Bankers lobbied secretly to keep derivatives under Federal Reserve ‘oversight’ and away from real scrutiny

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With demand for accountability soaring, the GAO has been given audit power over Fed’s TARP lending, even as Geithner opens "giant loophole" for banker secrecy in derivatives clearinghouse plan

Aaron Dykes / Jones Report | June 2, 2009

"The banks run the place," Rep. Collin Peterson cried out this week. The New York Times reports that he has a bill that would specifically ban derivatives from trading in a clearinghouse regulated by the New York Federal Reserve, which Peterson blasted as "a tool of the big banks."

A "tool" because the nine biggest banks in the derivatives market– including JP Morgan Chase, Goldman Sachs, Citigroup and Bank of America– all met secretly to discuss how to use the lax regulation and institutional secrecy of the NY Fed to shield their credit-default swaps business from prying eyes and attempts at regulation, as the Times reports:

As the financial crisis entered one of its darkest phases in October, a handful of the nation’s largest banks began holding daily telephone sessions. Murmurs were already emanating from Washington about the need for a wide-ranging regulatory overhaul, and Wall Street executives girded for a fight.

Atop the agenda during their calls: how to counter an expected attempt to rein in credit-default swaps and other derivatives — the sophisticated and profitable financial instruments that were intended to limit risk but instead had helped take the economy to the brink of disaster.

What’s more, the banks formed a lobby– the CDS Dealers Consortium– only weeks after accepting TARP funds in October 2008 to protect its interests. Heading this effort is Edward Rosen, who previously helped fend off derivatives regulation. Rosen wrote and circulated a "confidential memo" to the ‘Treasury Department and leaders on Capital Hill’ making their agenda clear, the Times reported.

Rosen and his backers propose that derivatives be "traded in privately managed clearinghouses, with less disclosure," according to the Times. The clearinghouse of choice for the big banks in Rosen’s CDS Consortium is ICE U.S. Trust, which is in turned regulated only by the Federal Reserve system.

Mr. Rosen’s confidential memo, dated Feb. 10 and obtained by The New York Times, recommended that the biggest participants in the derivatives market should continue to be overseen by the Federal Reserve Board. Critics say the Fed has been an overly friendly regulator, which is why big banks favor it.

featured stories Bankers lobbied secretly to keep derivatives under Federal Reserve oversight and away from real scrutiny Ironically, the Times notes, Treasury Secretary Tim Geithner, former president of the New York Federal Reserve, submitted a plan similar to Rosen’s, although Treasury officials stated the proposal was "independent." Although Geithner vowed to make derivatives "more accountable", critics say the emphasis on clearinghouses in the plan is a "major loophole" because ‘little disclosure would be required’ for any ‘customized’ swap.

It is clear that banks, who wanted their credit swaps to remain private, counted on the lack of transparency over Federal Reserve affairs to keep derivative affairs in the dark, thus enhancing their profit potential. It is further clear that Treasury Secretary Geithner intended to help them in that aim.

Senator Tom Harkin said the loophole "could be worth trillions and trillions of swaps," blasting it as "a loophole big enough to drive a truck through."

Derivatives are the bulk of the "toxic assets" TARP was set up to fight– and total an astounding $1.5 quadrillion in estimate.

REGULATING THE FEDERAL RESERVE

Bloomberg reported Friday that the "Fed’s Role in AIG May Be First Target of GAO Audit." President Obama signed into law on May 20 a "Fed clause" giving the Government Accounting Office (GAO) the "power to examine the Federal Reserve’s emergency aid to specific companies, such as AIG, Bank of America Corp. and Citigroup Inc."

The new law is designed to give the GAO access to records and people at the Fed’s Board of Governors in Washington as well as the 12 district banks, such as the New York Fed, which has been the government’s lead day-to-day supervisor of AIG.

Under what Bloomberg has called "war powers", the Fed has issued "an unprecedented expansion of credit to nonbank financial firms… invoking emergency powers and doubling its assets the past year."

The authority is notably only a half-measure. Bloomberg notes that it "doesn’t remove limits from a 1978 law that prohibits the GAO from peering into Fed activities involving monetary policy or discount-window loans to banks."

A d v e r t i s e m e n t

Fed chairman Ben Bernanke stated he would have no objections to audits, so long as there was no examination of monetary policy. He stated clearly, "I certainly would resist any attempt to dictate to the Federal Reserve how to make monetary policy."

Bloomberg makes a distinction from the "more intrusive" legislation introduced in the House by Ron Paul and in the Senate by Bernie Sanders. Those bills now have well over a hundred sponsors. Sanders was rebuffed by Ben Bernanke previously during TARP hearings after he demanded to know who the Fed lent money to and was told frankly, "No."

Those bills, which haven’t made it past the initial stage of being introduced in Congress, would remove limits on GAO audits of the Fed and direct the agency to issue a report on the central bank by the end of next year.

Nevertheless, information about the meeting of the big banks shows that there is a desire to keep the Federal Reserve and its dealings quiet at a time when interest in the Fed’s actions is at an all-time high. Any move to bring accountability to that institution is positive, even if insufficient.

Comment Rules

34 Responses to “Bankers lobbied secretly to keep derivatives under Federal Reserve ‘oversight’ and away from real scrutiny”

roaddog Says:
June 2nd, 2009 at 6:56 am
Thats what thieves do.

Dogfood Reply:
June 2nd, 2009 at 7:43 am
Look at the photo of Bernake.
Touching your nose implies your lying.
Simple body language is always lots of fun!

Ben Reply:
June 2nd, 2009 at 7:45 am
Criminals obviously hide their crime. That was predictable.

Pack a gun and pay no tax.
Alenkka Says:
June 2nd, 2009 at 7:14 am
Здравствуй! Спасибо за подаренные хорошие эмоции…
roaddog Says:
June 2nd, 2009 at 7:17 am
huh? looks up
roaddog Says:
June 2nd, 2009 at 7:44 am
The Ale.x Jone.s Deceptio.n comes out on 9/.5/.09
TechiePatriot Says:
June 2nd, 2009 at 7:45 am
ARREST THE BANKERS – NOW!!!!!!!!! Tar and Feather them! then set them loose into the masses!

Chris uk Reply:
June 2nd, 2009 at 11:23 am
That seems fair to me .
roaddog Says:
June 2nd, 2009 at 7:47 am
The Ale.x Jone.s Deceptio.n comes out on 9/.5/.09

dick467 Reply:
June 2nd, 2009 at 10:16 am
hey ur deception comes up when u re faced up in bunch of firing squads.DUmbasss
Dogfood Says:
June 2nd, 2009 at 7:48 am
Read this, it’s great!

“Chinese students laugh at Geithner’s assurances (about Dollar)”

http://www.freerepublic.com/fo.....2284/posts

Linda Reply:
June 2nd, 2009 at 8:36 am
Good link… yet more impressive BS by Geithner.
roaddog Says:
June 2nd, 2009 at 8:05 am
Has Aaron Dykes ever kissed a girl? Dykes is one homely, ugly motherfucker.
Dogfood Says:
June 2nd, 2009 at 8:08 am
I’m really looking forward to watching the Ale.x Jone.s Deceptio.n. Its about time Alex gets exposed for lying fearmongerer he is.

Dogfood Reply:
June 2nd, 2009 at 8:57 am
I see we have a name hijacker here…

Dogfood Reply:
June 2nd, 2009 at 9:09 am
who gives a shit?

Dogfood Reply:
June 2nd, 2009 at 9:22 am
Apparently you do…

Hijacker
Sir Baby De Porky Says:
June 2nd, 2009 at 8:44 am
Scamin’ n’ schemin’ !!! Where are the cops ?!?

TakerOfCorporateSouls Reply:
June 2nd, 2009 at 7:40 pm
why have they not used the RICO ACT and go after all of these racketeers……….

Gary Schnell Reply:
June 2nd, 2009 at 10:14 pm
The answer is real simple,.. It’s like telling Al Capone to arrest Al Capone
haha Says:
June 2nd, 2009 at 8:45 am
Exposing Alex? Give me a break… we all know there are subjects he won’t touch. The thing is, why take only 1 man’s word for anything?? If your some idiot that will only go to Alex to inform you then why take it any further? Your wasting your time and others’….

Dogfood Reply:
June 2nd, 2009 at 9:16 am
Yo haha.

I didn’t make this comment: “I’m really looking forward to watching the Ale.x Jone.s Deceptio.n. Its about time Alex gets exposed for lying fearmongerer he is.”

There is a name thief here.

Someone hijacked my name is and trying to discredit me in this forum.
Apparently I’m pissing Tim Geithner off.

I guess I should be flattered.
Hey Tim, it’s not my fault the world is laughing at you.
Trauma Says:
June 2nd, 2009 at 9:50 am
Bush Barak Cheney an Collen Powel
sit around n burn babies for the Moloch Owl
an I gotta git the witches all outta Sarah Palin
so i make an exit wound, one thru her cere-bellum
no the terror neva fail ‘em, man the end has just begun
but its nothing wats in store, think Agenda 21
cuz with all the time an money that git spent on security
ya dont understand its a decent into tyranny
thats y i only roll with alternitive media
thru the shadow of darkness we see a blur in the sepia
theze new world bastards prove to be a frivoulous demon, Ah!
the serpent its creepin, up the servents are speakin up
the world is decievin’ ya, if ya turn ta belivein’ em
observin the evil of the service of secrets uh
we wont stand down like subservient sheeple (duh)
we slice ur fuckin throats so u can burn in magniesium!
MASTER MASON Says:
June 2nd, 2009 at 9:51 am
*******THIS IS WHAT THE FUTURE WILL LOOK LIKE BUILT BY A FREEMASON*********
http://www.BILLINGTONMASONRY.COM
Desslok Says:
June 2nd, 2009 at 10:14 am
Our government has been overthrown. Obama, aka Soetoro, aka Dunham, is constitutionally ineligible for the office he holds. Voter fraud organized by ACORN, voter intimidation by the Black Panthers, and now a statement barring states from performing voter identification verifications. The enemies of the USA have placed their own into all three branches of the federal government through illegal, fraudulent crimes against this nation. Americans are under rule of foreign enemies.

It is time for all Americans loyal to their country, especially those in military service, to take their government back. It is time to take up arms and remove those in office who refuse to submit to the constitution of our country. We have all the evidence we need to try these criminals in our courts, but they have taken our courts. So we have no option but to take back our country by force. I have no means of doing this. I am not a member of any group. And so, I can only pray that by some miracle, America will rise up to reclaim its government and its land.

Desslok Reply:
June 2nd, 2009 at 11:42 am
I apologize, everyone. I let my emotions get the better of me there.

Just ME Reply:
June 2nd, 2009 at 12:21 pm
Take back the Constitution!

Take back the Bill of Rights!

Take back our Liberty!

Take back America!

Just ME Reply:
June 2nd, 2009 at 12:23 pm
Where is our William Wallace? Our Thomas Jefferson?
Outrage Says:
June 2nd, 2009 at 10:14 am
I’m starting to hope that the next False Flag Event will include an electro magnetic pulse [ya'll know how that happens] and occur smack dab in the center of Wall St.
Bobbipin Says:
June 2nd, 2009 at 10:24 am
So called “derivatives” are merely the way banksters and fraudsters illegally create currency with which to speculate, lend and leverage.

They literally create money out of thin air to lend. When they come to crap, the Federal Reserve creates yet more money out of thin air to cover the bad bets.
AJ Vidz Says:
June 2nd, 2009 at 11:49 am
HERE: Stream and Download ALL the best interviews and rants from the Alex Jones Show Archives:

LATEST VIDEOS:
- Jesse Ventura on Alex Jones Tv:No More Torture!
- Jason Bermas:New “Cyber Czar” End of Internet Freedom!

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Backup your favorite episodes, don’t miss any!
wallstreet13 Says:
June 2nd, 2009 at 1:57 pm
Derivatives created after 1987 should be banned.

Derivatives do nothing to create true wealth, in the form of employment, creation, productivity, and ingenuity.

Derivatives also take investment funds away from the stock market. Small cash chasing stocks mean lower prices.

Derivatives are a great way to make a lot of money if you are a broker. Just put two brokers together and without oversight or regulation guess what, the clowns create an insane $500 trillion dollar derivative market.

Now who (brokerage) is going to raise funds for a new company looking for a cure for cancer when the bastard brokers and banks can simply pick up the phone and create a derivative swap?

I can hear it now. “Hello Smith, this is Barney. Christ these car payments on the Mercedes are outrageous let’s talk about doing some swaps to help me keep up with the payments. Badges? Badges? There are no stinking badges! Nobody gets hurt. We just roll the positions over and over without ever having a cash settlement. See you in the Russian Tea Room for cocktails today at 1pm Smith. Cheers!”
PEACEFUL WARRIOR Says:
June 2nd, 2009 at 1:59 pm
Geithner looks shit scared.
Specter Says:
June 2nd, 2009 at 3:17 pm
http://www.usdebtclock.org/

Just go here and see the 600trillion dollar number for yourselves.