WE NEED TO BE AWARE OF THE INCREASING LOSS OF GOVERNMENT INDEPENDENCE AS THE JUSTICE DEPARTMENT ABDICATES RULE OF LAW AND AS THE FED......JUST AS THE ECB IN EUROPE ARE ALLOWED TO USE ECONOMIC POLICY THAT OPENLY CONFLICTS WITH WHAT IS GOOD FOR THE PUBLIC.  IT IS OBVIOUS BY NOW TO EVERYONE THAT WHAT IS GOOD FOR THE BANKS IS NOT GOOD FOR THE PUBLIC, YET YOUR INCUMBENT IS SILENT ABOUT THESE POLICIES USED BY THE FED TO STAGNATE THE DOMESTIC ECONOMY WHILE GIVING FREE MONEY TO CORPORATIONS TO EXPAND GLOBALLY.


AlterNet / By Pam Martens

The Federal Reserve, a Privately Owned Banking Cartel, Has Been Given Police Powers, with Glock 22s and Patrol Cars Shocking signs of business control of government September 17, 2012  |        

  By mid morning on Monday, September 17, as Occupy Wall Street protesters marched around the perimeter of the Federal Reserve Bank of New York, all signs that an FRPD (Federal Reserve Police Department) existed had disappeared.  The FRPD patrol cars and law enforcement officers had been replaced by NYPD patrol cars and officers.   That decision may have been made to keep from drawing attention to a mushrooming new domestic police force that most Americans do not know exists.

Quietly, without fanfare or Congressional hearings, the USA Patriot Act in 2001 bestowed on the 12 privately owned Federal Reserve Banks, domestic policing powers.

Section 364 of the Act, “Uniform Protection Authority for Federal Reserve,” reads: “Law enforcement officers designated or authorized by the Board or a reserve bank under paragraph (1) or (2) are authorized while on duty to carry firearms and make arrests without warrants for any offense against the United States committed in their presence…Such officers shall have access to law enforcement information that may be necessary for the protection of the property or personnel of the Board or a reserve bank.”

The police officers are technically known as FRLEO, short for Federal Reserve Law Enforcement Officer.  The system has its own police academies for training, their own patch and badges, uniforms, pistols, rifles, police cars and the power to arrest coast to coast without a warrant.  They have ranks of Sergeant, Lieutenant, Captain and a recruitment ad campaign with the slogan:  “It’s about respect and recognition from your peers. It’s you.”  

According to a former St. Louis Federal Reserve Law Enforcement Training Instructor, the officers are trained on pistol, rifle, auto-rifle, sub-gun and shotgun with manufacturers encompassing Smith & Wesson, Glock, Remington and  Armalite.

The FRLEOs employed by the Federal Reserve Board of Governors in Washington, D.C. are considered employees of the Federal government since the Board is a government entity.  Each of the 12 Federal Reserve Banks, as settled law under Lewis v. United States confirms, is a private corporation owned by commercial banks in its region.  An email to several of the Federal Reserve Banks confirmed that they regard their FRLEOs to be privately employed by the bank.

The San Francisco Fed ran an ad for Captain Specialist, noting that “you will be charged with gathering and disseminating law enforcement intelligence information to the District.” It also noted that the individual would need to “obtain and maintain top secret clearance.”  Typically, that clearance level is reserved for only the highest positions in the Federal government.

A recruitment ad for the Richmond Fed indicates their FRLEOs would be plugged into the nation’s criminal databases: “The Law Enforcement Unit has an immediate opening for a Communications Center Operator, reporting to the Center leadership team in Richmond, Virginia. The pay is $32,458 — $40,573…[the officer will query]  “information from a variety of law enforcement data bases for information, wants/warrants, intelligence, driver’s license and vehicle information, etc.” The Cleveland Fed notes that the job “may include, but would not be limited to: use of deadly or non-lethal force…” 

FRLEOs now even have their own Federal Reserve Policemen’s Benevolent Association, Local 385.  The group’s  Facebook page  carries the statement that it is a “government organization.”  The site says the group “was established to create a fraternal organization for its membership and to act on behalf of the members as a liaison between the New Jersey State PBA and all other police agencies within the state and the country.”   The connection to New Jersey likely stems from a now deceased police officer, James Rose, from Moonachie, New Jersey, who was a FRLEO in New York and helped to establish Local 385.  In addition, the Regional office of the New York Fed is located in East Rutherford, New Jersey. 



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THIS IS A GOOD OVERVIEW OF THE STATE OF THE FEDERAL RESERVE.  I WANT IT GREATLY REDUCED IN POWER BUT OBAMA WILL NOT BE THE ONE TO DO THAT.  IF A POLITICIAN IS NOT SPEAKING OUT AGAINST THIS INSTITUTION DESIGNED TO FUNCTION SOLELY FOR THE BANKS TO PREVAIL NO MATTER WHAT.....THEY ARE NOT CONCERNED FOR YOUR FUTURE! 

THIS IS MY COMMENT TO NPR'S WALL STREET NEWS...I like to pretend they will go away and we will have a public-friendly media:

Everytime Bernanke does one of his actions, he says he is doing it for employment and each time all the financial analysts say that what he is doing creates few jobs. What the public wants the Fed to do is create the condition that has banks paying a modest interest rate on savings accounts so people can take their money out of the market and have slow, safe returns on savings......like when the banking industry was a useful institution. Bernanke's policies are all about allowing banks free money to invest and profit as with corporations, all the while expanding globally. He gives the very businesses we need to invest in America the means to profit without production. It would be useful for your listeners to hear that dynamic as it is the reason we see no job growth domestically while corporate profits hit record highs. This is the public media approach to market analysis!

New Republic: Your Taxes At Work, Wall Street Style
 by Noam Scheiber   The New Republic



When we last left Morgan Stanley, the company was taking all manner of abuse for botching the biggest IPO of the millennium. Alas, that turns out to be the least of its problems. Far more pressing is the fact that Moody's may be on the verge of massively downgrading Morgan Stanley's bond rating, which could cost the company billions of dollars (perhaps tens of billions) in collateral and increased borrowing costs.

Then yesterday's Financial Times brought even worse news. To help save some cash in the event of a downgrade, Morgan Stanley was hoping to park a big portion of its $52 trillion derivatives portfolio inside its bank subsidiary — the portion of the company that functions as an old-fashioned loan-maker, not a hedge fund or investment bank. The reason for doing this is that it would lower borrowing costs that would otherwise shoot up when its credit rating dropped. Why? Because being a bank means you have lots of customer deposits, most of them insured by the federal government, and that you have access to really cheap loans from the Federal Reserve. If, say, you suddenly took a multi-billion-dollar bath on your derivatives bets, Uncle Sam would be there to absorb the losses, or at least help you manage them, and the bondholders who'd loaned you money wouldn't feel the pinch. And, of course, the bondholders know that in advance, which is why they're likely to loan you money at reasonable rates in the first place. Hence the low borrowing costs.

Sounds like an ingenious plan — just have the taxpayers subsidize the riskiest part of your operation! And, indeed, it is. As the FT notes, most of Morgan's Stanley's American competitors, chief among them Goldman Sachs, already house something like 90 percent of their derivative book in their bank subsidiaries (versus a mere 3 percent for Morgan Stanley today).

Unfortunately, the folks at Morgan Stanley just can't catch a break. Just as they were about to follow suit and mosey on over to the federal trough, the feds (well, presumably the FDIC, whose insurance fund would be on the hook for those losses) decided that having taxpayers stand between bondholders and trillions of dollars in derivatives bets might not be the greatest idea in the world. According to the FT:

[R]egulators have not yet ruled on the request. Under a lengthier process introduced by the Dodd-Frank financial reforms, the Fed is required to formally consult on such moves with the Federal Deposit Insurance Corp, complicating the issue.

The Fed, which oversees Morgan Stanley as a financial group and looks to safeguard the stability of the broader financial system, has a different mandate from the FDIC, whose concern is safeguarding bank deposits.

Man — what's a giant Wall Street firm have to do to catch a break these days!

In all seriousness, I've been pretty hard on Dodd-Frank these past two years ago. But if all it does is stop these kinds of shenanigans, then there's clearly something to be said for it. If, on the other hand, the Fed gets its way on this — the Fed being famous for trying to shield bondholders from losses — then it will have proven itself to be a truly worthless piece of legislation. I'm not holding my breath

~

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June 14, 2012, 11:37 am

An Institutional Flaw at the Heart of the Federal Reserve
By SIMON JOHNSON Simon Johnson

On the “PBS NewsHour” in late May, Treasury Secretary Timothy F. Geithner indicated that the continued presence of Jamie Dimon, the chief executive of JPMorgan Chase, on the board on the Federal Reserve Bank of New York created a perception problem that should be addressed. He used the diplomatic language favored by finance ministers, but the message was loud and clear: Mr. Dimon should resign from the board of the New York Fed.



Today’s Economist Perspectives from expert contributors.

Mr. Dimon has been an effective opponent of financial reform over the past four years. He remains an outspoken advocate of the view that global megabanks can manage their own risks, and he has stated publicly that the new international rules on capital requirements are “anti-American.”

Mr. Dimon now finds himself at the center of a number of official investigations into how his bank could have lost so much money so quickly in its London-based trading operation – including whether adverse material information was disclosed to regulators and to markets in a timely manner.

(The Wall Street Journal reported this week that serious concerns about the London trading operation had been raised – but not made public – two years ago; The New York Times has reported similar concerns. On Wednesday, the Senate Banking Committee questioned Mr. Dimon; the event was inconclusive, perhaps because JPMorgan Chase is a major donor to some members of the committee.)

On Monday, Lee C. Bollinger, chairman of the board of the New York Fed and president of Columbia University, weighed in to contradict Mr. Geithner in no uncertain terms. The Wall Street Journal reported Mr. Bollinger’s view: Mr. Dimon should stay on the New York Fed’s board, and critics attacking the Fed have a “false understanding” of how it works.

This is a remarkable statement in part because Mr. Geithner is himself a former president of the New York Fed, so it is hard to see how he would have a false understanding of how the Fed works.

More generally, however, Mr. Bollinger’s intervention is inadvertently helpful, as it opens the door to a more productive conversation about the exact nature of the institutional weakness that lurks at the heart of the Federal Reserve System and that threatens our financial stability more broadly.

I stick up for the Federal Reserve System in many settings, including on Capitol Hill. We need a central bank that can provide emergency liquidity support when needed. That is a major lesson from the financial disaster and banking collapses that were an integral part of the Great Depression.

A significant number of Americans assert that the central bank should be abolished. With respect, I have argued elsewhere that this view is misguided. But the anti-Fed view continues to gain traction, and versions of it are increasingly manifest among mainstream Republicans (as well as some people on the left of the political spectrum).

The problem is that sensible liquidity support can easily become inappropriate subsidies, particularly when some financial institutions are considered too big to fail. Outsiders will never observe the real-time information on which central banks make decisions, so we need to be able to trust the people running our central bank; otherwise the system will go badly wrong — again.

As Esther George, president of the Kansas City Fed, put it recently, the “integrity, dignity and reputation of the Federal Reserve System” need to be preserved. As in ancient Rome, “Caesar’s wife must be above suspicion.”

Mr. Bollinger’s intervention brings a fresh spotlight to a deep governance problem at the heart of the Federal Reserve System – prominent executives in the financial sector and their close allies are much too involved in how the New York Fed operates. This is partly an anachronistic holdover from the original Federal Reserve Act of 1913 – and reflects the political milieu of that time, in which bankers had to be persuaded to accept a central bank (for more background and a lot of relevant technical detail, I recommend Edwin Walter Kemmerer’s “The ABC of the Federal Reserve System,” published in 1920).

But it is also an all-too-accurate reflection of where we stand today with regard to global megabanks and the large, nontransparent and highly dangerous subsidies they extract from the rest of society by being too big to fail.

The people who run global megabanks get the upside when things go well – they are paid based on their return on equity unadjusted for risk, so they prefer a lot of debt piled on top of very little equity. When things go badly, the downside is someone else’s problem – in the first instance, typically, the Federal Reserve’s.

The New York Fed has a special role – as the eyes and ears of the Federal Reserve System on Wall Street. It is also the repository for much of the expertise of the system on the complexities of modern capital requirements.

The board of the New York Fed has, in part, a mandate to oversee the operations of that bank, including by reviewing and approving its budget and by assessing the performance of its top personnel.

As James Kwak and I noted in our book “13 Bankers,” the complacency of the entire Fed system leading up to the financial crisis can be traced in part to the cozy relationship between the New York Fed (headed then by Mr. Geithner) and the Wall Street elite. We cannot let this happen again. Yet all too often with regard to financial reform today, we find the Fed lagging rather than leading.

A version of the pre-2007 governance problem is playing out in full view, this time through interactions between different “classes” of directors at regional Feds. There are three directors in each class, and nine directors in all, at each regional Fed (the Federal Reserve provides an online primer on its structure).

Class A directors are elected by member banks to represent banks. As a matter of practice, bankers have taken these positions – although there is no presumption that any of them should lead a too-big-to-fail institution and no legal requirement that any should actually be bankers.

The awkwardness raised by the existence of Class A directors was recognized most recently by Congress during the debate on the Dodd-Frank financial reform legislation, as a result of which such directors are no longer involved in selecting the heads of the regional Federal Reserve Banks. They are also not allowed to be engaged in the selection and oversight of supervisory personnel. But this just shifts the exact locus of the problem.

Class B directors are elected by member banks “to represent the public.” This is a very strange concept; it’s hard to understand how it made sense even in 1913.

The heart of the matter is Class C directors, who are appointed directly by the Fed’s Board of Governors also “to represent the public.” At most regional Feds today, these directors are typically the chief executive or chief financial officer of a significant regional business. At the New York Fed, however, the three Class C directors are all heads of nonprofits, at least two of which – Columbia University and the Metropolitan Museum of Art – have high-profile fund-raising efforts.

Only Class C directors (and Class B directors, if they are not involved in running a savings institution supervised by the Fed) are involved in overseeing Reserve Bank officers involved in supervision.

The Federal Reserve — both at the Board of Governors level and in New York — sets high ethical standards for its directors in general. But there are apparently no rules that effectively constrain the nature of interaction among directors.

According to a statement reported on Tuesday by The Guardian, a British newspaper, the JPMorgan Chase Foundation donated about $2 million to Columbia University in recent years.

There are many problematic issues associated with Mr. Dimon’s position on the board of the New York Fed, but he is kept well away from supervision. However, his bank is allowed to give money to Mr. Bollinger’s university. (The New York Fed allows a Class C director to solicit donations from a Class A director only in his or her “professional role” as head of a nonprofit, not as a fellow board member. This strikes me as a meaningless distinction.)

To anyone who does not work at the Federal Reserve, this kind of monetary transfer to an organization run by a Class C director is obviously inappropriate as it creates a perception problem. I’m surprised it is allowed under the ethics rules of Columbia University. When I asked to put questions to Mr. Bollinger, I was told that he was traveling and unable to talk with me directly. However, through a representative, he did e-mail a statement, part of which reads:

“The Federal Reserve Act embodies the policy judgment by Congress that by creating distinct classes of directors selected from different constituencies and diverse parts of the economy, and with different degrees of association with the financial industry, the Board will be constituted in a manner that allows it to effectively serve the public’s interest in expressing views on the state of the economy. Significantly, neither the Board nor any of its individual members have any involvement in the Fed’s supervisory responsibilities over financial institutions, nor does the Board have any authority over supervised institutions such as JPMorgan. Supervisory responsibilities are conducted by New York Fed officials under authority provided by the Federal Reserve Board. Prior board chairs … have been drawn from New York’s major business, civic, cultural and educational institutions. As required by statute, the chair is selected from among the Board’s Class C directors, appointed by the Board of Governors to represent the public.”

The board of the New York Fed may well express “views on the state of the economy.” But it is also formally in charge of the organization in many respects. If it were not, it could have been changed to a purely advisory group long ago. Mr. Bollinger heads not just the board but also its management and budget committee (MBC), which has specific oversight functions that are made quite clear on the New York Fed’s Web site. Mr. Dimon is also a member of this committee.

And either the Class C directors of the New York Fed oversee the “ selection, appointment, or compensation of Reserve Bank officers whose primary duties involve supervisory matters” or they do not. This is not a question to which a satisfactory answer can be, “only a little bit.” The fact that the Board of Governors is also involved is somewhat reassuring but not decisive – how on the outside are we to know who makes which final decision and on what basis?

The good news is that the sum of donations from Jamie Dimon’s firm is small relative to the total fund-raising of Columbia University. A Columbia representative e-mailed me that “regarding JPMorgan Chase and Columbia, it might be helpful to know that placed in the context of the $4.9 billion raised by the university since 2004, JPMorgan Chase is not one of Columbia’s major donors. Specifically, over the eight-year period, JPMorgan has given $845,000, as well as $989,000 from its corporate foundation and $121,000 from employee matching gifts to support the university’s mission of scholarship, teaching and research. This total represents .04 percent of overall university fund-raising during this period.” That should make it easy to return the money to the donors. In fact, I don’t think that should even be a long or difficult conversation for the trustees of Columbia, who include Vikram Pandit, the chief executive of Citigroup. Avoiding even the appearance of a conflict of interest is most important for all involved.

To be clear, I am not accusing Mr. Bollinger of any wrongdoing. Mr. Bollinger is a leading legal scholar and one of the top thinkers on and defenders of the First Amendment. (I particularly recommend his “Uninhibited, Robust and Wide Open: A Free Press for a New Century,” published in 2010.) The Columbia representative also tells me that Mr. Bollinger has not personally solicited any donations from Mr. Dimon or JPMorgan Chase.

The fault here lies with the rules and expectations set by the Board of Governors of the Federal Reserve System.

The prevailing view of those at the top of Federal Reserve remains indifferent to how the rest of us view their legitimacy; they live in a bubble – in the old, pre-Greenspan meaning of the expression. And the Board of Governors is making a serious mistake in perpetuating this indifference – jeopardizing, through inaction, the political future of the institution.

For Ben Bernanke, the chairman of the Federal Reserve, to seek to shift the blame entirely onto Congress last week is, at best, disingenuous. The Fed Board of Governors has plenty of power to tighten governance at regional Feds, even within the framework provided by existing legislation – a point made in an important opinion article by Jonathan Reiss, an experienced financial services executive, that appeared Wednesday night on Bloomberg View.

In addition, the Federal Reserve Act should be amended. The boards of regional Federal Reserve banks should become advisory groups. If local boards are retained in any fashion, they should be filled with distinguished experts toward the end of their careers – as is the case at the National Transportation Safety Board.

More broadly and with regard to the substance of the matter, Mr. Bollinger’s choice of words was unfortunate. No one has a false understanding of the situation. He has his understanding of how the New York Fed works within the Federal Reserve System. The rest of us, looking in, have a different understanding of the role of the Fed in the boom-bust-bailout cycle that has dominated the last decade or so.

Columbia University should return the donations it received from JPMorgan and the JPMorgan Chase Foundation while Mr. Bollinger was a Class C director. And Mr. Dimon should resign from the board of the New York Fed.