To put a southern handle on this story, let me refer you to the Arkansas banker, Warren Stephens, opining in the Wall Street Journal about the disaster that’s coming as what he calls “the federal government allocating credit.” The reason the Congress reclaiming the purse strings is a disaster in his book is because that’s what was reserved to the Federal Reserve Bank when it was set up as a private corporation by the Congress. Why Congress gave up the power of the purse is a matter of speculation for another day.
The big story today, as announced in a press release from the office of Senator Bernie Sanders, the socialist Senator from Vermont, is that, in response to the assertion of the Freedom of Information Act demand for records (a demand that was initially resisted until ordered by a court), the Federal Reserve has been forced to disclose that it was lending dollars to Libya at a very low rate of interest while the U.S. Treasury was paying a higher interest on dollars it had borrowed from Libya.
Bernie Sanders wants to know why the Fed bailed out the Bank of Libya. The other thing he wants to know is why the bank’s branches in New York are exempt from the embargo that’s designed to prompt the removal of Gadhafi.
Pehaps the answer to the latter question is that Dodd/Frank doesn’t apply to foreign banks, so there’s no way to enforce an embargo and prevent the transmission of dollars back home. Anyway, my answer to the Senator’s main question is as follows. (He probably knows all of this, but lots of other people, especially people who don’t think of themselves as owning the public corporation known as the U.S. government, don’t).
The Federal Reserve Bank does what its constituents (banks) want because, on the theory that money management ought not to be political, the power of the purse strings has been delegated (reserved) by Congress to a private/secretive corporation. That the Federal Reserve Bank has now been made subject to the open records laws spells disaster for business as usual (especially if it leads to Congress reclaiming the purse strings).
What we need to do to understand what’s going on is to distinguish the various meanings of “political.” Basically, since the word is derived from polis — i.e. the people –“political” should refer to the people and their interests. However, the people we select to serve those interests, prefer to believe that they know better and that, in exchange for providing their wisdom, the people are obligated to defer to them — i.e. recognize their importance and give them power over the people. So, not a few of our public servants actually consider themselves to be politicians, the wielders of power over people.
Perhaps it was thought that power over the people is sufficient and, if the people can be controlled by the law-makers, the power over the purse is incidental, not to mention a burden, and can just as easily be delegated to someone else — i.e. the bankers. Nobody anticipated that staid bankers would evolve into rapacious banksters.
To confuse the people even more, our politicians have recently redefined or refined the meaning of “political” to refer to the electoral lottery whereby pre-selected candidates are chosen to represent the public interest — an interest for which they have no personal use, since their agenda in getting chosen is to ascend to dominion, not stewardship. The objective, of course, is to denigrate the polis and participation in a lottery is about as low as participation by the polis can go.
If you want to conclude that our Congresscritters are corrupt, be my guest.