Eliot Spitzer: The Federal Reserve is a Ponzi Scheme

The Raw Story

The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to

be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.

In a wide-ranging discussion of the bank bailouts on MSNBC’s Morning Meeting, host Dylan Ratigan described the process by which the Federal Reserve exchanged $13.9 trillion of bad bank debt for cash that it gave to the struggling banks.

Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”

Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.

“The reality is the Fed has blown it. Time and time again, they blew it. Bubble after bubble, they failed to understand what they were doing to the economy.

“The most poignant example for me is the AIG bailout, where they gave tens of billions of dollars that went right through — conduit payments — to the investment banks that are now solvent. We [taxpayers] didn’t get stock in those banks, they didn’t ask what was going on — this begs and cries out for hard, tough examination.

“You look at the governing structure of the New York [Federal Reserve], it was run by the very banks that got the money. This is a Ponzi scheme, an inside job. It is outrageous, it is time for Congress to say enough of this. And to give them more power now is crazy.

“The Fed needs to be examined carefully.”

I must differ with Mr Spitzer on one point.  I doubt the Fed “failed to understand what they were doing to the economy,” I think they knew exactly what they were doing — looting this country’s treasury.

Other than that, I agree completely.  The Federal Reserve needs an independent audit ASAP.  Do I have any illusions that it will happen?  Not many.

Be careful, Mr Spitzer…

Madoff reloaded: It can’t get worse? Oh yes it can.

Stanford brings out $20m in a big box at his press conference to announce the ‘Stanford 2020 for 20’ tournament.

(Thanks to nwmuse for researching the story)

While the Republican majority and the Bush administration in line with a number of crooked Democrats were busily creating the Ponzi scheme a.k.a. Bush’s economic policy, the fat cat crooks were equally busy in ripping off investors.

We all have heard about Madoff, of course, but here’s another one. His name is R. Allen Stanford, and he’s a Texas billionaire:

The US Securities and Exchange Commission (SEC) lodged 25 pages of allegations with a court in Detroit yesterday, detailing a $9.2 billion fraud allegedly perpetrated by Mr Stanford and three companies he controls.
(read article)

Full text of complaint by the Securities and Exchange Commission.

Eschewing the prospect of a Madoff-style luxury arrest, Stanford decided to split the scene and fly to Antigua, but his credit card was refused. He has disappeared nevertheless. Meanwhile, desperate customers are trying to get their money back.

More than 600 people queued outside two branches of the tycoon’s Bank of Antigua in an attempt to withdraw their cash, even though the bank is not one of the companies involved in the alleged fraud.

Similar panic was reported in Panama, where bank regulators stepped in to take control of the Stanford Bank Panama – also not involved in the fraud allegations – after retail customers began a run on it.
(read more)

There are speculations that the damage done could be well in the vicinity of Madoff’s $ 50 billion fraud.

Stanford invested heavily into getting legislation focused away from money laundering as far back as 2000 and a couple of familiar names crop up in the bipartisan list of his beneficiaries:

Stanford’s [l]obbying disclosure reports in 2000 made it clear that the company had only one interest in federal policy: money-laundering legislation. Former Treasury Department official confirmed, in interviews with Public Citizen, that Stanford Financial vigorously opposed the legislation – along with several other Texas-border banking institutions – in meetings held on Capitol Hill. Between February 2000 and June 2001, Stanford Financial gave Republican party committees $208,000 and Democratic party committees $145,000.

But Stanford didn’t stop there. Stanford Financial and R. Allen Stanford gave another $95,000 to the 527 groups of three influential politicians – Senate Majority Leader Tom Daschle ($40,000), House Democratic Caucus Chairman Martin Frost ($50,000), and Senate Minority Leader Trent Lott ($5,000).

In doing so, Stanford became the single largest contributor between July 1, 2000 and June 30, 2001 to the 527 groups of Daschle and Frost. (read more)

The New York Times has more details and the juiciest bit at the end of their story:

The current S.E.C. charges stem from an inquiry opened in October 2006 after a routine exam of Stanford Group, according to Stephen J. Korotash, an associate regional director of enforcement with the agency’s Fort Worth office.

He said the S.E.C. “stood down” on its investigation at the time at the request of another federal agency, which he declined to name, but resumed the inquiry in December 2008.

Another federal agency. Figures.

Honestly, I’m sure we will be busy writing about similar cases still. Whatever wealth may have been created during the Bush years – and Paul Krugman makes the case that none was – filled the pockets of crooks. Now that figures, too.

UPDATE: It now turns out that the SEC’s fraud charges may be the least of Stanford’s worries. Federal authorities tell ABC News that the FBI and others have been investigating whether Stanford was involved in laundering drug money for Mexico’s notorious Gulf Cartel.

UPDATE 2: Found! Accused Scammer Stanford Turns in Passport in Washington

add to del.icio.us : Add to Blinkslist : add to furl : add to ma.gnolia : Stumble It! : add to simpy : seed the vine : : : TailRank : post to facebook