Bernanke Under Fire as Lawmakers Call for Probe of Fed Role in BofA Merger
By Staff News & Analysis - July 13, 2009

House lawmakers are calling for an investigation of the Federal Reserve's conduct in Bank of America Corp.'s takeover of Merrill Lynch & Co. before they consider granting more powers to the central bank. In a letter to President Barack Obama, 14 Republicans and three Democrats said there is a "considerable amount" of evidence that calls into question Federal Reserve Chairman Ben S. Bernanke's testimony (pictured left) last month that the Fed didn't put undue pressure on executives to carry out the takeover. The letter was released by Representative Scott Garrett, a New Jersey Republican on the House Financial Services Committee, which will consider the measure to expand the Fed's authority. Obama wants to give the Fed more power to oversee the largest and most interconnected financial institutions as part of a plan to overhaul regulation. Lawmakers from both parties have raised concerns about giving the Fed additional oversight powers. – Bloomberg

Dominant Social Theme: All must be held accountable.

Free-Market Analysis: We've written the Federal Reserve is on the downswing and in a fairly big way. We traced the initial impetus to the Internet, which has exposed what central banking actually is (price-fixing) to tens of millions. The specific trigger mechanism is to be seen on the Internet where Federal Reserve Inspector General Elizabeth Coleman splutters through a lamentable confession that she has no idea where up to US$9 trillion in Federal Reserve disbursements ended up. These two clips have some two million views between them and counting.

Now comes this report that Ben Bernanke has antagonized Congress to the point where the Fed's usual allies are coming undone. The Fed's additional challenges include a concerted effort to have it audited in a serious fashion and a lawsuit from Bloomberg which the news services reports on as follows:

Bloomberg requested details of Fed lending under the Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. Arguments in the suit may be heard as soon as this month, according to the court docket. Bloomberg asked the Treasury in an FOIA request Jan. 28 for a detailed list of the securities it planned to guarantee for Citigroup and Bank of America. Bloomberg hasn't received a response to the request.

We have no idea where the lawsuit stands now, but we are more certain than ever that the Fed is in trouble. In fact, we will go a step further and say that central banking itself is in great difficulty. Central banking's survival is dependent on people's willingness to believe in the alchemy of money control by a handful of top men who know more than anyone else. This works so long as the top men's activities are reported through the dry medium of words. But once people can see top men and women in action and share their thoughts on the bank policies via the Internet, the reverence begins to fade. What is familiar almost by definition cannot be divine.

Nothing lasts forever. Central banks had a good run in the 20th century, but in the 21st century, their invulnerability and majesty has been compromised. The rationale is indefensible and the elitism is difficult to sustain in an era of democratic media. Central banks are necessary to the larger elite because of the money power inherent in the system and the control it grants to a fortunate few. But ultimately, central banks have been badly injured by the Internet just as the Roman Catholic Church was almost fatally injured by the Gutenberg Press. An excess of information has done in the both of them – though the full effects of the Internet have yet to be realized.

After Thoughts

This is the biggest story of the first part of the 21st century in our opinion, yet it is seemingly going almost unnoticed in the mainstream media. Central banks are the glue of the modern world and their gradual demise, if it is occurring, is worthy of intense commentary and scrutiny. We will do what we can.

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