Partially because the government has so many to sell, partially to shift some of the TARP costs back to the Fed where it arguably belongs and partially to manipulate the price of Treasuries so that the US Gov't gets a better rate.

And mostly for the reason it usually does so: to encourage savers to do something other than buy US government debt and invest their money in businesses.

That isn't what got us into this mess. It was the communist federal reserve system and the communist housing sector led by the communist institutions Fannie and Freddie and the communist CRA.

Challenge. Please explain how the following facts fit your theory:

1) Fannie and Freddie *lost* market share to non-bank entities over the major subprime run-up.
2) The CRA has been around for ~30 years.
3) The institutions that were making the majority of the subprime loans are not subject to the CRA.
4) Loans made under the CRA do not appear to have underperformed the market as a whole.

The other thing that I'd *really* like explained is how the following scenario works out:

* You're a brilliant capitalist banker and some filthy commie poor people come to you for a loan.
* You *know* the loan will be unprofitable because they're filthy smelly poor people.
* The communist government says "You have to make some loans to poor people and lose money, because we hate wealth and want to eat rich peoples' babies!"

Do you:

a) Make the bare minimum set of loans and use your significant lobbying power to change the law?
b) Leverage yourself up to your eyeballs and scramble to make as many loans to filthy poor people as possible, knowing that you're going to lose money on each and every one?

Your explanation of the CRA should explain why bankers appear to have chosen (b).

The idea that capitalism could cause a problem is mathematically impossible.

Please show your work.

To all manufacturers: Your business model is not viable and your product is silly unless The Hooloovoo (78790) can personally afford your product. Starting with a profitable model and reducing its costs iteratively is a bad thing because it does nothing to immediately serve the needs of Hooloovoo (78790). That is all.

Suspending habeous corpus is not the same thing as suspending the First Amendment.

I think there's a reasonable argument to be made that it effectively is. A suspension of habeas corpus basically means that you can be thrown in jail and have no right to demand that the government explain why in a timely fashion. In a case like that, it really doesn't matter whether you were thrown in there for espionage or exercising your perfectly legal First Amendment rights. The why of it no longer matters.

I certainly wouldn't say that using the suspension of habeas as a backdoor way to squelch speech or any other legal activity, but I don't think it's necessarily true that it's an obvious constitutional violation. I suppose it's reasonable to make the argument that the suspension of habeas corpus is listed in Article I and that in this case, it conflicts directly with Amendment I and Amendment V. If that's really the case, I suppose that the amendments win, since they're amendments (even though the amendments in question were ratified at the same time as the suspension of habeas corpus was).

Any con. law experts out there willing to take a stab at the argument that the Bill of Rights effectively neutered the President's right to suspend habeas corpus under most circumstances? I think the argument is an interesting one, so it has probably been tried somewhere. Anybody?

I'm going to try to respond to this as best I can, since it's not quite what I was looking for. I'm looking for the conflicts of interest and bad behavior on the the part of the Federal Reserve banks, specifically. Yes, I could go on for pages about what I think is going well and going badly in the government's attempt to rescue the banking system, but I don't see that your first point about AIG has any real bearing on the subject. Moving on:

Bernanke, meanwhile, has been busy at the Fed pouring trillions of dollars into the banking system and monetizing its own debt in an attempt to keep the major shareholders of the Fed (JP Morgan Chase, Bank of America Citibank, Goldman Sachs, and Wells Fargo Wachovia) from being put into bankruptcy or receivership under the FDIC, where they belong.

I take it from this that you're suggesting that the Fed has some sort of interest in seeing its major shareholders bailed out. I disagree for a few reasons:

1) "Major" shareholders (meaning banks with lots of required reserves sitting in Fed accounts) have the same voting rights for Fed board members as minor banks. The point of that rule is to keep what you're suggesting from happening. The fact that Wells Fargo is gargantuan could otherwise be used to unduly influence voting for board members.
2) Goldman Sachs only recently became a bank holding company. Unless was is some holding I'm not aware of (and I suppose there could be), they had no say in the current board for the Fed.
3) The connection between the Fed's leadership and the private banks that hold the stock in the Fed is often blown out of proportion. The Board of Governors is a bunch of federal appointees.

As for whether they "should" be in receivership, I agree that we should be more aggressive about which zombies we kill. I would be happier seeing them taken over and restructured by the government than kept on life support. We've already essentially guaranteed all of their debts anyway, so we might as well go the rest of the way. We're treating GM like we're 100% owners while we're treating companies we actually do have a major stake in like we have no right to touch them.

Geithner, Larry Summers (former Treasury secretary) and Robert Rubin were primary architects of this massive wealth build-up and credit default swap scheme...

I'm not sure how one gets from "They didn't stop it when they should have" to "They were primary architects" but I'll leave that debate for another time. The point of my posts with Curunir_wolf was simply that the Federal Reserve conspiracy theories are usually based on ridiculous nonsense. So far, I haven't seen much that indicates otherwise this time around.

Ummm... Let's see... total control of the global monetary system, natural resources and food production of most of the world (if not all). Yea, they're pretty ambitious. But they have managed, through actions of the world bank and the IMF, to gain control of a good portion of the resources of the 3rd world.

"They"? Let's start here. Who is "they" in this context?

That depends. Are you of the flawed Keynesian school (and blindingly dedicated to it), or are you open to the theories of the Austrian school and its theories? Are you open to a mixture of ideas and take into account historical perspectives of global, value-based economies?

I tend to think that most schools have something worthwhile to offer. The Austrians don't appear to have contributed anything meaningful in decades, and I think that their business cycle theory is more of a descriptive morality play than an actual mechanistic theory, but that doesn't mean that nothing can be learned from reading the likes of Hayek.
Of course, when I hear phrases like, "the flawed Keyensian school" and "blindingly dedicated" I am forced to question whether intellectual plurality for thee but not for me is the game we're playing.

Those aren't my claims. The banking system is global, and is controlled by a small group of people that are loyal to no country, but only to themselves.

I recommend not repeating the one about foreign Fed shareholders, then, since it's not your claim and it's only true in the most peripheral sense. Anyway, could you name some of these people? That's what I'm really getting at. All you have at this point is vague innuendo about some small number of people who are taking over the world. This seems important enough to warrant some details.

I'm also aware of what a "dollar" is (it's not what the Federal Reserve claims it is), and that the only thing propping up the value of what passes for a dollar today is the willingness of the American taxpayer to continue paying taxes.

I'm hoping you're not waiting for some sort of shocked reaction that fiat money is... well... fiat money.

I think I already did that.

Humor me. I'm looking for something along the lines of, "Person X can enhance his wealth by using his position of influence [name that position here] to cause the Federal Reserve to do [list some Fed action here]. This will cause [something] in the financial system that is desirable for person X, but not for Americans in general."

Probably a good thing. Because if I could prove it, when even those in Congress are blocked even trying to get a modicum of information about the internal workings of the Fed (see, for instance, HR 1207), then they would have a hard time keeping people like you in the dark.

Again, humor me. What data would you be looking for in that audit? How would you analyze it and what would it tell you that something like this would not? What would you be looking for, specifically?

If you have any desire to explain yourself, please do. I really want to know: What incentive do the decision makers at the Federal Reserve have to do what you claim they're doing (and... err... what exactly do you claim they're doing)? If you can be charitable and assume that an econ degree qualifies me to understand your deep and ground-breaking claims, I'd like to hear them...explicitly.

Frankly, you're not doing too well at the moment. You've popped off a few claims that appear to be complete fabrications (Foreign stock holders making a profit? WTF?) and you've given hints that your understanding of our banking system comes 100% from the illustrious Internet. I'm not confident that you can fully explain the structure of the Federal Reserve system and what it actually accomplishes, much less provide a meaningful explanation of where these supposed adverse incentives come from. You could prove me wrong, but I'm not going to hold my breath.

So by, "They admit [that the government can never pay off the debt]" you actually mean, "I believe that there is a conspiracy to prevent the government from paying off the debt." Let me try to detangle this:

*) Yes, it is mathematically impossible for 100% of the debt owed in a fractional reserve system to be paid off. That does not mean that any given actor (e.g. the government) cannot pay off its debt.
*) This point may seem like a problem, but it is only an issue if you're concerned that we will run out of integers.
*) The vast majority of US debt is not held by the Fed. The Fed has increased its stake in the past year due to unusual circumstances, but those measures are temporary.

In order for the great Federal Reserve conspiracy to work, somebody needs to explain exactly how the decision makers at the Fed (who are largely government appointees at the top) have some profit motive that encourages them to act against the best interests of the US financial system. I have never seen such an explanation that doesn't include completely made up stuff (like the idea that there are lots of shadowy foreign Federal Reserve Bank stock holders reaping huge profits that don't show up on any accounting statements).

What makes you think they don't earn a profit? The shareholders do, through dividends paid by the Fed.

Non-tradeable stock with a fixed dividend held by member banks is hardly a recipe for perverse incentives. The dividends paid out are proportional to the required reserves held by the banks at the Fed.

Many of those shareholders are foreign investors. What makes you so sure they would act in the best interests of the US?

The fact that, unless something has changed in the past few years, none of those shareholders are foreign investors. The shareholders are US banks whose holdings of Fed stock are requirements of their membership in the Federal Reserve system. As far as I can tell, whoever originated that claim simply fabricated it.

Congress and the US treasury did a fine job running the monetary system for 150 years. What happened in 1913 that suddenly made them too incompetent to do so?

I would take issue with your first sentence. The lack of any sort of fast-acting buffer on the fluctuations in demand for money and debt made for a very exciting banking system as seen here.

In fact, it only took the Fed 16 years to completely bankrupt the banking system and the US government.

I think that we can all acknowledge that the Fed did the wrong thing during the run up to the Great Depression. I'm not sure what that has to do with modern Fed operations.

And they admit that because of the way the government is funded through the Fed they can never pay off the debt. What makes that a good thing?

I have no idea what this refers to, but I strongly suspect that the source is nonsense.

The FDIC can deal with bank failures like they did in the '80s, and let the insurance companies fail. Bankruptcy court can sort them out.

For one thing, the FDIC is finite and actually quite small relative to the banking system as a whole. If a lot of banks go under, the FDIC has to go back for taxpayer money to cover the rest. Letting a company like AIG default on its debts would trigger *more* bankruptcies. At some point, you have three options:

1) Let everything fall apart and then spend enormous piles of money paying out on everbody's underinsured demand accounts while dealing with the fact that there are not nearly enough banks left to facilitate a healthy economy.
2) Let everything fall apart and don't pay off the insured deposits and watch as people act surprised when their FDIC bank accounts shrink. Follow this up by wondering why a huge percentage of otherwise healthy large companies shrink and downsize massively because nobody will lend to them.
3) Realize that while the banks have very real solvency issues, such insolvency is contagious if you allow large scale defaults on wideley spread debt and try to stop the contagion to keep healthy and fixable banks alive.

Done properly, (3) allows you to avoid draining the FDIC to zero and watching a lot of otherwise perfectly workable financial institutions go down in flames.

Why should the taxpayers be on the hook for them? That's what risk is all about.

The problem is that we're largely "on the hook" for them already in the form of FDIC guarantees and whatever pain we experience when the financial system comes to a complete halt. The simple question is whether it's cheaper to take full responsibility for a small number of very badly broken pieces or partial responsibility for a huge number of failed pieces once everything hits the fan.

If you are so in favor of government control, why do you think it's okay for the Federal Reserve, the largest private bank in the world, to be in complete control of our monetary system?

I'm not the grandparent, but I'm OK with it for two reasons:

1) Politicians would do a phenomenally bad job of deciding how big the monetary base should be. I'm much happier limiting them to nuclear weapons. Ben Bernanke is infinitely more qualified to do what he does than any group of congressmen.
2) As long as the Fed is a public / private partnership and not run for profit, the incentives for it to act in the national interest are stronger than the incentives for it to do evil things.

And as I mentioned, I know for a fact that many of these guys are very sharp and well read and know how hypocritical the organisational position is.

And how many of them believe otherwise? The ACLU is an organization. Not every member has to believe everything in its platform. If one member believes something contrary to what other members believe, that also doesn't constitute hypocrisy.

Liking peanut butter or not isnt even vaguely comparable - you're talking about personal taste on the one hand, and fundamental civil rights on the other, as if they were somehow comparable.

I don't know what I was thinking. One is a matter of taste and one is Absolute Truth that a lot of people are just too stupid to see. My bad.

It really holds no water at all. A subordinate clause just doesnt function that way in English, and certainly didnt function that way in 18th century English. See here [constitution.org] if you really dont understand what I'm talking about.

I don't think that the issue is with the word regulated. I think that the issue is with with the fact that the wording basically means, "Because a ready militia is important, citizens may keep weapons." It opens up the reasonable line of argument that restrictions on weapons not used in militia service does not interfere with the reason for the right to bear arms.

It's similar to, "Because people sometimes experience pain, possession of morphine shall be legal." It's not unreasonable to suggest that possession of morphine for purposes other than pain relief may be restricted without interfering with the original objective of the rule. The book analogy in your link is hopelessly broken. A more accurate question would be, although we must allow books because education is necessary, are we allowed to restrict the use of books to educational purposes?

I don't necessarily agree with the analysis, and I certainly believe that many gun control measures are impractical security theater. I just don't happen to think that disagreeing with me on a sticky policy issue like this one constitutes stupidity, dishonesty, hypocrisy, possession by demons, or anything else like that. Sometimes a disagreement is just a disagreement.

No, the government has no right to curtail my actions until they endanger someone else.

What constitutes endangerment? Are stop signs are violation of civil liberties, or is there a reasonable expectation of danger? Can I have one gun? One cruise missile? Anthrax? A hydrogen bomb? I think that reasonable people may disagree about what constitutes a "right" if you define a "right" as something that the government has absolutely no business regulating.

You don't see the hypocrisy in fighting for as broad of a reading of the Constitution as possible except for one part? They fight for rights that aren't even mentioned in the document (the right to privacy) under this theory but the one part of the document that they don't like doesn't get the same treatment? That doesn't seem just a little bit hypocritical to you?

No, it really doesn't. If you read the words and decide, based on a reasonable interpretation (which the militia clause certainly gives you), that the Constitution explicitly allows the government some regulation over guns, it seems perfectly reasonable to say so, even if you believe that it doesn't explicitly allow regulation of some other things. They're different clauses with different wording and different meaning.

I'm not suggesting that I agree with the interpretation, but I'm having a very hard time with accusations of hypocrisy being thrown around simply because they're confusing their perfectly legitimate political views with objective realities.

I'm saying they are hypocrites because they claim a mandate to protect civil liberties while choosing which rights they deem important enough to consider civil liberties.

Are all rights really important enough to call civil liberties? Is there nothing that an individual can physically do that the government has no right to curtail?

It's hard to see how the 2nd amendment isn't a fundamental individual right.

I believe that their argument is something along the lines of the right to bear arms being within the context of a militia. I can certainly see the argument as a reasonable one, if not necessarily correct.