More Federal Reserve Outrage

Americans will be outraged by this story. And rightly so. But this is nothing new. Central banks have been loaning each other and favored banks money ever since the idea was established on a large scale in the 19th century. People fail to realize what a close knit community the worlds central bankers are.

One central banker might decide to inflate a countries currency to depreciate the currency and help another countries currency appreciate in value for no other reason that a gentleman’s agreement between good friends. Far fetched? This is exactly what happened between Federal Reserve Chairman Benjamin Strong (1913-28) and Bank of England Governor Montagu Norman (1920-1944). This easy money policy from 1925 to 1928, when Strong passed away, lead to the 1920′s stock market bubble and collapse in 1929.

So to those familiar to the industry this comes as little surprise, the only surprise is why was it leaked now?

Montagu Norman, Governor of the Bank of England (1920-44), had a close personal relationship with Federal Reserve Chairman Benjamin Strong that some say lead to the 1929 stock market crash

For the record I never was a “End the Fed” Ron Paulista. I never wore a tin foil hat. I never believed in pyramid power. The monetarist himself, Milton Friedman, was always my favorite economist in college, but there comes a time in life and the course of events where you admit something is a mistake. I admit the Federal Reserve is a mistake. The actions of Ben Bernanke and Alan Greenspan will haunt America for a decade or two. Time to end this creature from Jekyll Island. I think the late Dr. Friedman might even agree.

Foreign Banks Tapped Fed’s Secret Lifeline Most at Crisis Peak

U.S. Federal Reserve Chairman Ben S. Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya.

Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request. Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion.

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.

Rest of story link.