The other day, the driver’s side brake on my car began to squeak so I took it into a local Mechanic. After 15-minutes of looking around, the Mechanic explained that the sound was being caused by a broken caliper, which he recommended that I have replaced at a cost of $75.
Knowing nothing about car brakes, and feeling $75 was a relatively minor expense, I chose to take the man at his word.
If you are old enough to read this, you have surely had a similar experience, whether it was in school at the doctors or even at home.
When things seem to work, we don’t ask questions. Why should we? We feel the answers would be too complex to be worth our time, so we accept the replacement brakes, the surgeries, the heating and cooling work, just so long as we can afford it.
Similarly, when the nation’s Financial System begins to squeak, we pay as little attention as we have to and we trust that the Government Financial-Mechanics are dealing with the problem. Sure a more than $1,000,000,000,000 repair bill sounds like a lot, but at somewhere $4,000 per person and payable in 5-20 years at 0% financing, we can afford it, right?
Curious individuals may even try and dig a little further, asking the Government/Financial-Mechanics for a little more detail into what’s causing the squeaking. However, when they begin to explain using complex sounding terms like “Sub-Prime”, “Alt-A” and “Over the Counter Derivatives”, just as with the Auto-Mechanic, our instinct is to quickly skip the questions and go with the experts opinion.
Nonetheless, while we all share the natural instinct to focus on the problems we have more knowledge of, it is important to remember that the worst possible result of being misled by an Auto-Mechanic is a bad personal accident. But as the recent Financial Crisis is evidence, being misled by the Government/Financial-Mechanic will lead to nothing less than the collapse of our Economy.
On the bright side, the problems of our Financial System are far easier to understand than those of our cars, our bodies or even our homes. This is because while the Financial System might have 100,000 different names for its products and 1,000 different terms for each, when there is a wide scale breakdown in the Financial System there is only one cause: the overextension of credit, or to put it another way, too much trust is given to the wrong people.
So all we have to do to find the source of the recent Financial Crisis is determine: Which group of individuals in the Financial System proved to be untrustworthy?
What makes answering this question so intimidating is the sheer scale of the current problem. With millions of properties foreclosed on and hundreds of failed banks, clearly trust has been wrongfully overextended to a million different individuals, not just a few, right?
However, this interpretation is deadly wrong.
What this widespread breakdown reveals is a failure at the very heart of the system. The misplaced trust is that of the American public in the individuals they trusted to regulate their financial system, namely the Federal Reserve banking system and its Overseers/Patrons in the Federal Government.
To simplify this complex problem please consider the following analogy:
Imagine that you have worked at a Bank in Detroit city for the last 20 years- let’s call it the Detroit City Bank.
Like all Banks, your bank has two major functions:
1. Taking Deposits
2. Making Loans
You work on the Deposit side of the Bank as you have since you started with the Detroit City Bank 40-years ago.
Your Depositors are primarily the Residents that live in the City of Detroit. This is because it is the City’s official policy that it will only guarantee the Deposits of Residents that keep their money with this Bank.
20 years ago, when you first started at this Bank you noticed the Loan Manager was very tight with Loans. He insisted that Loan Applicants verify their:
1. Identification, by coming to the bank in person.
2. Wages, and likelihood of continued employment and/or promotion, by providing the Loan Manager their Employers Phone # and Pay Stubs.
3. History of paying back debts, by providing statements of previous loans and credit they had been given.
With this information, the Loan Manager would select only the top 10% of Loan Applicants he considered the most likely to pay off the loan.
He adhered to these standards because this is what the City of Detroit required, and if he did not adhere to them he would have been terminated. He was not allowed to make any more loans than this amount. He could have made fewer, but the more loans he makes the more he is paid.
20 years later, you notice the Loan Manager has loosened up considerably.
Now to make a loan, he only requires Loan Applicants to verify their:
1. Wages, and Likelihood of Continued Employment, by answering two questions on a form. He no longer checks with the Loan Applicants Employer.
2. History of paying back debts, by providing statements of previous loans and credit they had been given.
In addition, the Loan Applicant no longer needs to show up in person. They can complete the Application by phone or do so online.
He now approves the top 90% of the Loan Applicants.
He adheres to these standards because this is what the City of Detroit requires, and if he did not adhere to them he would be terminated. The Loan Manager could choose to make fewer loans, but the more loans he makes the more he is paid.
One day, after you find out the Bank has made a loan to your deadbeat brother-in-law, whom you know must have lied about having a job, you get concerned about the kind of loans your Bank is making so you decide to investigate.
It is illegal for you to access the files of the Loan Manager, so instead you simply move your office closer to his and you begin to ask around town about his dealings.
What you find out is that:
1. The Loan Manager’s salary has grown by more than 40 times since when you started240 years ago, while yours has only doubled over that same period.
2. The Loan Manager is the single largest contributor to the Political Campaigns of every candidate for Mayor, and every candidate for City Council (the two groups who are supposed to oversee his activities)
3. The Loan Manager has made extensive loans to not only the current and former Mayor and every City Councilor, but he has also made loans to many of their business partners and friends. He has also regularly given them better terms than most Loan Applicants.
Realizing that the finances of the City residents may be in great peril, you take this evidence to the City Ombudsmen, then the Chief of Police and upon getting no response, asides from, “we’ll look into it”, eventually you go to Detroit’s newspapers. But still you get no response.
In time, you discover that each one of the people that you notified has received extensive loans from the Loan Manager.
With no help forthcoming, you feel your only option is to directly notify the Bank’s Depositors. Eventually, you happen to gain the attention and trust of one such Depositor that happens to own a prestigious Accounting firm who helps you to gather public support for a large scale investigation into the activities of the Bank.
While the Bank and the City Government refuse to hand over their records, this Depositor and his firm are able to collect enough information from you and other Depositors to compose a report that shows the Bank is almost completely out of money.
Together, you both publicize this information to all the Depositors that you can find. The Newspapers finally report the story, and the City Government finally acknowledges your report is accurate.
Their official response is:
“The previous administrations really screwed up. We have a huge problem on our hands resulting almost solely from the fact that we allowed too many loans to poorly qualified Loan Applicants. To fix it we are going to have to take 20% more in taxes from the paycheck of every City Resident in 10-years time. Please trust us when we say that we will fix this problem.”
At this point, they change their loan policies to require Loan Applicants to verify their:
1. Identification, by coming to the bank in person.
2. Wages, and likelihood of continued employment and/or promotion, by providing the Loan Manager their Employers Phone # and Pay Stubs.
3. History of paying back debts, by providing statements of previous loans and credit they had been given.
And they now allow the Loan Manager to approve only 70% of Loan Applicants.
However, the City Government does not fire the Loan Manager. In fact, they do not fire anyone at the Bank. They do not put any former Mayor or City Council Member or any of their staff on trial for their insider dealings nor do they force any of these individuals to return the loans and/or donations previously made.
Instead, to counter the negative public sentiment of these recent revelations, the City Government and the Bank both spend millions of resident’s tax dollars on a Public Relations campaign featuring Rallies, Televised Speeches and a Trust the Bank parade.
People appreciate the gestures, and while they still have some lingering resentment about the future tax hike that has been announced, this feeling slowly fades to the back of their mind and they fall back into their comfortable routine.
As a reward for your hard work and honesty, the City Government gives you a Citizenship Award.
You keep your job at the Bank for a while, but when it becomes clear that the only change you can expect is the rising pay scale of the Loan Manager you leave to take the post of Loan Manager in a new city.
Now, just replace the Detroit City Government with the US Federal Government and the Loan Manager with the Federal Reserve Bank and the cause of the recent Financial Crisis should be easier to see.
Like the Detroit City Government in this example, the US Federal Government guarantees only the deposits of banks that fall under the authority of the Federal Reserve System. The FDIC (Federal Deposit Insurance Corporation), the name you may be more familiar with from plaques at the bank, was created by FDR’s 1933 Banking act, largely to extend the Federal Reserve’s regulatory power to non-members.
Like the Loan Manager in this example, Members of the US Federal Reserve system (think Goldman Sachs, Morgan Stanley and practically every major Bank in the US) are as a class the largest contributors to almost every major candidates for high Federal Office. Taken as a class, they were the largest backers of both John McCain and Barack Obama’s campaigns, just as they were to both George W. Bush and John Kerry four years prior. Think of Enron – a company whose rapid growth largely came from a change in financial regulations regarding energy pricing and accounting practices –George W.’s largest backer.
Pres. Obama’s single largest contributors in 2008:
http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638
Compare this to John McCain’s contributors:
http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00006424
Like the Loan Manager and the City Government in this example, the Federal Reserve System and the Federal Government together set the lending standards for almost all US Banking Institutions. They establish the Reserve Requirements that determine how much liquid capital banks must maintain to meet obligations. They set the Discount rate at which money is borrowed (Currently 0%) for short term needs and are intimately involved in the policies and procedures of all major banks.
And perhaps most importantly of all, just as in this example, despite the largest and most widespread bank failures in the history of this nation, responsibility has been assigned to no one. The explanation has been that so many people failed that it would be wrong to blame anyone – that “the market” failed, not “the system”. But a tree that bares so much rotten fruit can only have a problem in its very roots.
The Federal Reserve describes itself has having “both public purposes and private aspects.” But what this crisis has laid before the public to see is that its public purpose is loss sharing amongst the entire dollar holding population, and the private aspect is profit of a small elite.
And this is no hidden secret. Look only to the Federal Reserve’s own description of the structure of their authority.
http://www.federalreserveeducation.org/fed101/structure/
Now understand that the top tiers of the pyramid that they show are 100% private bankers and political appointees and you begin to see who this Bailout really was for and hand-in-hand why there have been no prosecutions.
Current Treasury Secretary Timothy Geithner was previously with Goldman Sachs, and so was his predecessor former Treasury Secretary Henry Paulson. Even current New York Fed Chairman Stephen Friedman is drawing heat for his large holdings of Goldman Sach’s stock.
And how much did Goldman Sachs borrow from the American People via the Federal Reserve over the past 2-years in its own borrowings and guarantees? The American Public are officially not allowed to know the answer to that question- the Federal Reserve claims such information falls under the “private aspects”, of its mission. What else falls under theses “private aspects”? Consider the Fed’s hiring of a lobbyist to improve its image with Congress as described below:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZjQKyLci1AM
Not only are the Feds member-banks the largest political lobbyists- spending the American People’s money to lobby the American People’s representatives- but the Fed itself feels it’s appropriate to do the same. Just so happens this was also a lobbyist previously employed by Enron.
Ladies and Gentleman, this system is broken.
The fact is that if any person or persons has the ability to print money they will, and they will be generous with it. It is everywhere in our society. It is the dirt cheap, quick and simple mortgages, the bubbles in oil and energy prices the growth of the financial industry in so many ways and the MASSIVE deficit spending of the Federal Government (think multiple foreign wars and 60 trillion in unfunded liabilities).
All of these feed at the trough of the Fed- supported unknowingly by the American people in their sheer willingness to trust the $.
We have just witnessed the greatest bank heist in the history of the world and what makes it so spectacular is that so few people are aware that it has occurred.
What I have just informed you of is not a, “conspiracy theory.” Because the person that makes the rules doesn’t need a conspiracy.
It is not on the agenda of the Federal Governments to bring justice to the rogue and irresponsible Banking regulators, because they are in fact their political Cohorts. They are Patron #1.
Why prevent Goldman Sachs from giving out $9 Billion in bonuses when $20 million of that is headed to the political campaigns of your party eventually?
The problem is simple: if anyone has the ability to vote themselves more money they will do it. Who wouldn’t?
This is why there are checks and balances on every branch of government, and clearly this branch is off its moorings and has been for some time (though it would claim that it is an “independent” institution – a public corporation – not a branch of government).
Of course this is not a new problem. If you require more evidence than my word, just read this brief interview with William Black, called in on an exactly parallel though smaller scale fraud of this nature took place in the 1970-80’s.
http://online.barrons.com/article/SB123940701204709985.html
What is new is the scale of the fraud and the depth of the devaluation and dehumanization that is being experienced by the American public.
We are now engaged in two long-term conflicts in Iraq and Afghanistan. In addition, we have hundreds of thousands of troops stationed at hundreds of bases across the world, and intelligence agencies performing operations we don’t understand (and often don’t support), with budgets that we cannot understand. Our inner-cities are drug fueled warzones (and even amongst this clientele Private Banking is en vogue) and our State capitals are revenue/influence grabbing free-for-alls. Meanwhile steroidal housing subsidization has sprawled our communities in every direction with no end in sight making unity in our communities far more difficult to achieve.
You no longer turn to the banker in your town for a loan, you turn to Washington DC. You turn to a credit score, designed to expedite the cash rationing program that fuels this bubbling economy we live in.
Do not hide behind ignorance that you cannot see this which is occurring directly before your eyes.
It is time that you see the dollars in your pocket for what they are: the leaves of a rotting tree.
If you actually finished this lengthy article than you must be engaged. Your question would now be – what the heck do I do about?
First, spread the word. At root the heart of this crisis is that people blindly trust their dollars, and with them the organization that prints them. Your currency is not a car. You are not trusting the mechanic to re-do your breaks, you are giving them a stack of cash you haven’t counted and saying, “Give me back what you feel is right.”
The first step is the most important and it is the easiest- discuss it with the people you are around. No need to have a political discussion this is about facts, not red or blue colors.
Second, get active. Ultimately talk is idle if it does not lead you to action.
So what does it mean if your dollars are going to decrease in value? What do we do- is the frightened question. First, do not panic. We live in an era where living has ever been easier.
Realize that dollars are merely the commoditization of TRUST. What we need is trust in each other, not dollars, not gold. What makes you rich is the people in your life that you can count on, not the size of your bank account. I have never met anyone more miserable in my life than those who think that money buys the ticket to happiness.
The greatest weakness this federalization/centralization of American credit is that our communities are disunited. Our houses are no longer the sacred connections to the earth and to our communities that our ancestors once enjoyed, they are transitional and transactional- to be flipped at the first sign of lowering values. Imagine what life would be like if we depended on our reputation to obtain financing for our homes and our businesses, rather than the capricious score of a computer system with parameters set by people we will never meet, that cannot have our best interests at heart.
Get connected to your own community, your own family. This is not something you have to do, but if you choose not then get dressed for cold weather and a tough trail ahead.
Third, for those with the time and patience: get educated.
In the end the information is out there. If you have the hunger for knowledge (if only to protect your community) it is out there.
For example:
http://www.ffiec.gov/nicpubweb/nicweb/NicHome.aspx
This is information collected by the Federal Reserve itself. It contains a simple list of the largest banks. Here are the top 10:
1
BANK OF AMERICA CORPORATION (1073757)
CHARLOTTE, NC
$2,252,813,550
2
JPMORGAN CHASE & CO. (1039502)
NEW YORK, NY
$2,041,009,000
3
CITIGROUP INC. (1951350)
NEW YORK, NY
$1,888,599,000
4
WELLS FARGO & COMPANY (1120754)
SAN FRANCISCO, CA
$1,228,625,000
5
GOLDMAN SACHS GROUP, INC., THE (2380443)
NEW YORK, NY
$882,586,000
6
MORGAN STANLEY (2162966)
NEW YORK, NY
$769,503,000
7
METLIFE, INC. (2945824)
NEW YORK, NY
$535,192,209
8
HSBC NORTH AMERICA HOLDINGS INC. (3232316)
METTAWA, IL
$390,657,817
9
BARCLAYS GROUP US INC. (2914521)
WILMINGTON, DE
$377,926,385
10
TAUNUS CORPORATION (2816906)
NEW YORK, NY
$368,225,000
Learn to listen to the news of these organizations at least, but the list they provide is of the top 50- maybe best just to pick the bank closest to your own community. For Detroit:
14
GMAC INC. (1562859)
DETROIT, MI
$178,257,000
You don’t need to be an expert, just ask yourself: How are these organizations creating money- and therein controlling trust? And whom are they giving it to?
Think it is just a coincidence that it costs 2x as much to live in New York as anywhere else in this country? The city is beautiful, but with 6 of the 10 largest banks it is ground zero for inflation, and it is sustained by siphoning off much of the strength of our own communities (of course I am not speaking to the majority of New Yorkers that are disenfranchised like us Detroiters, but those that live at the top of our pyramid shaped economy).
There are also websites like Open Secrets that record contributions paid to candidates.
Look at Pres. Obama’s single largest corporate contributors:
http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638
Compare this to John McCain’s contributors:
http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00006424
When you know how to break this down it is not a secret. You just need to have the will to follow your instincts even though the information may get dreary to read.
You can visit the End the Fed organization, whose solution is just that.
I am not recommending this solution, but I think it is vital that we not be afraid of considering all options. Joining their local groups will at least put you in touch with people with alternative views, for good or bad.
I do recommend the resolutions authored by Congressman Ron Paul to allow the Congress to audit the Federal Reserve and I urge that you support them.
This list is incomplete for a reason.
Ultimately, while it is important that we be aware of the evils waged by those at the top of the pyramid, I think a great fault of our age is that we seem to think that power rests at the top.
Change doesn’t come from Washington DC or NYC, it comes from the small towns and the ordinary people that surround you. The federalization/centralization of power rests on the idolization we have become so accustomed to SO STOP IDOLIZING.
Turn off the TV and start taking care of those people around you; pick up a book and study your history- that is where you will find the strength to change this system.
Need further proof to believe that the top is misleading the bottom? The Chairman of the Federal Reserve has declared that the Recession is over, and that the Recovery has begun. Just observe what actually unfolds and you will come to know the truth. Your mechanic is lying to you.
