC Chairman Christopher
    Cox isn't protesting the proposed merger of his
    agency -- formed during the Great Depression --
    with the CFTC, saying that regulation would be
    better served by fewer organizations.

    "Just as systemic risk cannot be neatly parceled
    along outdated regulatory lines, the overarching
    objective of investor protection can't be fully
    achieved if it fails to encompass derivatives,
    insurance, and new instruments that straddle
    today's regulatory divides," Cox said in a
    statement on March 29.

            http://GaryNorth.com/snip/527.htm

    In other words, the main bureaucracies that would
normally oppose this move have fallen into line.  Mr. Reich
is an exception.  He is a minor figure in a marginal
agency.

WHAT WILL HAPPEN NEXT?

    There will be hearings in Congress.  The media will
announce bipartisan support for the restructuring.  A bill
will pass.  It will become law. Then a massive, years-long
restructuring will begin. No one will be fired from existing
agencies.  They will be placed under the FED's titular control.  
Lots of new economists and lawyers will be hired by the Board
of Governors of the FED.

    The politicians may think they can change things in
Washington.  They can, but only marginally.  Bureaucracies
move slowly when they move at all.  They protect
themselves.  They use red tape to hide their activities and
smother attempts by outsiders to interfere with their
operations.  They use delay as their main weapon of
defense.

    The FED has no existing structure to oversee the non-
banking financial system.  It will have to design it and
then implement it.  It will then have to integrate this
with existing agencies.  Lawyers inside and outside the
Federal government will gum up the transfer of power.

    Meanwhile, the horses are out of the barn.  The spread
of bad debt through the world's financial system will
continue.  The figure of $200 billion of bad debt has been
tossed around.  This is a low-ball estimate.  A Reuters
report (March 29) announced:

    The financial market crisis could cause losses of
    up to $600 billion at banks and other financial
    institutions worldwide, a German magazine
    reported on Saturday, citing an internal report
    by German financial watchdog BaFin. . . .

    "Based on current knowledge and the market
    situation, we believe $430 billion is more
    likely," the magazine quoted what it said was a
    16-page report by BaFin as saying.

    A report on BaFin's paper first appeared in German's
Establishment magazine, "Der Spiegel."  The losses may not
be able to be contained inside the banking system.

    However, the magazine also said BaFin cited the
    risk that the financial crisis could spread
    beyond the banking sector to affect hedge funds,
    insurance companies, pension funds and even some
    non-financial companies.

            http://GaryNorth.com/snip/528.htm

    So, we are facing falling dominoes around the world.
This is the result of the carry trade: borrowing short and
lending long.  This is what brought down the American
savings & loan industry in the 1980's.  Decade by decade,
carry-trade investing has spread to wider areas of the
economy.  It has spread across borders and across
industries.

    The hoopla in Washington over having the FED lock the
barn door is not going to get the horses back.  The loans
were made.  They cannot be recalled.  Foreclosing on two
million households at tens of thousands of dollars of legal
fees per home is not feasible.  The loans may be able to be
renegotiated in some cases, but this takes time.  It takes
trained personnel.  Meanwhile, 244 of the companies that
initially made the loans are bankrupt or have merged.
Renegotiated terms of repayment at lower rates will impose
capital losses.  No company wants to post these losses on
its balance sheet.

THE PALSIED HAND

    The Federal Reserve System was always the lender of
last resort for the commercial banks.  It is about to
become the lender of first resort for the investment banks.
The 20 largest investment banks act as the agents of the
New York Federal Reserve Bank in implementing the Federal
Open Market Committee's instructions.  These are the FED's
primary dealers:

            http://GaryNorth.com/snip/529.htm

    The FED must not allow a primary dealer to collapse.
It owes the FED money.  So, the FED will do whatever is
required to keep these investment banks alone.

    We are moving into a situation where the FED will
become the regulator.  It is already the de facto rescuer.
It wants power to accompany its growing responsibility to
prevent financial panic.  Responsibility without power is
suicidal.  The FED is not deliberately suicidal.

    This unelected, tenured, money-creating, privately
owned cartel will create a committee to write the rules for
other committees to regulate a financial structure that is
so complex that no committee can possibly foresee
everything that can go wrong.  This will substitute the
palsied hand of regulation for the invisible hand of the
free market.

    The financial markets will become less efficient.
They will become less careful regarding risk.  They will
follow the FED's rules, but we can be sure entrepreneurs
will find ways to beat these rules.  They always do.

    The horses are out of the barn.  We are in the early
phase of a public relations program to persuade investors
to turn over more horses to the companies that the FED
promises to protect.

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---------------------

CONCLUSION

    Moral hazard -- guaranteed bailouts -- is alive and
well in Washington.  It is about to be expanded
extensively.  The presence of the FED, as the lender of
first resort, will persuade entrepreneurs to take risks
that they would not consider if the FED were not there as
the guarantor.

    Ludwig von Mises wrote decades ago that the results of
government intervention into the free market will produce
results opposite to those announced to justify the
intervention.

    The justification for this transfer of power to the
Federal Reserve System is that the FED will provide greater
stability for the capital markets.

    Conclusion: prepare for more instability than we have
seen since the Great Depression, which the FED was created
to avoid.

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Don't you realize that Congress will now privatize financal regulation, handing total
authority to the private central bank that from the beginning has been the pliant tool
of international banking interests hostile  our Jeffersonian principles and forever bent
on plundering our citizens?

Nothing could be more absurd or lethal to the interests of citizens of the United States
than abdicating regulation of our banking system to the very international predators
from whom intelligent regulation should be protecting us.  

The Fed is accountable to no one but those who put the President in office who appoints
the goverors who rubber stamp the policies of the international money power behind all
wars and economic catastrophes.

No candidate now running for office understands the situation and at least two of the
three candidates still in the running  are completely owned by the interests that are
now going to privately "own" American financial regulation.

I ask you to join me in organizing a mighty movement to draft Dr. Robert Bowman and Dr.
Richard C. Cook for the Independent National-Economy-First Peace and Prosperity Ticket
in 2008.  These are the only two men in the country that know the job that has to be
done, know who and what is against getting that job accomplished, and are perfectly
willing to commit themselves to moving to get the job done if there are people who will
support them in the effort.

Commit to this last best hope.

Dick Eastman

Yakima, Washington

================================================

BOB BOWMAN WILL BE THE NEXT PRESIDENT OF THE UNTIED STATES -- Now you say it.

http://groups. <http://groups.yahoo.com/group/frameup/message/26045>
yahoo.com/group/frameup/message/26045

================================================

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