Exposing the Secrets of the Temple: How the Federal Reserve Makes Money Out of Thin Air

For some, the Federal Reserve is the right place to house any new regulatory powers contained in financial reform legislation. For others, the Fed is at the center of all that ails us. In fact, over 95,000 have signed a petition at auditthefed.com.

"In a major victory for transparency at the Federal Reserve, the Senate passed on Tuesday an amendment by Sen. Bernie Sanders that directs the Government Accountability Office to conduct a top-to-bottom audit of all emergency actions by the Fed since the start of the financial crisis in 2007. In addition to the audit, the Fed for the first time would have to reveal by Dec.1, 2010, the identities of banks and other financial institutions that took more than $2 trillion in nearly zero-interest loans." -- from the office of Sen. Sanders, 05/11/10

William Greider, author of Secrets of the Temple, perhaps the finest book on the Federal Reserve, termed the Sanders-Paul audit bill the "first breach in the wall," adding, "it promises to keep alive popular demands for more fundamental reforms." Greider challenged Greenspan and Paulson long before it was fashionable, and has written lately about restructuring the Fed. Now national affairs correspondent for the Nation, Greider was for 17 years the national affairs editor at Rolling Stone, and spent 15 years at the Washington Post. His latest book is Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country, and he wrote the introduction to Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover, by the editors of the Nation.

Terrence McNally: Your latest book, Come Home, America, is a bit of a departure for you, isn't it?

William Greider: I hope It's a gentle and helpful description for people of how deep a hole we are in, and that the country that emerges from this ditch -- I'm talking more broadly than the financial crisis -- is going to be different from the country we knew for so many years. That passage is going to be painful, but I stick to my optimism and insist that we can be a better country on the other side of the ditch

I wrote it just as the financial crisis was blossoming (if you can use that word) and I think I was a little premature in how quickly the public at large, never mind the governing types, could grasp the reality of what was happening to us.

The book is now out in paperback, but I almost wish it were published for the first time right now or even next year, because this is a really hard blow Americans have taken. I think many people are still in denial, which I understand.

McNally: I assume the book says things you've stored up for years, but America wasn't ready yet to recognize the depth of our problems and thus the possibility of change. What do you make of that?

Greider: I've always tried to take a longer frame historical view of things, which gives me sympathy for people trying to cope with what's new. In the book I suggest that this country is at the end of a long and mostly glorious run that started with victory in World War II. There were some very dark passages as well, we know, but American prosperity became not just fabulous, but also widely shared.

McNally: That was the great era of the American middle class.

Greider: And my message is that the good times that we knew are not coming back. This is not just about when do we get out of the grand recession or start creating jobs again and so forth. It's deeper than that. The business model for American prosperity that more or less worked for most of the last 50 years is gone.

I urge you to test this. Talk to young people, 18 to 30. Ask them what their reality is. I guarantee they will bring you up to date, because that prosperity model has been busted for them for years. California is experiencing a lot of the symptoms now. As the bubble of prosperity shrinks, they're piling more of the costs on young people.