Federal Reserve Continues to Push on a String

The AP noted today that With credit tight, Fed extends consumer loan plan:

With banks limiting the availability of auto, student and other consumer loans, the Federal Reserve said Monday it would extend a program intended to help spur more lending at low rates.

The program is set up to provide up to $1 trillion in low-cost financing to investors to buy securities backed by consumer and commercial loans. But private economists said the program, Term Asset-Backed Securities Loan Facility, or TALF, has so far provided little benefit for consumers and businesses still struggling to get credit.

The program, originally set to expire at the end of the year, has two parts.

The part aimed at boosting consumer and business lending is being extended through March. The part geared toward boosting new commercial real estate lending will run through June, because of the extra time typically needed to complete such deals. Delinquency rates on such loans have soared as companies have downsized or closed their doors, the Fed has said.

TALF was created in March, part of the efforts by the Fed and the Obama administration to ease credit, stabilize the financial system and fight the recession. Under the program, the Fed allows for low-rate financing for investors to buy securities backed by credit card debt, auto loans, student loans and loans to small businesses. The market for such loans essentially froze up last fall with the eruption of the worst financial crisis since the Great Depression.

The program has the potential to generate up to $1 trillion in lending, according to the government. But participation has been scant: As of Aug. 12, the value of loans outstanding stood at just $29.6 billion.

To get an idea of how successful the Fed’s program to bring back consumer lending has been, please consider the latest update on consumer credit:


In June 2009 total consumer credit volume dropped to $2.48 trillion. It fell by $17.2 billion (0.7%) from May 2009 and a total of $110.5 billion (4.3%) since its peak in December 2008; an ongoing corollary of deflation, overall contraction, and ending consumerism.

It is important to understand what is so misguided about these ideas. We hear it again and again, how the Fed will continue to push for more credit, borrowing, lending, consumption, etc. Rarely ever do we hear the question asked “Do people want any more debt?”. The simple answer: No. People are sick and tired of debt. The Fed can try as much as it wants, it won’t be able to force lending. When people have had enough they have had enough.

Since this causality is not intuitive for everyone to understand, Robert Prechter came up with a neat example that explains the concept a little better, I already posted it before:

Jaguar Inflation

I am tired of hearing people insist that the Fed can expand credit all it wants. Sometimes an analogy clarifies a subject so let’s try one.

[smartads]It may sound crazy, but suppose the government were to decide that the health of the nation depends upon producing Jaguar automobiles and providing them to as many people as possible. To facilitate that goal, it begins operating Jaguar plants all over the country, subsidizing it with tax money. To everyone’s delight , it offers these luxury cars for sale at 50 percent off the old price. People flock to the showrooms and buy. Later, sales slow down, so the government cuts the price in half again. More people rush in and buy. Sales again slow, so it lowers the price to $900 each. People return to the stores and buy two or three, or half a dozen. Why not? Look how cheap they are! Buyers give Jaguars to their kids and park an extra one on the lawn. Finally, the country is awash in Jaguars. Alas, sales slow again, and the government panics. It must move more Jaguars, or, according to its theory – ironically now made fact – the economy will recede. People are working three days a week just to pay their taxes so the government can keep producing more Jaguars. If Jaguars stop moving the economy will stop. So the government begins giving Jaguars away. A few more cars move out of the showrooms, but then it ends. Nobody wants any more Jaguars. They don’t care if they’re free. They can’t find a use for them. Production of Jaguars ceases. It takes years to work through the overhanging supply of Jaguars. Tax collections collapse, the factories close, and unemployment soars. The economy is wrecked. People can’t afford to buy gasoline , so many of the Jaguars rust away to worthlessness. The number of Jaguars – at best – returns to the level it was before the program began.

The same thing can happen with credit.
It may sound crazy, but suppose the government were to decide that the health of the nation depends upon producing credit and providing it to as many people as possible. To facilitate that goal, it begins operating credit production plants all over the country, called Federal Reserve Banks. To everyone’s delight , the banks offer the credit for sale at below market rates. People flock to the banks and buy. Later, sales slow down, so the banks cut the price again. More people rush in and buy. Sales again slow, so it lowers the price to 1 percent. People return to the banks and buy even more credit. Why not? Look how cheap it is! Borrowers use credit to buy houses, boats and an extra Jaguar to park out  on the lawn. Finally, the country is awash in credit. Alas, sales slow again, and the banks panic. They must move more credit, or, according to its theory – ironically now made fact – the economy will recede. People are working three days a week just to pay the interest on their debt so the banks can keep offering more credit. If credit stops moving the economy will stop. So they start giving credit away at zero percent interest. A few more loans move through the tellers’ windows, but then it ends. Nobody wants any more credit. They don’t care if they’re free. They can’t find a use for it. Production of credit ceases. It takes years to work through the overhanging supply of credit. Interest payments collapse, banks close, and unemployment soars. The economy is wrecked. People can’t afford to pay interest on their debts , so many bonds deteriorate away to worthlessness. The value of credit – at best – returns to the level it was before the program began.

This is exactly the situation we have in the US. People took on way more credit than they could ever pay off. They have over borrowed, over spent, over consumed. The contraction we see now is the deflationary payback for years of unprecedented profligacy. When people have had enough of something, they’ve had enough. Jaguars? Anyone?

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AIG – A Ponzi Scheme, Endorsed and Bailed Out by Uncle Sam

AIG, of which, since the “rescue”, 80% is now owned by the Federal Reserve Bank, is a bloated, confusing, procrastinating, monstrous, liabilities-shifting, allegations-denying, catchphrase-uttering apparatus whose cracks are leaking left and right:

The dozens of insurance companies that make up the American International Group show signs of considerable weakness even after their corporate parent got the biggest bailout in history, a review of state regulatory filings shows.

Over time, the weaknesses could mean trouble for A.I.G.’s policyholders, and they raise difficult questions for regulators, who normally step in when an insurer gets into trouble. State commissioners are supposed to keep insurers from writing new policies if there is any doubt that they can cover their claims. But in A.I.G.’s case, regulators are eager for the insurers to keep writing new business, because they see it as the best hope of paying back taxpayers.

In the months since A.I.G. received its $182 billion rescue from the Treasury and the Federal Reserve, state insurance regulators have said repeatedly that its core insurance operations were sound — that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives.

My comment: This sounds a lot like the early assurances that “sub-prime” was a well contained issue that will have no spill over effects to other sectors, right Mr. Bernanke? It was obviously clear to everyone that these statements from the insurance regulators were complete and utter nonsense, right?

But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good. Insurance examiners working for the states have occasionally flagged these activities, to little effect.

More ominously, many of A.I.G.’s insurance companies have reduced their own exposure by sending their risks to other companies, often under the same A.I.G. umbrella.

Echoing state regulators’ statements, the company said the interdependency of its businesses posed no problem and strongly disputed that any units had obligations they could not pay.

“There is absolutely no concern about the capital in these companies,” said Rob Schimek, the chief financial officer of A.I.G.’s property and casualty insurance business. The company authorized him to speak about these issues.

My comment: If there was absolutely no concern, then why does Mr. Schimek have to assure us so vehemently? What he really means is of course “There are serious, really serious, concerns about the capital in these companies but I am hoping we can hide it for as long as I am still in charge”.

Nothing is wrong with spreading risks to other companies, a practice known as reinsurance, when it is carried out with unrelated, solvent companies. It can also be acceptable in small amounts between related companies. But A.I.G.’s companies have reinsured each other to such a large extent, experts say, that now billions of dollars worth of risks may have ended up at related companies that lack the means to cover them.

“An organization like this one relies on constant, ever-growing premium volume, so it can cover and pay for the deficits,” said W. O. Myrick, a retired chief insurance examiner for Louisiana. If A.I.G.’s incoming premiums shrink, he warned, “the whole thing’s going to collapse in on itself.”

My comment: … also known as a “Ponzi scheme”.

Mr. Myrick has not fully examined all the A.I.G. subsidiaries but said his own recent review of many state filings raised serious concerns, particularly about the use of reinsurance to “bounce things around inside the holding company group.”

“That is a method used by holding companies to falsify the liabilities,” he said.

A.I.G.’s premiums have, in fact, been declining in important lines. Its ratings have fallen, and customers tend to steer clear of lower-rated insurers. To woo them back, A.I.G. has in some cases lowered its prices, competitors say. A.I.G. executives insist they would rather lose a customer than drive down prices dangerously.

A.I.G. has also pledged a share of its life insurance premiums to the Fed, to pay back about $8 billion. Details have not been provided, but consumer advocates say it is not clear how the life companies will pay future claims if their premiums are diverted.

“Eventually, there’s going to be a battle between the policyholders and the feds,” said Thomas D. Gober, a former insurance examiner who now has his own forensic accounting firm that specializes in insurance fraud. “The Fed is going to say, ‘We want our money back,’ but the law says, ‘Policyholders come first.’ It’s going to be ugly.”

Mr. Gober is a consultant for a lawsuit on behalf of A.I.G. policyholders, filed in California Superior Court in Los Angeles. The lawsuit seeks a court order requiring all A.I.G. subsidiaries doing business in California to put enough money to cover their obligations into a secure account controlled by the state treasurer.

The goal is to keep money from being moved out of California or used to finance A.I.G.’s other activities, said Maria C. Severson, a lawyer for the plaintiffs. The lawsuit also seeks to bar A.I.G. companies from soliciting new business without full disclosure of their financial condition.

The condition of A.I.G.’s individual companies is hard to see in the parent company’s filings with the Securities and Exchange Commission. Those filings simply tally all the individual subsidiaries’ financial information.

The companies’ weaknesses emerge in their filings with state insurance regulators — particularly when several are reviewed together. But that appears not to happen often, because there are so many. A.I.G. has more than 4,000 units in more than 100 countries.

Responsibility for A.I.G.’s 71 American insurance companies is spread among 19 state insurance commissions, which do not conduct examinations simultaneously.

As a result, Mr. Myrick said, a conglomerate like A.I.G. “can keep moving assets around to clean up one company” at a time, when examiners were looking. He said that it would take a coordinated, multistate examination of all the insurance companies to catch this.

Mr. Schimek, speaking for the insurance companies, said that in 2005, a team of examiners had at least considered A.I.G.’s property and casualty businesses as a group.

“It was a thorough examination,” he said. “I have absolutely no concern about the integrity of the financial information that’s been filed under my watch.”

My comment: Translation: “I am absolutely and 100% concerned about the integrity of the financial information filed under my watch.”

State regulators confirmed that they believed the A.I.G. subsidiaries under their authority were solvent. Mike Moriarty, deputy insurance superintendent for New York State, said that while A.I.G. subsidiaries did not report all their reinsured obligations on their balances sheets, state regulators could “follow the trail of liabilities” and make sure they did not get lost in the holding company.

Obligations “can’t be hidden from state insurance regulators,” Mr. Moriarty said.

One A.I.G. subsidiary, the National Union Fire Insurance Company of Pittsburgh, shows what can happen by heavily relying on affiliates. Its most recent regulatory filing in Pennsylvania said it had more than enough money to pay its obligations.

But at the end of 2008, more than a third of National Union’s portfolio was invested in the stock of other A.I.G. companies, which are not publicly traded. National Union might not be able to sell all of these shares, and it is not clear what it could get for them. Many states bar insurers from investing that heavily in related companies.

Meanwhile, National Union has $42.1 billion in obligations looming off its balance sheet. These have been transferred to 56 other A.I.G. companies, through reinsurance. National Union will have to pay any of these claims and then collect from its relatives.

But it is not clear that the affiliates could pay promptly. National Union’s biggest reinsurance partner is American Home Assurance, an A.I.G. subsidiary that has taken $23.1 billion of obligations off National Union’s hands. In a New York filing, American Home reports total assets of $26.3 billion, but part of that consists of assets that cannot be used to pay claims, like furniture. It too includes a number of investments in other A.I.G. companies.

My comment: This is, by and large, one of those cascading dependencies that I was talking about in Inflation & Deflation Revisited:

The US economy has been at the center of a worldwide network of such cascading credit relationships. Central banks loaned fiat money to fractional reserve banks, those would pass it on to financial institutions which would make it available as wholesale mortgages, individual mortgage banks would take those on and make loans to homebuyers. Insurance companies would insure one or the other loan in the chain and again consider the insurance policy as good as money, using it as collateral to obtain … more credit.

Everyone insures everyone and everyone thinks everything is fine. In the meantime the money has been squandered and it will come back to haunt everyone once everyone wants to see real cash.

In addition, American Home has “unconditionally” guaranteed the obligations of 16 other A.I.G. subsidiaries, bringing the total it might have to pay to $140.6 billion.

Normally, when an insurance company weakens, regulators in its home state will first measure its capital. They may demand a weak company rebuild its capital, and if it fails, eventually bar it from selling new policies.

Like New York regulators, Pennsylvania regulators say they do not see a problem. “The insurance companies remain strong and are probably the most valuable assets within the A.I.G. structure,” said Joel Ario, Pennsylvania’s insurance commissioner. “To the best we know it, we think the companies are sound.”

My comment: Haha, well put, commissioner! Such a statement requires no further comment.

But policyholder advocates said they feared state regulators were deferring to the wishes of the Fed and Treasury, to use the insurance operations to pay back the taxpayers.

“The insurance commissioners, for whatever reason, are letting them do this,” Mr. Myrick said. “I’d be jumping out of my shoes.”

Taxpayers won’t see their money back. Why would they?? The very purpose of corporate bailouts is to rip him off! It is what we already realized months ago: Sinking Money Down a Hole.

The government should have let AIG go bankrupt right then and there. Now the Fed is stuck with a huge non-performing asset that will be worth a tiny fraction of what they paid. Who knows, most likely the obligations to policy holders will be worth much more than what was acquired, in which case the value of assets held is less than zero. The oh so “independent” Fed just needs to assure us one thing: Don’t you dare come to the taxpayer and have the Treasury reimburse you for the losses you will suffer and probably have already suffered from this hideous acquisition of AIG!

Related Posts:

Audit the Fed – 75% in Favor – Time to Push Senate Bill

According to a recent Rasmussen poll, 75% support efforts to Audit the Fed:

So much for the ongoing secrecy of the nation’s independent central banking system. A new Rasmussen Reports national telephone survey finds that 75% of Americans favor auditing the Federal Reserve and making the results available to the public.

Just nine percent (9%) of adults think that’s a bad idea and oppose it. Fifteen percent (15%) aren’t sure.
Over half the members of the House now support a bill giving the Government Accounting Office, Congress’ investigative agency, the authorization to audit the books of the Federal Reserve Board.

This is great momentum. People aren’t buying Bernanke’s nonsense. But then, why should they? He has been consistently wrong on everything he said:

The new, opposite video is a compilation of the 2005–2007 prognostications of Federal Reserve Chairman Ben Bernanke. In it, Bernanke is shown to have been just as embarrassingly wrong as Schiff was uncannily right.

Could their differences in economic understanding have anything to do with this remarkable dichotomy? I have transcribed most of the video, and offer my own comments interspersed with it.

July 2005

INTERVIEWER: Ben, there’s been a lot of talk about a housing bubble, particularly, you know [inaudible] from all sorts of places. Can you give us your view as to whether or not there is a housing bubble out there?

BERNANKE: Well, unquestionably, housing prices are up quite a bit; I think it’s important to note that fundamentals are also very strong. We’ve got a growing economy, jobs, incomes. We’ve got very low mortgage rates. We’ve got demographics supporting housing growth. We’ve got restricted supply in some places. So it’s certainly understandable that prices would go up some. I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy.

This is not only wrong in hindsight; it’s a complete misunderstanding of the issue. Bernanke said that the housing boom was fine because it was supported by, among other things, growth in jobs, incomes, and in the economy in general. But that very growth itself was supported by the housing boom! For example, most of the job growth was in the housing sector. Witness Bernanke’s amazing levitating economy: its housing sector is held up by economic growth, which is held up by its housing sector. And it’s just as ridiculous that he denied the existence of a housing bubble by pointing to low mortgage rates. The low rates were a chief cause of the housing bubble, and were a direct result of his actions as Federal Reserve chairman.

July 2005

INTERVIEWER: Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, “Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.” Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?

BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.

As Peter Schiff pointed out in his speech “Why the Meltdown Should Have Surprised No One,” while it is true that up until the housing crash, house prices hadn’t gone down on a nationwide basis, it’s also true that they had never risen so precipitously before either. Bernanke’s argument is akin to getting someone drunk for the first time, putting them in a car, and then saying, “He’ll be fine; he’s never been in a car accident before.”

That interview continued:

INTERVIEWER: So would you agree with Alan Greenspan’s comments recently that we’ve got some areas of that country that are seeing froth, not necessarily a national situation, but certainly froth in some areas?

BERNANKE: You can see some types of speculation: investors turning over condos quickly. Those sorts of things you see in some local areas. I’m hopeful — I’m confident, in fact, that the bank regulators will pay close attention to the kinds of loans that are being made, and make sure that underwriting is done right. But I do think this is mostly a localized problem, and not something that’s going to affect the national economy.

Bernanke’s Fed itself created the false signals that led to vast disruptions in the housing market. Speculators try to see through those disruptions and anticipate how prices will change as valuation mistakes are corrected in order to profit from them. In fact, their speculation is part of the correction process. If their speculation is on the mark, it speeds up the price-correction process. If it’s wrong, then the consequences are on their heads. Speculation is nothing but high-uncertainty entrepreneurship; and entrepreneurship is how optimal prices are found and markets clear. It was the Fed under Bernanke himself, and his predecessor Alan Greenspan, that created the price disruption and high uncertainty that made speculation profitable in the first place.

November 2006

BERNANKE: This scenario envisions that consumer spending, supported by rising incomes and the recent decline in energy prices, will continue to grow near its trend rate and that the drag on the economy from the [inaudible] housing sector will gradually diminish. The motor vehicles sector may already be showing signs of strengthening. After having cut production significantly in recent months, in response to the rise in inventory of unsold vehicles, automakers appear to have boosted the assembly rate a bit in November, and they have scheduled further increases for December. The effects of the housing correction on real economic activity are likely to persist into next year, as I’ve already noted. But the rate of decline in home construction should slow as the inventory of unsold new homes is gradually worked down.

Here we have the Keynesian fallacy (which I have written about here) that consumer spending, in and of itself, creates general increases in wealth. And note the irony in Bernanke applauding the boost in automotive production: the products accumulated during that boost turned out just to be more malinvestment to be liquidated or bailed out when Chrysler and GM collapsed.

February 2007

BERNANKE: We expect moderate growth going forward. We believe that if the housing sector begins to stabilize, and if some of the inventory corrections still going on in manufacturing begin to be completed, that there’s a reasonable possibility that we’ll see some strengthening in the economy sometime during the middle of the new year.

Our assessment is that there’s not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy.

For Bernanke, healthy lending is the same thing as “a lot of lending.” This dovetails with his statement in the first interview, hailing low mortgage rates as a self-evidently good thing. He has no conception of an equilibrium interest rate determined by society’s average time preference, so bubbles will always surprise him. For more on this calamitous gap in Bernanke’s understanding, see “Manipulating the Interest Rate: a Recipe for Disaster” by Thorsten Polleit.

July 2007

BERNANKE: The pace of home sales seems likely to remain sluggish for a time, partly as a result of some tightening in lending standards, and the recent increase in mortgage interest rates. Sales should ultimately be supported by growth in income and employment, as well as by mortgage rates that, despite the recent increase, remain fairly low relative to historical norms. However, even if demand stabilizes as we expect, the pace of construction will probably fall somewhat further, as builders work down the stocks of unsold new homes. Thus, declines in residential construction will likely continue to weigh on economic growth in coming quarters, although the magnitude of the drag on growth should diminish over time. The global economy continues to be strong, supported by solid economic growth abroad. U.S. exports should expand further in coming quarters. Overall, the U.S. economy seems likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend.

Strengthening in 2008? Perhaps the biggest confirmation ever of Rockwell’s Law: always believe the opposite of what government officials tell you.

Bernanke’s own words, in light of how the crisis developed, are a testament to much more than his own personal failings as a forecaster and policy maker. They demonstrate the complete inadequacy of mainstream macroeconomics in its present state, devoid as it is of the essential insights of the Austrian School. They also reveal the folly of the very idea of giving a single man and his institution the power to centrally plan the most important price in the economy: the rate of interest. Make no mistake: the present economic crisis was brought on by central planning. It is unsettling to think that the fellow in the new video who so badly misread an economy on the brink is arguably the most powerful central planner in the world.

But even the most powerful and sequestered bureaucrat is not completely invulnerable. The Federal Reserve Transparency Act and the End the Fed movement have ruffled the Fed’s feathers enough that Bernanke actually felt the need to address the public in a “townhall forum” to be broadcast on the News Hour. According to NPR,

after the forum was over, a Fed employee passed out souvenirs, an unintended metaphor perhaps for what some fear Bernanke’s aggressive policies may eventually do to the currency: shredded cash.

The Fed employee, who apparently suffers from a defective sense of irony, was even recorded saying, “Here, you want money?” and, “Here’s some free shred folks, thanks for coming by, we appreciate it,”

No, no, thank you and your boss, Mr. Fed employee. Within the space of days, we’ve been provided, courtesy of the Fed itself, with footage that perfectly distills the complete failure of Fed forecasting and planning, and audio that encapsulates splendidly the only thing that the Fed actually accomplishes: the destruction of money.

Everyone can do their part to put an end to this shenanigans: Support the Audit the Fed Bill in the House of Reperesentatives.

But now it’s also time to Push the corresponding Senate bill, S604. Without it, all efforts in the House are futile. Momentum is building, the Senators will listen if their offices are flooded with faxes and calls:

Start your phone tree to call the committee to support the bill.
Link to bill info:

# Denotes on Banking Committee!
~ Denotes up for reelection!

Graph of S604 by 95687-for-rp:

SPONSOR: SANDERS, BERNARD (I – VT) 202 224 – 5141


Sen DeMint, Jim [SC] – 6/11/2009
Sen Vitter, David [LA] – 6/16/2009
Sen Crapo, Mike [ID] – 6/25/2009
Sen Isakson, Johnny [GA] – 7/8/2009
Sen Chambliss, Saxby [GA] – 7/8/2009
Sen Brownback, Sam [KS] – 7/8/2009
Sen Inhofe, James M. [OK] – 7/9/2009
Sen Burr, Richard [NC] – 7/9/2009
Sen Feingold, Russell D. [WI] – 7/15/2009
Sen Lincoln, Blanche L. [AR] – 7/15/2009
Sen McCain, John [AZ] – 7/15/2009
Sen Bennett, Robert F. [UT] – 7/15/2009
Sen Barrasso, John [WY] – 7/15/2009
Sen Harkin, Tom [IA] – 7/20/2009
Sen Hutchison, Kay Bailey [TX] – 7/20/2009
Sen Cornyn, John [TX] – 7/20/2009
Sen Coburn, Tom [OK] – 7/20/2009
Sen Hatch, Orrin G. [UT] – 7/24/2009
Sen Graham, Lindsey [SC] – 7/24/2009
Sen Cardin, Benjamin L. [MD] – 7/28/2009

SENATOR – position on S604

#Akaka, Daniel K (D-HI)202-224-6361fax:202-224-2126 – neutral
Alexander, Lamar (R – TN) 202 224-4944 – neutral
Baucus, Max (D – MT) 202 224-2651 – neutral
~#Bayh, Evan (D – IN) 202 224-5623 fax: 202-228-1377
Begich, Mark (D – AK) 202 224-3004 – unknown
~#Bennet,Michael (D – CO)202-224-5852fax:202-228-5036
Bingaman, Jeff (D – M) 202 224-5521- neutral
~Bond, Christopher S.(R – MO) 202 224-5721-neutral
~Boxer, Barbara (D – CA) 202-224-3553
#Brown, Sherrod (D-OH)202-224-2315fax:202-228-6321 – neutral
~#Bunning, Jim(R-KY)202-224-4343fax:202-228-1373 – supportive
~Burris, Roland W (D – IL) 202 224-2854 – neutral
Byrd, Robert C.(D – WV) 202 224-3954 – neutral
Cantwell, Maria (D – WA) 202 224-3441 – neutral
Carper, Thomas R (D – DE) 202 224-2441 – unknown
Casey, Robert P. Jr (D – PA) 202 224-6324 – neutral
Cochran, Thad(R – MS) 202 224-5054 – unknown
Collins, Susan M.(R – ME) 202 224-2523 – neutral
Conrad, Kent (D – ND) 202 224-2043 – unknown
#Corker, Bob (R-TN)202-224-3344 fax: 202-228-0566 – neutral
~#Dodd, Chris J(D-CT)Chairman202-224-2823f:202-224-1083
~Dorgan, Byron L (D – ND) 202 224-2551
Durbin, Richard J (D – IL) 202 224-2152
Ensign, John (R – NV) 202 224-6244
Enzi, Michael B (R – WY) 202 224-3424
Feinstein, Dianne (D – CA) 202 224-3841
Franken, Al (D-MN) 202-224-5641
Gillibrand, Kirsten E (D – NY) 202 224-4451
~Grassley, Chuck (R – IA) 202 224-3744
~Gregg, Judd (R – NH) 202 224-3324
Hagan, Kay R (D – NC) 202 224-6342
~Inouye, Daniel K (D – HI) 202 224-3934
#Johanns, Mike (R – NE) 202 224-4224 fax: 202-228-0436
#Johnson, Tim (D-SD) 202 224-5842 fax: 202-228-5765
Kaufman, Edward E (D-DE) 202 224-5042
Kennedy, Edward M (D-MA) 202 224-4543
Kerry, John F (D-MA) 202 224-2742
Klobuchar, Amy (D-MN) 202 224-3244
#Kohl,Herb (D-WI) 202 224-5653 fax: 202-224-9787
Kyl, Jon (R – AZ) 202 224-4521
Landrieu, Mary L 202 224-5824
Lautenberg, Frank R (D – NJ) 202 224-3224
~Leahy, Patrick J (D – VT) 202 224-4242
Levin, Carl (D – MI) 202 224-6221
Lieberman, Joseph I (ID – CT) 202 224-4041
~Lincoln, Blanche L (D – AR) 202 224-4843
Lugar, Richard G (R – IN) 202 224-4814
~#Martinez, Mel (R-FL) 202224-3041 f:202-228-5171
~McCain, John (R – AZ) 202 224-2235
McCaskill, Claire (D – MO) 202 224-6154
McConnell, Mitch (R – KY) 202 224-2541
#Menendez, Robert (D-NJ) 202-224-4744 fax: 202-228-2197
#Merkley, Jeff (D – OR) 202 224-3753 fax: 202-228-3997
~Mikulski, Barbara A (D – MD) 202 224-4654
~Murkowski, Lisa (R – AK) 202 224-6665
~Murray, Patty (D – WA) 202 224-2621
Nelson, Ben (D – NE) 202 224-6551
Nelson, Bill (D – FL) 202 224-5274
Pryor, Mark L (D – AR) 202 224-2353
#Reed, Jack (D – RI) 202 224-4642 fax: 202-224-4680
~Reid, Harry (D – NV) 202 224-3542
Risch, James E. (R – ID) 202 224-2752
Roberts, Pat (R – KS) 202 224-4774
Rockefeller, John D IV (D – WV) 202 224-6472
~#Schumer, Charles E (D-NY) 202 224-6542 fax: 202-228-3027
Sessions, Jeff (R – AL) 202 224-4124
Shaheen, Jeanne (D – NH) 202 224-2841
~#Shelby, Richard C(R-AL)Ranking Member202 224-5744fax: 202-224-3416
Snowe, Olympia J (R – ME) 202 224-5344
~Specter, Arlen (D – PA) 202 224-4254
Stabenow, Debbie (D – MI) 202 224-4822
#Tester, Jon (D-MT) 202 224-2644 fax: 202-224-8594 t
~Thune, John (R – SD) 202 224-2321
Udall, Mark (D – CO) 202 224-5941
Udall, Tom (D – NM) 202 224-6621
~Voinovich, George V (R – OH) 202 224-3353
#Warner, Mark R (D – VA) 202 224-2023 fax: 202-224-6295
Webb, Jim (D – VA) 202 224-4024
Whitehouse, Sheldon (D – RI) 202 224-2921
Wicker, Roger F (R – MS) 202 224-6253
~Wyden, Ron (D – OR) 202 224-5244

{My script was as follows:
Hi, How are you. My name is: … from city, state. I’m calling Senator … to urge him/her to support S 604 Federal Reserve Sunshine Act of 2009.
Remember to stay polite above all else. You’ll get more bees with honey than vinegar. Plus, a friendly face to face meeting goes a long ways. Act just like a professional lobbyist would. Our mission is to sell S604.}

Post from Liberty_Mike with complete addresses

Updated with the fax numbers thanks to Qwerk
Updated with election cycle thanks to cactus1010

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Bernanke on Excess Reserves and Broad Money Measures

I agree (believe it of not) with a few statements that Bernanke made in the recent hearing.

In this statement I agree that the Fed has made available lots of reserves, but the banks are not loaning those out:

And in this one I agree with the fact that, even though base money supply has exploded, broader money measures are not necessarily growing rapidly:

Ron Paul is very adamant about the issue of inflation. But what he is talking about is monetary inflation, not total inflation. In doing so he is missing the point. The problem with the current Fed policies is not that they will be sparking another inflation. The problem is that they slow down and prolong the current correctional period, the deflation that is going on right now.

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Federal Reserve Officials Lost in Mindless Blather

Grilled by Ron Paul, Kohn warns Congress on meddling in Fed’s affairs:

The Federal Reserve on Thursday launched a robust defense of its independence and warned that efforts in Congress to put monetary policy under political sway would hurt the economy.

Fed Vice Chairman Donald Kohn said opening up some of the U.S. central bank’s most sensitive decisions to political scrutiny could result in higher long-term interest rates and hurt the United States’ credit rating.

Testifying before a congressional panel, Kohn sought to beat back a proposed bill that would open the U.S. central bank’s policy decisions to audits by a federal watchdog agency. More than half of the members of the U.S. House of Representatives have signed as co-sponsors of the measure.

“Any substantial erosion of the Federal Reserve’s monetary independence likely would lead to higher long-term interest rates as investors begin to fear future inflation,” Kohn told a House subcommittee.

Kohn’s testimony comes as Congress debates President Barack Obama’s plan for regulatory reform, which envisions the Fed taking on an expanded role monitoring risks across the entire financial system to help ward off future financial crises.

The proposal has boosted calls for greater accountability at the central bank, which already faces heavy scrutiny from lawmakers troubled by its role in bailing out Wall Street.

Kohn said the administration’s plan would not greatly expand the Fed’s power, and said it would work hand-in-glove with monetary policy, not compromise it as some critics contend.


Fed officials have had to endure rigorous congressional grillings over their aggressive actions to restore financial calm. Their e-mails have been subpoenaed, recalling past episodes when the central bank came under attack and was forced to yield to the political will.

The proposed bill, put forward by Representative Ron Paul, a Texas Republican and long-standing Fed foe, would expose decisions on monetary policy and emergency lending to audits by the Government Accountability Office.

The GAO is currently prohibited from auditing these areas. Kohn said removing this exclusion would be highly detrimental and could lead investors to worry that politics — not economics — would guide the Fed’s decisions.

“The Federal Reserve strongly believes that removing the statutory limits on GAO audits of monetary policy matters would be contrary to the public interest by tending to undermine the independence and efficacy of monetary policy,” Kohn said.

He also said it could “cast a chill” on monetary policy deliberations by making officials nervous that ideas they discuss behind closed doors could become public.

Paul denied his bill was about Fed independence. “We are not looking to the Congress to run monetary policy. We just want to know what’s going on, and why,” he told Kohn.

However, the bill would remove a provision of law that exempts Fed monetary policy decisions, transactions with other central banks and discussions between Fed officials from GAO audits.

Political attacks on the Fed are not new. Representative Henry Gonzalez pushed hard in the 1990s to force the central bank to publish transcripts of its policy meetings after he exposed that the meetings had been discretely recorded.

Paul’s bill has 250 co-sponsors, including 78 Democrats. But it has not been promoted by the Democratic majority leadership in the House, where it has yet to face even a committee-level vote.

If it were to emerge from the House, to become law it would also need to clear the Senate, where support may be scant.


Kohn warned that congressional meddling in the Fed’s affairs could threaten the United States’ AAA credit rating and drive up interest rates.

“History provides numerous examples of non-independent central banks being forced to finance large government budget deficits,” he said. “Such episodes invariably lead to high inflation.”

Some investors are already worried the Fed could begin to “monetize” the debt, and Kohn and St. Louis Federal Reserve Bank President James Bullard said with debt skyrocketing, the Fed’s independence had to be fiercely protected.

“Any kind of hint that you are trying to take away Fed independence could be very counterproductive at this point in time,” Bullard told Bloomberg television.

The Fed cut overnight interest rates almost to zero in December and has pledged to buy up to $1.75 trillion of longer-dated government debt to try to end the worst U.S. recession in decades.

Two other Fed policy-makers also spoke publicly on Thursday.

Minneapolis Federal Reserve Bank President Gary Stern said recovery was “close at hand,” [ID:nNYS005219] and Fed Governor Elizabeth Duke agreed, though she urged banks to do more to get credit flowing.

“Economic conditions are stabilizing or, where they are still deteriorating, appear to be doing so more slowly,” she said.

Kohn is seriously trying to tell the people that they are better off if they don’t know what he is doing behind closed doors. Ron Paul is not asking for Congress to run the Fed, he is asking that the representatives of the people know what an institution that has bee chartered by the public trust is doing. It is curious that Fed officials are so reluctant when it comes to opening up their books about relevant data, and letting the people know what is going on.

If this kind of independence was so great, then why don’t we make all government institutions independent of everyone?

Here is Ron Paul grilling Kohn:

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