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» The Ornery American Forum » General Comments » Remember how NSA-type surveillance would "never be used" for domestic law enforcement (Page 3)

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Author Topic: Remember how NSA-type surveillance would "never be used" for domestic law enforcement
Pyrtolin
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quote:
The Reserve Banks
Careful on this- the Reserve banks that operate under the the direcrect oversight of the Federal Reserve are highly regulated private conglomerations, but they're sill actually owned by the Fed, which is owned by the Federal government. The member banks that have bought their "shares" cannot sell their shares to other entities, they cannot accumulate shares or exercise any other kind of private control of their regional reserve that a private shareholder might be able to do. You may as well say "membership" instead of share, because in plain language, that's closer to what they've bought- a membership in an organization that they have some say in, but not ultimate ownership of. They are very much public private hybrids with some degree of independence to ace within the bounds to the top level public regulatory entity which is the Federal Reserve itself, which effectively reports to the President as part of the executive nature of its function.

quote:
. Its use as an instrument for private banks to conduct transactions is so apparent that I actually can't see how it could be perceived as having any other serious function.
Well, sure. But the fact that it provides infrastructure for private use doesn't make it private any more that the USPS or Interstate Highway system are private just because they similarly provide infrastructure for private transactions. The fact that it acts as a central clearinghouse for banks and provides them with access to money to meet their reserve requirements as needed is why you can write a check from one bank to another and count on it being honored, it's why we have on standard paper currency, instead of one issued by each bank and only as reliable as that bank. It's use as infrastructure for private banks to conduct transactions is inherent to the nature of any central bank; that's a huge part of why they exist in the first place.
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Fenring
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Yes, all of those functions have good utility and are a good argument for the existence of a central bank of some sort. But the inception of the Fed can't be compared to the Eisenhower Interstate System because that was a government-mandated activity (i.e. road-building) that is for everyone equally can be neither said to be partisan, preferential, or giving unfair advantages to anyone at all. The Fed as conceived was designed by a couple of politicians and a bunch of private bankers, drafted in secret, passed in bizarre circumstances, and unlike a public road serves only a select few members who have access to it.

The false comparison aside, the Fed doesn't merely provide some utility such as the things you mentioned (since those are quite fine and handy) but also serves as a bridge to entwine government with the financial sector and inextricably ties the Federal monetary (and even fiscal) policy in with private banking interests. This is the part of the Fed their website and book don't publicize, and also the more important of its functions in terms of overall effect. There's nothing wrong with being a clearinghouse, except that as far as I can tell this is at best the Fed's secondary function.

The partnership between select private interests and government is the great evil that libertarians don't like, and when Rand (and his dad) express antipathy towards the Fed it would be a mistake, I think, to take that to mean they are against having a central Federal clearinghouse for day-to-day banking transactions. Their beef is with oligarchy, with having taxpayers foot the bill when banks screw up (which is done through government bailouts, which in turn is financed by the Fed; i.e. debt is generated on the guarantee of the taxpayers repaying it), and with having big money interests dictating the results of Federal policy and political activity.

You may be right that bankers know more about the economy than the Congress does. But I'd rather have representatives of the people actually accountable even if that means they'll make mistakes, compared to shrewd connected bankers who have no allegiance to the American people.

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Pyrtolin
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quote:
The Fed as conceived was designed by a couple of politicians and a bunch of private bankers, drafted in secret, passed in bizarre circumstances, and unlike a public road serves only a select few members who have access to it.
The first part is conspiracy theory, not fact. The second part is not accurate either, not just because everyone does benefit from a stable, semi-public financial system, but because there are not magic restrictions on who can open a bank or credit union- the fact that a regulatory agency it mostly only relevant to the industry that it regulates doesn't make it a magic club of any sort.

quote:
The false comparison aside, the Fed doesn't merely provide some utility such as the things you mentioned (since those are quite fine and handy) but also serves as a bridge to entwine government with the financial sector and inextricably ties the Federal monetary (and even fiscal) policy in with private banking interests.
The nature of money entwines banks and public monetary policy. The options are to let banks operate on a completely independent basis and deal with the resultant monetary chaos that results, or to bring them into line as semi-public utilities under a public regulator that stabilizes the system.

quote:
This is the part of the Fed their website and book don't publicize, and also the more important of its functions in terms of overall effect. There's nothing wrong with being a clearinghouse, except that as far as I can tell this is at best the Fed's secondary function.
Doesn't publicize? It's front and center in the explicit nature of the Fed as a central bank and financial regulator. The Fed's function as a clearing house is part of the regulatory power that forces all banks to accept checks from each other. (Heck, it's what makes modern debit cards and most ecommerce possible without having to have an account at the same bank as the person that you're trying to transact with online or a bank that their bank has an explicit trusting relationship with)

quote:
The partnership between select private interests and government is the great evil that libertarians don't like, and when Rand (and his dad) express antipathy towards the Fed it would be a mistake, I think, to take that to mean they are against having a central Federal clearinghouse for day-to-day banking transactions. Their beef is with oligarchy, with having taxpayers foot the bill when banks screw up (which is done through government bailouts, which in turn is financed by the Fed; i.e. debt is generated on the guarantee of the taxpayers repaying it), and with having big money interests dictating the results of Federal policy and political activity.

In other words, their beef is with a fantasy based on a very bad understanding of how banks and the Fed work.

The proper order of events is- when Fed financing (which only works if people want loans and banks are willing to lend) cease to be enough to fill the shortfalls in reserves that occur because too many assets go sour, Federal bailouts create the actual money needed to prevent taxpayer accounts from drying up preserving their assets.

What we failed to do was then properly prosecute all of the bad actors in the financial industry similar to the investigations and prosecutions that followed the SnL crisis in the 80s- that certainly h\is the kind of collusion that causes problems, but it's completely independent of the Fed, and more directly a result of Clinton balancing the budget and deregulating the financial industry so that it was primed to resort to dishonest practices in the process of making up the huge monetary shortfall caused by too little federal spending. It comes from gutting campaign finance laws such that no politician can even hope to play unless they bow to the largest sources of money (the finance industry)

Either of the Pauls' nominal responses would have wiped out million of taxpayers- caused a depression that made the Great Depression look like a slight hiccup. To the extent that they actually earnestly endorse the policies they put forth, it demonstrates the same sheer ignorance of history and the actual conditions in the US economy in the 19th century as the rest of their hands off policies on regulation and anti worker-rights positions do.

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Fenring
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As I said, we won't agree on this. I also notice you didn't explain how handing over $13 trillion to the Bank of Scotland, Bank of Japan and several others can be classified as within the purview of a "regulatory agency." I suppose you'll say if they did it, since they are a government agency, the government therefore must have signed off on it. If so, who in the government signed off on it? No one in the Congress even knew about it until they were audited.
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Pyrtolin
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In the context of the Fed, do you understand that "handing over" is a biased description intended to provoke outrages over something innocuous?

The Fed doesn't have anything that it can just hand over. It bought securities from those banks who used the overnight window at that time, just like any others that are part of its network because they hold some portion of their assets in US dollars.

The alternative would effectively be to ban those banks from conducting business in dollars, or force them to go through some third party exchanger for all transactions with the US, which wouldn't make any sense at all.

You've managed to hit on exactly the kind of poorly informed panic that's why they think they need to keep such information confidential to protect the system from knee jerk reactions to normal use of the tools to provides to maintain economic sanity.

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Pyrtolin
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quote:
I suppose you'll say if they did it, since they are a government agency, the government therefore must have signed off on it.
First of all, 7 of the governors of the Fed are executive appointees- a controlling share of the board. If they sign off on something, that is, in effect, the collective Presidents who appointed them signing off on it

But more to the point here, that's like saying that Jamie Dimon needs to sign off on every balance transfer that happens at Chase Bank. They probably knew about it because I'm sure they would have noted such transactions taking place, but the transactions are initiated my the member banks using the basic tools the Fed provides. To the degree that there was any signoff, it was a signoff equivalent to whoever signs of on every ATM function you invoke oat your bank.

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Fenring
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quote:
Originally posted by Pyrtolin:
quote:
The Reserve Banks
Careful on this- the Reserve banks that operate under the the direcrect oversight of the Federal Reserve are highly regulated private conglomerations, but they're sill actually owned by the Fed, which is owned by the Federal government. The member banks that have bought their "shares" cannot sell their shares to other entities, they cannot accumulate shares or exercise any other kind of private control of their regional reserve that a private shareholder might be able to do. You may as well say "membership" instead of share, because in plain language, that's closer to what they've bought- a membership in an organization that they have some say in, but not ultimate ownership of. They are very much public private hybrids with some degree of independence to ace within the bounds to the top level public regulatory entity which is the Federal Reserve itself, which effectively reports to the President as part of the executive nature of its function.

Just an addition to this point. I came across the court transcript again that I had read before and remembered this thread:

http://www.globalresearch.ca/the-federal-reserve-is-a-private-financial-institution/8518

quote:
Federal reserve banks are not federal instrumentalities for purposes of a Federal Tort Claims Act, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as “wholly owned” government corporations nor as “mixed ownership” corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names. . . .
You correctly mentioned that the 7 members of the Fed Board are selected by the executive (and ratified by the senate), which in theory suggests they are connected to government. The selection process itself might serve to undermine this point, as well as the fact that terms are incredibly long and once chosen the members can act as they see fit. However the boards of the Fed branch banks are different, as 6/9 of the board members are chosen by local member banks (source: the Fed website) and the other three are chosen by the general Fed board. Having 3/9 members selected by the board which was, in turn, selected by the executive apparently gives the boards of the branch banks some indirect connection to the executive, although that's somewhat tenuous. But if the Fed board is appointed by the executive, and the branch boards are mostly selected by banks, who really controls the branches?

When the court above had to look at the day-to-day functionality of the branch banks to determine whether they were a part of government for the purposes of tort law, the judge determined that they were not. Looking at the bolded and italicized section the ruling specifies that the Fed branch banks, although they're regulated by the government and the Federal Reserve System, are "locally controlled by their member banks." Note the lack of phrasing such as "partially controlled" or "influenced by." The statement is clear; the member banks run the Fed branches. And since, as you point out, it is the branches who conduct all the individual transactions (such as the combined 'purchases' involved in the $13 trillion bailout), the member banks therefore controlled that too.

So although the Fed board is the main regulator of the branch banks and makes up 7/12 of the FOMC (thus having the large part in monetary policy) the actual day-to-day transactions and 'banking' are done by the branch banks within the parameters of that policy. And if the local member banks control the branches, as this court ruling suggests (to say nothing of the 6/9 board members selected by local banks in the first place), then it seems that the main operating power of the Fed System rests with the member banks and not with the government. The banks may not be the primary hand in setting monetary policy (although they may control up to 5/12 of the FOMC spots), but they are the primary force in conducting actual transactions, including the $13 trillion bailout.

This was my main point, which is to say that the government is not in direct and arguably not even indirect control of the activities of the Fed branch banks. And if any part of government does have some control it's the executive and not the Congress, the latter of which is the body representing the people. By 'undercutting the Fed', Rand Paul would not be letting the banks run wild since they are already running wild. In order to make this claim you'd have to say that Paul intends to undercut the main Fed board specifically but not the branch banks, and there is no evidence he has this specific plan in mind.

On the other hand, if Paul were to 'undercut' the Fed in some other way, such as increasing oversight, the member banks might have a reduced ability to use the apparatus of the Fed system while going unnoticed and making it look like 'the government' was making those transactions.

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