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Fake Conflict: Fed Criticizes Big Banks

by John Rubino on November 8, 2013 · 16 comments

Yesterday, Federal Reserve official William Dudley had some harsh words for Wall Street banks, sort of calling them criminals, among other things:

New York Fed Chief Levels Explosive Charge Against Big Banks

The head of the Federal Reserve Bank of New York said Thursday that some of America’s largest financial institutions appear to lack respect for the law, a potentially explosive charge against an industry already roiling from numerous government investigations into alleged wrongdoing.

William Dudley, one of the nation’s top banking regulators whose organization helps oversee Wall Street banks including JPMorgan Chase and Citigroup, made the commentduring a speech focused on the problems posed by banks perceived to be “too big to fail,” and possible solutions to correct them.

But in an abrupt turn, Dudley suggested that regulators may be stymied by “cultural” issues that have negatively affected the nation’s biggest banks.

“Collectively, these enhancements to our current regime may not solve another important problem evident within some large financial institutions — the apparent lack of respect for law, regulation and the public trust,” he said.

“There is evidence of deep-seated cultural and ethical failures at many large financial institutions,” he continued. “Whether this is due to size and complexity, bad incentives, or some other issues is difficult to judge, but it is another critical problem that needs to be addressed.”

Dudley’s comments come as the world’s biggest banks collectively face tens of billions of dollars in potential fines and government-driven settlements arising from alleged lawbreaking in markets ranging from home mortgages to interest rates and currencies.

This sounds serious, until you find out a couple of things:

1) The Federal Reserve is not part of the government. It is owned by the big banks it “regulates.” This sweetheart deal dates back to the formation of the Fed in 1913, when a secretive group of bankers and their pet politicians set themselves up with, get this, a monopoly on issuing new currency. The Fed finances itself by printing dollars, using them to buy bonds from banks (at a nice profit for the banks) and then collecting the interest the bonds generate. This is as close as it gets to a financial perpetual motion machine. And it has worked brilliantly, to the point that most people actually think the Fed is a branch of the government and Fed officials work for taxpayers rather than the banks that own them.

2) William Dudley, the “regulator” who is criticizing the banks, was Goldman Sachs’ chief economist from 1986 to 2007. By working for the Fed, he is still effectively an employee of the Fed’s owners, which is to say he never actually left his job at Goldman; he just moved to a new division.

So why bite the hand that feeds him? He wouldn’t unless he’s part of a cleverly-staged bit of theater tying nicely into the investigations now underway of big banks’ manipulation of the mortgage, energy, interest rate, foreign exchange – ok, of all the markets. The fact that the fines being levied sound huge but are mere fractions of what the banks make from these activities and that none of the bankers themselves are being convicted, let alone imprisoned, impoverished or even named, implies that the banks recognize that their behavior has become blatant enough to make the government look bad. So they’ve devised a PR strategy to make the regulators seem awake and the banks contrite. Having Dudley publicly criticize them is just another piece of that charm offensive.

Definitive proof that this is true will come in a few years when the Justice Department investigators and Fed officials who are now hassling the banks are rewarded by those same banks with corner offices at JP Morgan Chase or Citigroup – with pay packages orders of magnitude higher than what they get now for their “public service.”

  • Bill Johns

    Churchill said it best, when served ~ half a shot of brandy 45 minutes after dinner, “Too little, too late.”

  • eugene12

    Ethics, honesty? Frankly I find little of either one in America. Lying, misrepresentation, etc are rampant everywhere. I know it’s great fun to do the big bank, big government routine as it helps sell your opinion. Come out here and talk with us common folks. Not long ago, I sat down and tried to remember the last honest business transaction I had. I could not remember. I live near a town of 12,000 and I expect to be lied to. I research everything. The tales from our local hospital are legion. Few yrs ago, I bought a lot from a developer who was lying to me from the get go. Greed rules and when greed rules, fraud is everywhere. America is GREED and always has been.

    • Bruce C.

      You might like some of the articles at Barnhardt.biz.

      • pipefit9

        Funny you mention Barnhardt in a discussion of honesty. Shortly after the MF Global story broke, she did every thing but swear on her grandfather’s grave that the theft of client funds was a Democratic conspiracy, lol. How many Republicans have even mentioned that story in public, much less raised a finger to make them whole? Is it possible she is that clueless, or is she as dishonest as the rest of them? Does it matter which?

        • Sueychop

          Both parties are owned.

          • john cummins

            Just remember the Keating 5: 4 Dems and 1 RINO, McCainiAss!

  • Silverbug

    Their NET WORTH IS ZERO. All Investment houses now turned banks will be gone in 5 years if not sooner from a crashing and burning Government.

  • hellbentgerbils

    off Broadway

  • Dan

    Unregulated capitalism with capitalists in charge who can’t be put in jail will destroy free enterprise, resulting in chaos. During the depression the capitalist were under attack by the socialists and communists for not only control of our economy but control of the world, so the capitalists had to relent to the working class their power of controlling the purse by the FED and government officials.

    Now there is no alternative to capitalism in the public’s mind, and are held captive by the media who never has a discussion about capitalism and its problems and solutions the government might take to reign it in, as it was done in the FDR era. It’s a testament to the wealthy and their control over the media to never broach the subject because it would hurt their profits and create a different public opinion of what to do, like tax the wealthy and corporations to pay for the debt. A one percent tax on intangible property, like stocks and bonds, would be enough to pay down the debt in short order. It’s ideology trumping rational thought.

    However, ponzi schemes do come to an end and when the private sector is sitting on $700 trillion in derivatives in the dark markets, and the Dodd Frank Act was just watered down so that the public will be on the hook, well, It’s not to far fetched to see the ending to this story–Depression 2.0.

    • Sueychop

      We don’t have capitalism in this country. What we have is Crony Capitalism. In Communism the state owns the banks and in crony capitalism the banks own the state. Employment between the two is a revolving door for the elites. Their kids go to the best schools, etc.

  • sculptor bill

    shocking! shocking! how can this be? Sorry to be so cynical;

    I think this is the play:

    The FED becomes the “bad bank” of the whole world, swallowing all the bad paper it can find, putting it on its “balance sheet”(lol) 4 trillion is just the begining, how bout 40 trillion…..we use up the FED as a cleaning organ, like deaseased liver to absorb all the toxic assets produced by the in crowd banking system. The Fed swallows the poison while giving off “clean new money”…………then the FED dies, in an orchestrated financial crisis collapse event and all the worthless mbs’s and short positions on Gold go to asset heaven. bad stuff gone, fresh money left behind, mission accomplished

    The world resets with SDR paper as the new paper valuation /currency system and USD just becomes one country’s local currency, like the Yen, Yuan, Reale, Pound etc World Bankers form some sort of world-fed-org, so they still own it all, control it all, but on a world level they are evenmore untouchable.

    Same pile of manure , same swarm of flies, in a new place with a new name, ready to run another 40 years of ponzi paper game.

    • pipefit9

      That’s pretty much how I see it, except I don’t see why there is a need for $, Yen, Yuan, etc. after the dust settles. Maybe for small denomination exchanges, like putting a quarter in a gum ball machine.

      We’re moving rapidly toward a cashless economy. On the big reset, why won’t they just issue everyone an SDR denominated debit card?

    • Jack

      Sad so many of these web sites are leaving off the option to forward by email, may be old fashioned but many of use still use it!

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  • Arius1071

    Article is right. This is how it works. We are constantly being manipulated by the sociopathic elites that rule their crony capitalist/socialist empire. We are their serfs.


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