Government Shutdown: Yea or Nay?

US Government officials have given themselves until midnight of April 8th to decide whether or not the government will actually shut down. This is an evolving situation and the outcome is not immediately clear.

STILL WATCHING AND WAITING

In my last update I mentioned the date of April 8th as being a time where three interesting and potentially significant events converge. As the story has evolved, some things have become clear and others are still pending.

Therefore, at this point we’re still watching and waiting — and I will write more as the situation continues to take shape.

Here are the three events we’re now paying attention to.

FIRST EVENT: FEDERAL RESERVE

The first was the deadline of the Federal Reserve to release its information about where the 2008 bailout money went. This actually happened over a week ago, but there was barely a sound in the mainstream media about it.

Here was one of the initial articles about it on Bloomberg’s site — the guys who originated the suit:

Federal Reserve Has Two Weeks to Comply

 

http://www.bloomberg.com/news/2011-03-22/fed-s-court-ordered-transparency-shows-americans-have-a-right-to-know-.html

 

A Supreme Court order that forces unprecedented disclosures from the Federal Reserve ended a two- year legal battle that helped shape the public’s perceptions of the U.S. central bank.

 

The high court yesterday let stand a lower-court ruling compelling the Fed to reveal the names of banks that borrowed money at the so-called discount window during the credit crisis. The records were requested by Bloomberg LP, the parent company of Bloomberg News. In July, Congress passed the Dodd-Frank law, which mandated the release of other Fed bailout details.

 

Fed Chairman Ben S. Bernanke “now must finally understand that this money doesn’t belong to the Federal Reserve, it belongs to the American people and the American people have a right to know how their taxpayer dollars are being put at risk,” said Senator Bernard Sanders, a Vermont Independent who wrote Fed transparency provisions in Dodd-Frank.

 

The financial crisis, which began in August 2007 and peaked after the bankruptcy of Lehman Brothers Holdings Inc. in September 2008, focused the public’s attention on the Fed and its $3.5 trillion effort to rescue the banking system, said U.S. Representative Ron Paul, who heads the House subcommittee that oversees the central bank.

 

“People wanted to know more about what the Fed was doing,” said Paul, a Texas Republican. “It’s been a significant change and the American people won’t ever be complacent about this.”

 

While Congress required the Fed in December to reveal details of assistance it provided through various emergency programs during the crisis, discount window loans were exempt. The central bank, which was created in 1913, has resisted transparency for the discount window, its oldest lending tool.

 

‘Reluctant to Borrow’

 

“The presumption is that the borrowers were to be kept private,” said William Poole, former president of the St. Louis Fed. “Other loans are another matter but banks that borrow at the discount window are often presumed to be in financial trouble. That might create a run on those banks and will make banks in the future reluctant to borrow.”

 

The high court’s order means the Fed will have to reveal an unprecedented level of detail about its discount window lending during the financial crisis — including borrowers’ names and amounts. Officials are preparing to comply, said David Skidmore, a spokesman for the central bank. He declined to elaborate.

 

Attorneys for the Fed have not yet decided how or precisely when they will provide the information, said Thomas Golden, a partner with Willkie Farr & Gallagher LLP who represents Bloomberg LP in the case. Based on discussions with the Fed’s lawyers, Golden said he expects the central bank to comply within the next two weeks, though it’s not yet clear whether officials would post the information publicly on the Fed’s Web site…

 

Paul, who has called for abolishing the central bank, signed up more than 300 co-sponsors for a 2009 bill requiring a Fed audit. The measure passed the House before being dropped by the Senate. It was quite a difference from similar proposals in the 1970s that attracted little attention, he said.

 

“The Bloomberg lawsuit had a lot to do with the cultural change,” Paul said. “Bloomberg has credibility that politicians don’t have.”…

 

The Fed declined to appeal the case to the Supreme Court; the Clearing House Association LLC, a group of the largest U.S. commercial banks, asked the high court to intervene.

 

Under the trial judge’s order, which the Supreme Court refused to reconsider, the Fed must reveal 231 pages of documents related to discount window borrowers in April and May 2008, along with loan amounts. After Bloomberg filed suit, News Corp. (NWSA)’s Fox News Network LLC requested similar records over a longer period of time and also filed suit. It stands to receive 6,186 pages of documents on loans made from August 2007 to November 2008.

 

The Fed must be forced to divulge such information, said Mark Williams, executive-in-residence at the Boston University School of Management and a former Fed bank examiner.

 

“The Fed has to be held to higher accountability,” Williams said. “It takes lawsuits like this to do that.”

The Federal Reserve released the data on or around April Fool’s Day — but this was no joke. After its release, the news was again very quiet — but here is what we did see from Bloomberg:

Foreign Banks Took Most of Fed Money

http://www.bloomberg.com/news/2011-04-01/foreign-banks-tapped-fed-s-lifeline-most-as-bernanke-kept-borrowers-secret.html

 

The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record. The disclosures may stoke a reexamination of the risks posed to U.S. taxpayers by the central bank’s role in global financial markets.

 

“The caricature of the Fed is that it was shoveling money to big New York banks and a bunch of foreigners, and that is not conducive to its long-run reputation,” said Vincent Reinhart, the Fed’s director of monetary affairs from 2001 to 2007.

 

Commercial Paper

 

Separate data disclosed in December on temporary emergency- lending programs set up by the Fed also showed big foreign banks as borrowers. Six European banks were among the top 11 companies that sold the most debt overall — a combined $274.1 billion — to the Commercial Paper Funding Facility.

 

Those programs also loaned hundreds of billions of dollars to the biggest U.S. banks, including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. and Morgan Stanley. (MS) …

 

“The American people are going to be outraged when they understand what has been going on,” U.S. Representative Ron Paul, a Texas Republican who is chairman of the House subcommittee that oversees the Fed, said in a Bloomberg Television interview.

 

“What in the world are we doing thinking we can pass out tens of billions of dollars to banks that are overseas?” said Paul, who has advocated abolishing the Fed. “We have problems here at home with people not being able to pay their mortgages, and they’re losing their homes.”

This definitely does not mean the story is over. Ron Paul is aggressively pursuing litigation against the Fed — due to the fact that a surprising percentage of these bailouts went to banks in countries outside the US.

This is not necessarily a bad thing, except that the Federal Reserve is supposed to be creating money for the US — not secretly handing it out to international bankers:

Rep. Paul Planning Hearing on Fed Foreign Lending in May

http://www.reuters.com/article/2011/04/02/usa-fed-paul-idUSN0214517620110402?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=22&sp=true

 

(Reuters) – Persistent Federal Reserve critic Representative Ron Paul plans to hold a hearing on the U.S. central bank’s emergency loans to the branches of non-U.S. banks, his spokeswoman said on Saturday.

 

“I was surprised and deeply disturbed … to learn the staggering amount of money that went to foreign banks,” Paul said in a statement.

 

“These lending activities provided no benefit to American taxpayers, the American economy, or even directly to American banks,” he said.

 

Paul spokeswoman Rachel Mills said the Republican lawmaker, who advocates abolishing the Fed and returning to a currency backed by gold or silver, is planning a hearing on the discount windowlending in May. Details are still being worked out, she told Reuters.

 

Data the Fed was required by courts to disclose on Thursday showed the U.S. branches of foreign-headquartered financial firms had made extensive use of the central bank’s emergency lending discount window during the severe financial crisis that froze financial markets in the fall of 2008.

 

During that period, the Fed actively encouraged financial firms to obtain funding from an array of unusual emergency funding vehicles to prevent markets from freezing up entirely.

 

While making emergency loans is at the discretion of the individual regional Fed banks, the discount window is open to any firms in sound condition able to post good collateral.

SECOND EVENT: GOVERNMENT SHUTDOWN

The second major event was the government shutdown. All efforts so far to avert this event — which would be the first of its kind in fifteen years — have failed. I have to be on stage in fifteen minutes for this weekend’s conference, but so far there is still no word about what will actually happen.

However, I did not foresee the high theater and drama that would surround this event, where we have a deadline that runs until midnight before the outcome will be announced:

http://online.wsj.com/article/SB10001424052748704013604576248683501879442.html?mod=WSJ_hp_LEFTTopStories

The federal government moved within a day of shutting down for the first time in 15 years Thursday, though House and Senate leaders said after a nighttime meeting with President Barack Obama that they had moved closer to a deal ahead of a deadline of Friday at midnight.

Mr. Obama, after the meeting with House Speaker John Boehner (R., Ohio) and Senate Majority Leader Harry Reid (D., Nev.), said he had told them he expected a final answer Friday morning on whether a shutdown could be averted. The president canceled a scheduled trip to Indiana in order to monitor the situation, but he said little to indicate what he would do to bring that deal to completion.

“I’m not yet prepared to express wild optimism, but I think we’re further along today than we were yesterday,” Mr. Obama said after the meeting.

Messrs. Reid and Boehner issued a joint statement saying, “We have narrowed the issues, however, we have not yet reached an agreement. We will continue to work through the night to attempt to resolve our remaining differences.”

I will be busy throughout the weekend with the conference. It will be interesting to see whether the shutdown actually happens or not, particularly since we’re this close to the edge and there is still no answer.

THIRD EVENT: NEW BRETTON WOODS

The third major event is the beginning of the “New Bretton Woods” financial meeting, organized by George Soros — with the purpose of restructuring the world’s financial system for the first time since World War II.

The media reporting on this is basically nonexistent. This was one article that came out in advance of the event itself. I have heavily edited it to avoid the massive bias that was in the original:

Soros Pushes for New World Order on April 8^th

http://www.mrc.org/bmi/commentary/2011/Unreported_Soros_Event_Aims_to_Remake_Entire_Global_Economy.html

 

Two years ago, George Soros said he wanted to reorganize the entire global economic system. In two short weeks, he is going to start – and no one seems to have noticed.

 

On April 8, a group he’s funded with $50 million is holding a major economic conference and Soros’s goal for such an event is to “establish new international rules” and “reform the currency system.” It’s all according to a plan laid out in a Nov. 4, 2009, Soros op-ed calling for “a grand bargain that rearranges the entire financial order.”

 

The event is bringing together “more than 200 academic, business and government policy thought leaders’ to repeat the famed 1944 Bretton Woods gathering that helped create the World Bank and International Monetary Fund. Soros wants a new ‘multilateral system,” or an economic system where America isn’t so dominant…

 

His 2009 commentary pushed for “a new Bretton Woods conference, like the one that established the post-WWII international financial architecture.” And he had already set the wheels in motion…

 

INET is bringing together prominent people like former U.K. Prime Minister Gordon Brown, former Fed Chairman Paul Volcker and Soros, to produce “a lot of high-quality, breakthrough thinking.”… Volcker is chairman of President Obama’s Economic Advisory Board…

 

INET isn’t subtle about its aims for the conference. Johnson interviewed fellow INET board member Robert Skidelsky about “The Need for a New Bretton Woods” in a recent video. The introductory slide to the video is subtitled: “How currency issues and tension between the US and China are renewing calls for a global financial overhaul.”

 

Skidelsky called for a new agreement and said in the video that the conflict between the United States and China was “at the center of any monetary deal that may be struck, that needs to be struck.”

 

Soros described in the 2009 op-ed that U.S.-China conflict as “another stark choice between two fundamentally different forms of organization: international capitalism and state capitalism.” He concluded that “a new multilateral system based on sounder principles must be invented.” As he explained it in 2010, “we need a global sheriff.”

 

In the 2000 version of his book “Open Society: Reforming Global Capitalism,” Soros wrote how the Bretton Woods institutions “failed spectacularly” during the economic crisis of the late 1990s.

 

When he called for a new Bretton Woods in 2009, he wanted it to “reconstitute the International Monetary Fund,” and while he’s at it, restructure the United Nations, too, boosting China and other countries at our expense.

 

“Reorganizing the world order will need to extend beyond the financial system and involve the United Nations, especially membership of the Security Council,’ he wrote. ‘That process needs to be initiated by the US, but China and other developing countries ought to participate as equals.”

 

Soros emphasized that point, that this needs to be a global solution, making America one among many. “The rising powers must be present at the creation of this new system in order to ensure that they will be active supporters.”

 

And that’s exactly the kind of event INET is delivering, with the event website emphasizing “today’s reconstruction must engage the larger European Union, as well as the emerging economies of Eastern Europe, Latin America, and Asia.”

 

China figures prominently, including a senior economist for the World Bank in Beijing, the director of the Chinese Academy of Social Sciences, the chief adviser for the China Banking Regulatory Commission and the Director of the Center on U.S.-China Relations.

Now that the event is beginning, the coverage we do see from Fox News is so laden with bias and hatred that there must be more than meets the eye to this story:

http://www.foxnews.com/opinion/2011/04/06/george-soros-events-weekend-aim-remake-financial-order-media-wheres-reporting/

Apparently, megalomaniacs need schedulers.

 

Just ask George Soros. The left-wing billionaire is helping fund two major conferences that start on the same day, in two different locations just a three hours apart by car. Two liberal events packed into one long weekend. God created the world in six days. Apparently, Soros, who sees himself as “some kind of god,”needs just a long weekend to start remaking today’s world in his image.

 

The emphasis of both conferences is a familiar one to American voters – change. Soros wants to begin changing the global economy in one event. In the other, his flunkies want to “Change the world. Change the media.”

 

Now that is change you can believe in. Sadly, those who actually report the news must believe in it because they sure as heck aren’t reporting on Soros or either event. And that’s even though staffers or even executives from Reuters, the Financial Times, NPR, PBS, The Washington Post and other major media outlets are speaking at one event or the other.

 

The first gathering in Bretton Woods, N.H., is an economic conference Soros once described as “a grand bargain that rearranges the entire financial order.”

 

In October 2009, Soros committed $50 million to the Institute for New Economic Thinking (INET). A week later, the glib lefty investor wrote a column calling for a new Bretton Woods event, to recreate the one that helped design the post-WWII economy. Only he wants this one to knock America down a peg or three.

 

Now, it’s been a little over a year later and the group he funded is making King George’s wish come true – bringing together a whole slew of important people to discuss how to change the global economy. In Soros speak, that means “establish new international rules” and “reform the currency system.”

http://www.dailymail.co.uk/news/article-1374850/Man-shot-dead-nuclear-submarine-HMS-Astute-fighting-life.html

 

A city councillor who was onboard a nuclear submarine when a gunman opened fire in the vessel’s crowded control room has emerged as the hero of the tragedy.

 

Southampton City Council leader Royston Smith single-handedly prevented further carnage after he wrestled the assailant to the ground.

 

One Royal Navy officer was killed and another injured in yesterday’s attack aboard HMS Astute after the gunman, believed to be an able seaman, went on the rampage during a change-over of armed guards in the sub’s crowded control room.