Not Everyone Is Cheering Fed's New Role

In recent days, President Obama has proposed sweeping regulatory changes over the banking and financial system. Under this new proposal, the Federal Reserve’s power will expand across the entire system. Remember – what is the Federal Reserve? It is a private corporation owned by a cartel of international bankers. What is causing this crisis? Is it caused by lax regulatory oversight? As we’ve discussed – while there are many problems accelerating the crisis (oversight, greed, derivatives, sub-prime mortgages, etc.) – none of these things caused the crisis. This crisis is a direct result of our debt-based monetary system. Who created this system? The Federal Reserve. You can see how deceptive these people truly are – they create a problem and then propose a solution – a solution that expands their power. Their tentacles are now spreading into the entire system.

Here is a summary of the proposed changes:

• The Federal Reserve will be able to ‘monitor’ risks across the entire financial system (this is a very broad statement – and essentially means that the Fed will oversee everything)

• The Federal Reserve will be able to ‘examine’ any firm that could threaten ‘financial stability’ (again – broad powers over all banking/financial firms)

• Our nations largest banks and financial firms would be subject to ‘heightened oversight’ by the Fed (Sounds like big brother will be watching closely)

• Our government would be given power to seize large financial companies (just what we need – more government intervention)

My personal belief is that our President is being told what to say and do – to implement these changes. The following excerpt from the article below says it all.

“President Obama said the plan would ensure "that lines of responsibility and accountability are clear" by placing authority in the Fed's hands.”

It shouldn’t surprise anyone that Tim Geithner supports the plan – he’s been nothing more than a mouthpiece for supporting the Fed since moving to Treasury Secretary – from the New York Fed. Mr. Geithner – there are always alternatives. There are alternatives that would remove this ridiculous, unsustainable system – but we certainly won’t hear these alternatives from you, our President or from most of our leaders in Congress (Ron Paul is an exception).

“Treasury Secretary Timothy Geithner reiterated the administration's determination to make the Fed the systemic regulator. "I do not believe there is a plausible alternative," he told reporters.”

Does anyone really believe that our President and leaders of Congress are so blind (or ignorant) that they do not understand what the Fed is – or is trying to do? I don’t. If this follows their standard operating procedure – then we’ll see some minor opposition to this plan – and then the changes will be passed – and the Fed will gain greater control over – everything. The only way this will ever be stopped - is if the American people wake up to what is really happening – and decide to do something about it. Currently – we’re a lot like lemmings being led off a cliff. I sincerely hope this changes.

jg – June 18, 2009
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JUNE 18, 2009

Not Everyone Is Cheering Fed's New Role

By SUDEEP REDDY

Wall St. Journal

WASHINGTON -- The Federal Reserve would become the nation's most powerful financial overseer, an approach that is becoming a flashpoint as lawmakers and consumer groups attack the central bank for its role in creating and handling the financial crisis.

WSJ's Damian Paletta discusses President Barack Obama's new plan to overhaul supervision of financial markets.

The proposal, if passed into law, would represent one of the biggest changes ever in the Fed's role. The central bank would win power to monitor risks across the financial system, and sweeping authority to examine any firm that could threaten financial stability, even if the Fed wouldn't normally supervise the institution. The nation's biggest and most interconnected firms would be subject to heightened oversight by the central bank.

President Obama said the plan would ensure "that lines of responsibility and accountability are clear" by placing authority in the Fed's hands.

Critics who wonder about the wisdom of the move say the Fed failed to use its authority to address loose lending practices and the housing bubble that pushed the U.S. into a recession. The Fed responded aggressively after the crisis began, but some argue those actions were overly secretive.

A movement is spreading in Congress to force the Fed to disclose the identity of institutions that borrow from the bank, a move officials say would discourage firms from seeking needed emergency funds. A large group of House members is pushing to audit the Fed.

"I don't have a lot of faith in the Fed being able to handle that big a universe," said John Taylor, president of the National Community Reinvestment Coalition, a group of 600 community organizations.

Senate Banking Chairman Christopher Dodd (D., Conn.) and House Financial Services Chairman Barney Frank (D., Mass.) both said Wednesday the Fed's role is the biggest potential source of friction in the plan.

Mr. Dodd said there is well-founded concern the Fed's responsibility for monetary policy, including setting interest rates, could conflict with its role monitoring systemic risk. Fed officials have said they can handle multiple responsibilities. "There's not a lot of confidence in the Fed at this point, and I'm stating the obvious," Mr. Dodd said.

Mr. Frank said most of Mr. Obama's proposals reflect a broad consensus on Capitol Hill. But "the interplay between the Fed and the rest of the regulators on systemic risk" will be a thorny issue.
Some lawmakers want an interagency council, another feature of the plan, to have greater responsibility for systemic risk, and the authority to act. Obama administration officials believe a committee approach would allow problems at financial institutions to fester without a clear regulator responsible for addressing them.

Listening to President Barack Obama's speech on Wednesday at the White House, from left, were Rep. Barney Frank, Sens. Dick Durbin and Christopher Dodd, HUD Secretary Shaun Donovan, Treasury Secretary Timothy Geithner and administration economic adviser Lawrence Summers.

"How much power the Fed is going to have is going to be probably one of the most controversial issues about this plan," said Robert Litan, a senior fellow at the Brookings Institution. He said he thinks the Fed's role in the new regulatory framework is likely to be changed by lawmakers.
Treasury Secretary Timothy Geithner reiterated the administration's determination to make the Fed the systemic regulator. "I do not believe there is a plausible alternative," he told reporters.

Fed officials said they took action throughout the financial crisis because the central bank was often the only institution with the power to prevent turmoil. The regulatory overhaul would provide a mechanism for the government to unwind failing nonbank financial institutions, freeing the Fed of the need to act. The central bank has also taken steps to release details about its lending programs.

Despite a major conceptual change in the Fed's role, central bank officials believe perhaps only a handful of additional firms would fall under their supervision. They are also expected to make a case to keep the Fed's consumer-protection responsibility -- with some tweaks -- instead of giving up that role entirely, as envisioned under the plan.

The regulatory overhaul proposed by the Bush administration last year also would have given the Fed responsibility for financial stability. But that plan would have removed its role of supervising banks. Fed officials quietly objected, saying it would be hard to guard against systemic risks without also performing routine bank examinations. The proposal gained little traction amid an escalating financial crisis.

The Obama proposal would require the central bank to seek approval from the Treasury secretary before invoking emergency lending powers. It also calls for the Fed to work with the Treasury and outside experts to review the Fed's structure and governance, including the role of the regional Fed banks. A report due by Oct. 1 would be used to propose changes to the Fed's structure "to improve its accountability and its capacity to achieve its statutory responsibilities."
—Jonathan Weisman and Damian Paletta contributed to this article.
Write to Sudeep Reddy at sudeep.reddy@wsj.com

Corporate Lenders Get Hit

Based on the speed at which these regulatory changes are being made – I have a feeling we’re on the verge of some major economic shocks. Things appear to be somewhat calm – but there are serious storms approaching.

This is a long article – so I’ll list the important info here:

• One proposal being pushed by the White House takes aim at industrial loan companies, which are allowed under their state-issued charters to collect federally insured deposits, offer credit cards, make loans and process financial transactions without facing as much scrutiny as traditional banks regulated by the U.S. government.

• President Barack Obama wants companies with ILC charters to register as bank-holding companies with the Federal Reserve. That would put them in the same regulatory category as Bank of America Corp. and J.P. Morgan Chase & Co., subjecting the non-banks to much greater government oversight.

• If that happens, most companies with ILC charters likely would close them down, potentially shutting off another source of credit for consumers, industry experts predict. That's because the companies might not be able to satisfy the Fed's capital and other requirements, and thus would be ineligible to become bank-holding companies, or they would balk at heavier regulation.

I’ll keep this short – because it’s obvious what is happening here. Who would gain regulatory authority over these firms under this proposal? The Federal Reserve. Are you beginning to see where these new regulatory proposals are leading?

Our entire financial system is being consolidated under one authority. This alone should cause us concern. A private bank (a small group of powerful interests) should never be given absolute economic power over the people of the United States. This is why our founders wrote the Constitution – to prevent this very thing from happening.

The even bigger issue is that this authority is controlled by people who have one, overriding objective – a one world socialist government.

jg – June 19, 2009
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JUNE 19, 2009

Corporate Lenders Get Hit
Financial-Oversight Bill Snags Loan Arms of Harley, Target; Girding for Battle

By DAVID ENRICH and ROBIN SIDEL

Wall St. Journal

Target Corp., Harley-Davidson Inc., Pitney Bowes Inc. and dozens of other companies that aren't banks but pitch loans and other financial products are being squeezed by the Obama administration's financial-overhaul plan.

One proposal being pushed by the White House takes aim at industrial loan companies, which are allowed under their state-issued charters to collect federally insured deposits, offer credit cards, make loans and process financial transactions without facing as much scrutiny as traditional banks regulated by the U.S. government.

President Barack Obama wants companies with ILC charters to register as bank-holding companies with the Federal Reserve. That would put them in the same regulatory category as Bank of America Corp. and J.P. Morgan Chase & Co., subjecting the non-banks to much greater government oversight.

If that happens, most companies with ILC charters likely would close them down, potentially shutting off another source of credit for consumers, industry experts predict. That's because the companies might not be able to satisfy the Fed's capital and other requirements, and thus would be ineligible to become bank-holding companies, or they would balk at heavier regulation.

As of last month, there were 45 ILCs with combined assets of $232.3 billion, according to the Federal Deposit Insurance Corp. That is equivalent in size to the 11th-largest U.S. bank, or slightly smaller than regional bank U.S. Bancorp.

Though relatively small players in the financial system, ILCs provide a wide variety of products and services to businesses and consumers. The offerings range from financing purchases of Harley motorcycles to loans that cover corporate medical payments to insurers. Eliminating or sharply curtailing those operations could make it harder or costlier for customers to get credit.

In its "white paper" outlining the reform package, the administration said the existence of ILCs and other non-bank charters have allowed certain institutions "to obtain access to the federal safety net," namely through insured deposits, while avoiding oversight by the Fed. The administration argues that in order for a regulator to be sufficiently powerful, it has to be able to see all the risks, and thus oversee all companies that provide financial services.

ILCs provide a wide variety of products and services, from financing purchases of Harley motorcycles to loans for corporate medical payments.

That's setting the stage for a showdown on Capitol Hill. Some lawmakers and banking groups are vowing to fight the ILC provision, which they see as an overzealous attempt to create a level regulatory playing field at the expense of companies that didn't play major roles in the financial crisis.

"There is not a single ILC that contributed to the crisis," said Sen. Robert Bennett, a Utah Republican, at a hearing Thursday with Treasury Secretary Timothy Geithner. "You're going to wipe them out as a source of credit, take them out of the marketplace where they're providing niche credit for people that don't otherwise get it."

Mr. Geithner responded that the change is meant to eliminate "gaps and loopholes" in financial regulation. But he said the administration is open to negotiating the plank with lawmakers. "We're going to have to work to try to persuade you of the merits of these proposals and take your concerns into consideration," Mr. Geithner said.

The brewing fight over the ILC proposal, tucked into a single paragraph in an 88-page document released Wednesday, is an early indicator of the intense scrutiny that the Obama administration's reform plan will encounter as lawmakers and industry groups pore over its details. In addition to policy disputes, lawmakers are looking to protect local industries. Utah, for example, is home to most of the nation's ILCs, although California, Nevada and other states also are popular destinations for the charters. Only a handful of states offer ILC charters, and for those that do, they can be a source of tax revenue.

Howard Headlee, president of the Utah Bankers Association, called the Obama administration proposal "extremely misguided" and said it would force many ILCs to shut down. But he said he's optimistic that lawmakers will kill the provision. "I'm confident that congressmen will see how foolish it is to be destroying sources of credit in this economy."

If the provision becomes law, the implications could be far-reaching. A diverse array of companies -- including Target, Pitney Bowes, UnitedHealth Group Inc., WellPoint Inc. and CMS Energy Corp. -- have Utah-based financing arms with ILC charters.

The companies use the charters to provide financial services that complement their main businesses and can be a source of profits. For example, Target, the Minneapolis-based retailer, uses its Target Bank subsidiary to extend credit to shoppers. UnitedHealth's OptumHealth Bank Inc. administers health-savings accounts and offers loans to cover medical payments, as does WellPoint's Arcus Financial Bank. EnerBank USA, a unit of Jackson, Mich.-based CMS Energy, finances home-improvement and energy loans nationwide. Pitney Bowes Bank Inc. allows businesses to prepay or borrow funds for postage costs.

Most of those companies said they were studying the administration's proposal and that it would be premature to comment. Pitney Bowes, which established its ILC in 1998, said it "will work to educate Congress about their role in providing credit for commercial activity -- something that is even more important during the current recession. We think it is important that these services continue."

The obscure banking charters, originally created in the early 1900s to provide loans to industrial workers, have been a sporadic source of controversy for years.

Federal Reserve officials, including ex-Chairman Alan Greenspan, have warned about the perils of allowing traditional commercial businesses to have banking operations. One concern is that the banking portion of the business could be at risk if, say, the retailing side went under. There are also competitive issues if giant companies use their existing customer base to crowd out traditional banks.

In 2006, ILCs were thrust into an especially bright spotlight after Wal-Mart Stores Inc. applied for a charter to process credit-card transactions. Banks waged an aggressive lobbying campaign to derail the retailing behemoth's application, arguing that it was laying the groundwork for a foray into retail banking.

Amid the mounting furor, the FDIC imposed a moratorium on new applications for ILC charters, to allow Congress time to debate whether to change the law. Wal-Mart withdrew its application.
In May 2007, the U.S. House passed a bill that would subject ILCs to greater federal oversight and bar the charters from being granted to nonfinancial firms. The bill died in the Senate.
—Damian Paletta and Ann Zimmerman contributed to this article.

Write to David Enrich at david.enrich@wsj.com and Robin Sidel at robin.sidel@wsj.com

Printed in The Wall Street Journal, page A1

Congress Weighs Scope of Fed's Authority

Here we see yet another attempt to give the Fed broader control over our financial system and economy.

Remember – these are the very same people who are destroying our economy.

Also take note of who is supporting this legislation – Barney Frank and Timothy Geithner. Who is standing up for the American people? Not these guys.

You’ll notice that this idea to give the Fed more authority never goes away. If a proposal to increase Fed authority is strongly opposed – it gets repackaged and submitted another way. You are watching some very evil people in the shadows orchestrate these things.

Ron Paul has proposed legislation to audit the Federal Reserve – and not surprisingly – the Fed opposes this legislation. Why? The Fed would tell you that an audit would somehow threaten the stability of the financial system. We know this to be untrue. The real reason is that they do not want their lies and actions exposed to the world.

This battle for control of our financial system is going to get much more heated (and more dangerous) in the months/years ahead. Who will win the battle? As always – it will depend on the American people. We will decide. Will we wake up and stand against this beast or will we succumb to it?

jg – October 29, 2009
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OCTOBER 28, 2009, 9:21 P.M. ET

Congress Weighs Scope of Fed's Authority

By SUDEEP REDDY

WASHINGTON -- Get ready for a fiery debate about the role of the Federal Reserve.

The latest financial-regulation legislation moving through Congress would give the Fed new oversight powers, including the authority to force large firms to shrink if their size threatens the broader economy.

The draft bill, released this week by House Financial Services Committee Chairman Barney Frank (D., Mass.) gives the central bank more direct authority than outlined in a proposal earlier this year.

The expansion of the Fed's role is sure to become a flash point in the debate over the overhaul of financial regulations.

On one side are Mr. Frank and Treasury Secretary Timothy Geithner, who favor giving the Fed broad authority. On the other side are lawmakers who want power spread out among agencies. Many also charge that the Fed's regulatory missteps helped to cause the financial crisis.

Mr. Geithner and major bank regulators will discuss the proposed legislation when they testify before the House Financial Services panel on Thursday.

In the Senate, where financial regulation is moving at a much slower pace, members of both parties have spoken out against giving the Fed significant new authority.

Senate Banking Committee Chairman Christopher Dodd doesn't think the Fed "did a particularly good job in using its authority leading into the financial crisis," his spokeswoman said Wednesday. Mr. Dodd is also concerned that if the Fed is stretched too thin, it "won't necessarily focus on monetary policy," she said.

Even Democrats more sympathetic to the central bank, such as Sen. Mark Warner of Virginia, have indicated they would like to put more authority in a council of regulators, rather than in the central bank.

Fed officials have repeatedly said they can handle multiple roles. They have acknowledged lapses in consumer protection over the past decade—not preventing the worst abuses in mortgage underwriting, for example. They have also acknowledged faults in monitoring banks' financial positions ahead of the crisis. But they maintain that the Fed's posture has changed and it will be far more vigilant down the road.

"The Fed is everybody's favorite pinata today for its obvious mistakes," said Cornelius Hurley, director of Boston University's Morin Center for Banking and Financial Law.

In a bid to mollify Fed critics, the draft legislation would create a council to share oversight authority. The council would be led by the Treasury secretary and include at least six regulators. It would identify activities that should be subject to greater supervision, issue recommendations and develop tougher rules if the activities threaten firms or markets.

The Fed would gain ultimate "backup authority" as a regulator that could step in if the council did not take action.

Under current law, the Fed can force a depository institution within a bank holding company to sell assets. The new law would greatly broaden that authority.

The plan would also put a Fed governor on the five-member board of the Federal Deposit Insurance Corp., replacing the head of the Office of Thrift Supervision, which would be phased out. The FDIC, with the approval of the Fed and Treasury, would be empowered to make loans or offer guarantees to financial firms to prevent financial instability.

"The broader task of monitoring and addressing systemic risks that might arise from the interaction of different types of financial institutions and markets—both regulated and unregulated—may exceed the capacity of any individual supervisor," Fed Chairman Ben Bernanke told a House committee earlier this month.

"We should seek to marshal the collective expertise and information of all financial supervisors to identify and respond to developments that threaten the stability of the system as a whole," Mr. Bernanke said.

Separately, the House Financial Services Committee Wednesday passed a bill that would tighten the Securities and Exchange Commission's oversight of credit-rating firms by establishing an office to review the firms and their ratings. It would also make it easier for investors to win civil lawsuits against raters that "knowingly or recklessly" issue poor-quality ratings.

The committee is expected to vote next week on a comprehensive investor-protection bill that includes an amendment giving the SEC authority to adopt rules to allow shareholders to nominate board members on corporate ballots, known as proxy access. Business groups have suggested they would sue the SEC if it moved ahead with proxy-access rules under its existing administrative rules. The amendment would put the SEC on firmer legal ground.

—Kara Scannell contributed to this article.

Write to Sudeep Reddy at sudeep.reddy@wsj.com