ALG: Bernanke Lied About Bailing Out Europe, Congressional Action Called For

Fed

"Bernanke lied when he said the Fed would not bail out Europe.  Yesterday, the Federal Reserve agreed to send billions of dollars to European foreign central banks, including the European Central Bank.  Clearly there were contingency plans in place that Bernanke did not disclose to Congress."   —ALG President Bill Wilson

May 10^th, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today condemned Federal Reserve Chairman Ben Bernanke for "lying about the Fed participating in a bailout of Europe in response to the rapidly escalating sovereign debt crisis," and called for a Congressional investigation into the Fed, including the passage of a complete audit of the central bank.

"Fed Chairman Ben Bernanke assured the Congress that the Fed had no plans to bail out Greece and other European countries," Wilson said, "and now here we are, and the Fed and the ECB are basically printing money to purchase worthless junk bonds from nations that are so bankrupt that nobody will buy their debt anymore."

In February, Congressman Ron Paul (R-TX), who proposed and had passed a House version of a Federal Reserve audit, questioned Fed Chairman Ben Bernanke about whether the central bank was planning to engage in a bailout of Greece.

At the time, Bernanke said, "we have no plans whatsoever to be involved in any foreign bailouts or anything of that sort."

According to the Wall Street Journal, "the U.S. Federal Reserve said Sunday that it would revive an emergency lending program used during the financial crisis. The Fed will ship billions of dollars overseas through foreign central banks, including the ECB, so they can, in turn, lend the money out to banks in their home countries in need of dollar funding."

Wilson said, "Now we know Bernanke lied when he said the Fed would not bail out Europe.  Yesterday, the Federal Reserve agreed to send billions of dollars to European foreign central banks, including the European Central Bank.  Clearly there were contingency plans in place that Bernanke did not disclose to Congress." 

The Fed program comes as the European Central Bank (ECB) announced a program to purchase European government bonds, and the European Union and International Monetary Fund announced a wider €750 billion bailout for the entire continent.

Wilson urged Congress to investigate the Fed Chairman "to find out when the bailout of Europe was planned" and to complete plans to audit the Federal Reserve.  He also denounced Senator Bernie Sanders (I-VT) for weakening a plan to conduct a full audit of the Federal Reserve as an amendment to the Dodd financial takeover bill. 

"Bernie Sanders is a sellout," Wilson declared, "His weakened amendment will still shield from public oversight the Federal Reserve's transactions with foreign central banks and governments, including yesterday's announced Fed participation in the trillion-dollar European bailout."

Under current law, the Government Accountability Office, according to 31 USCA §714(b), cannot audit and exempts from public oversight the following activities of the Federal Reserve:

 (1) transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization;
(2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, open market operations;
(3) transactions made under the direction of the Federal Open Market Committee; or
(4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to items.

The original Sanders amendment would have lifted these restrictions.  "Under the weakened Sanders amendment the European bailout is a transaction that will be protected from any public oversight and accountability," Wilson explained. 

"The Fed is bailing out Europe, and  the American people have a right to know everything about it.  The Senate must adopt the original Sanders amendment to completely audit the Federal Reserve, and Congress as a whole must now investigate how widespread these foreign bailouts by the central bank really are.  Now, more than ever, the Fed must be completely audited," Wilson concluded.

Attachments:

Original Sanders Amendment to the Dodd Bill, SA 3738, sponsored by Senator Bernie Sanders, and cosponsored by Senators Russ Feingold, Jim DeMint, Patrick Leahy, John McCain, Ron Wyden, Chuck Grassley, Byron Dorgan, David Vitter, Barbara Boxer, Sam Brownback, James Risch, Roger Wicker, Lindsay Graham, Orrin Hatch, Mike Crapo, Robert Bennett, and Jim Bunning.

NRN - Oppose Bernanke's Fed Re-Appointment

Fellow Bloggers –

Tomorrow (12/3) is the Senate Banking Committee hearing to confirm Ben Bernanke as Chairman of the Federal Reserve for another term. We have a real good opportunity to help stop this re-appointment.

According to a recent Rasmussen poll, Bernanke is opposed by 89%% of Americans. If the Senate reappoints him, it would be a classic case of Washington D.C. insiders not paying attention to their constituents.

To make matters worse, Bernanke is currently overseeing the TALF program which is run by the New York Fed. If you are not familiar with this, read our backgrounder on TALF (this backgrounder will be released tomorrow publicly). This is a simply unacceptable program that does nothing but redistribute wealth from Main Street to Wall Street.

Please urge everyone you know to call their Senator and ask them to Vote NO on Bernanke.

If you are interested in doing a blog post on this important issue, here is some great material that may help:

·         Backgrounder on TALF

·         Letter from Senators Vitter and Bunning asking questions about TALF

·         Rasmussen poll showing that 79% of Americans don't support Bernanke



The Bankruptcy of the United States is Now Certain

This comes from a private investment letter and their goal is to sell more newsletter subscriptions. However, the data provided makes sense, and is a bit on the scary side, The USA is on the Brink of becoming a Third World Nation! /Bob DeMaura Editor NHInsider.com Tuesday, November 24, 2009  From Porter Stansberry in the S&A Digest: It's one of those numbers that's so unbelievable you have to actually think about it for a while... Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from? How did we end up with so much short-term debt? Like most entities that have far too much debt - whether subprime borrowers, GM, Fannie, or GE - the U.S. Treasury has tried to minimize its interest burden by borrowing for short durations and then "rolling over" the loans when they come due. As they say on Wall Street, "a rolling debt collects no moss." What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt… at ever shorter durations… at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that's when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next. When governments go bankrupt it's called "a default." Currency speculators figured out how to accurately predict when a country would default. Two well-known economists - Alan Greenspan and Pablo Guidotti - published the secret formula in a 1999 academic paper. That's why the formula is called the Greenspan-Guidotti rule. The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world's largest money management firm, PIMCO, explains the rule this way: "The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support." The principle behind the rule is simple. If you can't pay off all of your foreign debts in the next 12 months, you're a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured. So how does America rank on the Greenspan-Guidotti scale? It's a guaranteed default. The U.S. holds gold, oil, and foreign currency in reserve. The U.S. has 8,133.5 metric tonnes of gold (it is the world's largest holder). That's 16,267,000 pounds. At current dollar values, it's worth around $300 billion. The U.S. strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that's roughly $58 billion worth of oil. And according to the IMF, the U.S. has $136 billion in foreign currency reserves. So altogether... that's around $500 billion of reserves. Our short-term foreign debts are far bigger. According to the U.S. Treasury, $2 trillion worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2 trillion worth of maturing debt in the next 12 months. That might not cause a crisis if we were still funding our national debt internally. But since 1985, we've been a net debtor to the world. Today, foreigners own 44% of all our debts, which means we owe foreign creditors at least $880 billion in the next 12 months - an amount far larger than our reserves. Keep in mind, this only covers our existing debts. The Office of Management and Budget is predicting a $1.5 trillion budget deficit over the next year. That puts our total funding requirements on the order of $3.5 trillion over the next 12 months. So… where will the money come from? Total domestic savings in the U.S. are only around $600 billion annually. Even if we all put every penny of our savings into U.S. Treasury debt, we're still going to come up nearly $3 trillion short. That's an annual funding requirement equal to roughly 40% of GDP. Where is the money going to come from? From our foreign creditors? Not according to Greenspan-Guidotti. And not according to the Indian or the Russian central bank, which have stopped buying Treasury bills and begun to buy enormous amounts of gold. The Indians bought 200 metric tonnes this month. Sources in Russia say the central bank there will double its gold reserves. So where will the money come from? The printing press. The Federal Reserve has already monetized nearly $2 trillion worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing Treasury bonds. Sooner or later, our creditors will face a stark choice: Hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their U.S. bonds plummet. One thing they're not going to do is buy more of our debt. Which central banks will abandon the dollar next? Brazil, Korea, and Chile. These are the three largest central banks that own the least amount of gold. None own even 1% of their total reserves in gold. I examined these issues in much greater detail in the most recent issue of my newsletter, Porter Stansberry's Investment Advisory, which we published last Friday. Coincidentally, the New York Times repeated our warnings - nearly word for word - in its paper today. (They didn't mention Greenspan-Guidotti, however... It's a real secret of international speculators.) Crux Note: The S&A Digest comes free with a subscription to Porter Stansberry's Investment Advisory. Porter says his latest issue is the most important he's ever written. If you don't act right now to protect yourself from the dollar, he thinks the odds are very high you'll be wiped out over the next 12 months. To learn more, click here.