How the Federal Reserve Is Manipulating Our Kids Into Loving Wall Street
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Each year the Federal Reserve sponsors a national academic competition to indoctrinate our leading high school students into revering the marvels of modern finance capitalism. Unfortunately, nowhere in that intensive program do our students learn about how the largest U.S. banks have turned the Federal Reserve into their own private piggy-bank.
The Fed, through a series of regional and national contests called the Fed Challenge, has shown little interest in giving kids a fair and balanced curriculum. Rather, its stated purpose is to provide students with “the opportunity to study the U.S. economy through the lens of the U.S. central bank.” Students are quizzed by a panel of mainstream economists about the role of the Fed and how it “makes interest rate decisions to foster economic strength and stability.”
What they won’t learn are the myriad of ways in which the central bank bolsters the “strength and stability” of Wall Street….at our expense.
For a more accurate view, our students would do well to study with Senator Bernie Sanders, the Vermont lawmaker who secured legislation mandating that the Government Accountability Office (GAO) audit the Fed. Perhaps we should launch a new economics contest and call it the Sanders Fed Challenge.
Our initial document for study would be the first audit Sanders secured in June 2011. As a result, Sanders said, “We now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world. This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else." (For a comparison, $16 trillion in financial assistance given to these large banks by the Fed is about a trillion more than the U.S economy produces in a year.)
Next, students should look carefully at the October 2011 GAO audit that painted an ugly portrait of crony capitalism. It revealed how the 12 regional Federal Reserve banks are top-heavy with representatives from the very financial interests the Fed allegedly regulates and monitors. (These regional bank boards are supposed to have a balanced group of directors from financial institutions, other private sector corporate representatives, and representatives from labor and consumer organizations.”)
So are you ready for the Sanders Fed Challenge ?
Question #1: Please estimate the distribution of federal reserve regional board members from banks, corporations, labor, and consumer groups from 2006 to 2010?”
You suspect it may be a bit tilted toward Wall Street?
Well done! Here are the findings from the GAO audit:
Labor: 6 (4.3%)
Consumer 5 (3.6%)
Non-financial corporations 56 (40.0%)
Banking interests 73 (52.1%)
Question #2: What impact do you think this distribution has on Federal Reserve policy?
You say it has the potential to cause a few conflicts of interest?
Right again! And the result is the biggest robbery in world history. Here’s what they’ll never teach in the Fed Challenge:
As Wall Street imploded late in 2008 due to its reckless gambling spree, some of our biggest financial institutions were on life support. Virtually every major Wall Street firm was in danger of going belly-up as the financial system became clogged with “toxic assets” based on fictitious bets upon bets. There were so many toxic assets rotting on and off the bank and investment house balance sheets that no one would lend to anyone else.
But along came the Federal Reserve which poured trillions of dollars into these banks. Of course, these same banks were more than amply represented on the regional Federal Reserve boards, especially the all-important New York Federal Reserve. It was like letting the kids loose in the candy store. Here are some of the goodies revealed by the third Sanders-inspired GAO audit released earlier this month: