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Federal Reserve Reform Upstaged by Trump’s Potty Mouth

Courtesy of Pam Martens

Economist Dean Baker Testifying Before the House Financial Services Committee, January 10, 2018

Economist Dean Baker Testifying Before the House Financial Services Committee, January 10, 2018

On Wednesday, the House Financial Services Committee held a hearing on a topic of critical importance to all Americans: restructuring the Federal Reserve into a modern day central bank instead of a captured regulator controlled by the very banks it purports to supervise. Dean Baker, the Senior Economist at the Center for Economic and Policy Research, presented an important assessment of reforms needed at the Fed but you will be hard pressed to find any mainstream media coverage of his testimony. Instead, President Trump’s characterization yesterday of Haiti and African nations as “sh**hole countries” is dominating the news.

How much critical work is falling by the wayside because mainstream media, dependent on ratings, elects to pursue only the most sensational stories – which they have no shortage of finding under President Trump.

Congress began its latest push to reform the Federal Reserve in 2014 after a bank examiner at the New York Fed, Carmen Segarra, filed a lawsuit stating that she was fired in retaliation for refusing to change her negative examination of Goldman Sachs. The gutsy Segarra secretly made tape recordings inside the Fed to show how the lapdog regulator viewed its supervisory mandate. Portions of the tape recordings were released by ProPublica and public radio’s This American Life.

A few weeks after the internal tapes were released in September 2014, additional news raised questions as to the competency of the New York Fed as a Wall Street regulator. The Federal Reserve’s Inspector General released a report indicating that the New York Fed was advised of potential trouble in the Chief Investment Office at JPMorgan on multiple occasions but failed to conduct a comprehensive examination that might have alerted it at an early stage to the wild gambles JPMorgan Chase’s traders were making in exotic, high risk derivatives with depositors’ money in its FDIC-insured bank. Those wild bets eventually led to the London Whale scandal and $6.2 billion in losses of depositors’ funds.

On November 21, 2014, Senator Sherrod Brown, Chair of the Senate Subcommittee on Financial Institutions and Consumer Protection, hauled the President of the New York Fed, William Dudley, before the Subcommittee to answer a blizzard of questions. Senator Brown said: “These recent reports should trouble any organization but they’re particularly catastrophic when the agency in question is responsible for four mega banks – four of the six largest banks in our country — four mega banks that alone account for $6 trillion in assets in some 11,000 subsidiaries.”

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