Email

Still At Large: The Guilty and the Gullible of the 2008 Crash

5 | By Shah Gilani

Editor’s Note: This is the fourth and final piece of Shah’s four-part series on what really happened to cause the Great Recession of 2008. You can access the first part of the series here, the second part of the series here, and the third part of the series here.

It’s important to understand what caused the financial crisis and the Great Recession. But it’s absolutely critical that you know who aided and abetted the leveraging and implosion of the U.S. banking system and the economy.

Because it’s going to happen again and again if the guilty parties aren’t identified and the power they wield over America and our future isn’t dismantled once and for all.

In fact, a crash is brewing that could make the crisis of 2008 pale in comparison.

2018 could be the year of the greatest economic crisis of the century. Jobs will suffer, the housing market will spiral downward, and millions of American seniors will face bankruptcy, but if you know how to prepare, you’ll be one of the few lucky ones. You can learn more about how to protect yourself here.

But who are the guilty parties who let the 2008 crisis happen? They are the people and institutions that gullible Americans believe are our protectors.

Here’s the real, raw truth about the oligarchs who run our country…

The Real Monster

It’s all about greed.

American capitalism is the most dynamic force on the planet. It is why the rest of the world used to believe our streets were paved with gold. It’s what makes the U.S. the land of opportunity.

But the tools that make our brand of capitalism work have been hijacked.

Meet the new boss; same as the old boss.

Before the founding of the United States, colonists debated and fought over money.

The colonies issued their own currencies, and private banks issued bills of credit and made loans. In addition, there was a debate over whether the North with its “money interests,” or the South with its “agrarian interests,” would lead the Confederation of States.

Money matters were a mess.

To further complicate the currency conundrum, in 1775, the Continental Congress (with nothing backing it) issued its own paper currency to finance the Revolutionary War.

After America’s independence and the adoption of the Constitution, at the First Congress in 1790, America’s first Secretary of the Treasury, Alexander Hamilton, proposed establishing the First Bank of the United States. The proposition intended to resolve the issue of fiat currency issued by the Continental Congress, consolidate the colonies wartime debts, and stabilize and improve the nation’s credit.

It was controversial, to say the least, but it passed and worked.

The Second Bank of the United States, chartered by Congress in 1816 and called a monster and “hydra of corruption” by President Andrew Jackson, died in 1834 when Jackson withdrew the federal government’s deposits in the bank and refused to recharter it.

While the imposition of central bank-type institutions had some positive effects, they also facilitated misuse of economic and financial powers of their directors, shareholders, and constituents.

The net result of America’s history of unsupervised and supervised excess lending by banks with inadequate capital and virtually no reserves led to booms and busts for both banks and the economy.

Then a real monster appeared.

Smoke and Mirrors

Using the Panic of 1907 as the basis for their creation, a group of the richest, most powerful bankers in the U.S. and Europe, with the help of insiders in Congress and the election of a paid-for President to sign their Trojan Horse legislation, enacted the Federal Reserve Act of 1913.

The long title of the legislation is, “An Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.”

What the American public doesn’t know is the Federal Reserve, often called America’s central bank, is a private bank system whose only real connection to America’s government and the American people is the President’s authority to nominate the seven members of the Board of Governors of the Federal Reserve System and the Senate’s confirmation of them for fourteen-year terms.

The public doesn’t know the Fed owns America’s currency.

On the very top of every bill, more correctly every “note” (a note is technically another name for a loan), or immediately under the $100 on a one-hundred dollar bill, proof of the Fed’s ownership of the notes is evidenced by the printed words, “Federal Reserve Note.”

The U.S. Treasury may have the U.S. Mint coin and it may print the Fed’s money, but it belongs to the Fed. Having the Secretary of the Treasury’s signature and the Treasurer of the United States’ signature on the Fed’s bills is nothing more than smoke and mirrors.

The Fed determines all issuance of money in the U.S., as well as the withdrawal of it.

[CRUCIAL] Once you see how easy it is for this man to make money, you’ll likely fire your broker

The reason this bait and switch worked for a mostly ignorant and duped Congress at the time the bill was being debated – except for those in Congress who were in on the great theft – is the Fed would promise to use its new money to buy government-issued Treasury bills, notes, bonds, and other obligations – essentially financing unlimited government deficits.

More importantly, the way the Fed buys government debt is by having the Treasury print the Fed’s money (now it’s done electronically through electronic credits), which the Fed issues to its favored Primary Dealer banks so they actually buy the government’s Treasuries.

That’s one way the big primary dealer banks get money, which they use to buy Treasuries, which they then use as collateral in the Fed Funds market with other big banks to borrow more money to make loans, against which they hold tiny reserves, so the remaining loan balances left on deposit can be calculated as excess capital, against which they can lend more money, always to make interest on their lending.

Not only does the Fed provide cover for politicians who spend recklessly to get votes, removing any need for fiscal discipline, it feeds massive amounts of money to its constituent banks – the big banks and “money interests” (the oligarchs who really run America) who own and control the Fed – so they can rake in profits, and egregiously leverage themselves to the edge of insolvency.

And when they fail, the Fed bails them out. Because that’s what they were created to do.

That’s how the financial crisis happened, the Fed kept interest rates low, so banks could keep borrowing cheaply and leveraging up their balance sheets and profitability.

Yep, It’s That Simple

When Lehman failed, no one really knew how leveraged and interconnected all the investment banks and universal banks were or how they’d used derivative credit default swaps (CDS) to downsize their capital reserve requirements.

It didn’t matter to the biggest of them, except Lehman Brothers Inc., because they’d be rescued by the Fed, one way or another.

It’s really that simple.

The real reason the Fed exists is to supply money and credit to its banking constituents and to bail them out. The afterthought is coming to the rescue of a faltering economy by floating trillions of dollars through its member banks.

That’s the true essence of “trickle-down economics.”

Anyone who believes we’d never have gotten out of the financial crisis or the Great Recession without the Fed shoring up the financial system and lowering rates enough, and long enough, to stimulate the economy again, is dangerously uninformed – or, if you ask me, just gullible.

If there was no Federal Reserve, the Treasury issued America’s currency and credit without interest, and all banks had a minimum capital reserve requirement of 20% (increasing with greater leverage, riskier assets, or an expanding total risk profile), there’d be absolutely no need for the Fed.

It’s the bankers and money interest oligarchs that use the Fed to feed profitability at their banks that really run this country. Most of the politicians in America are in their pockets.

So are the regulators at the Securities and Exchange Commission and other so-called prudential regulators.

The SEC was the principal regulator of all the investment banks:

  • Bear Stearns: sold to JPMorgan Chase & Co. (NYSE:JPM) with the Fed’s help,
  • Lehman Brothers: killed on purpose,
  • The Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS): both forced to become bank holding companies at the height of the crisis so they could be saved by the Fed, and;
  • Merrill Lynch: bought by Bank of America Corp. (NYSE:BAC), with the help of the Fed, which proves the principle of regulatory capture, where the regulated control those who regulate them.

To become that shining economic city on the hill again, all America must do is dismantle the power base of the oligarchs who run and ruin the country.

That means repeal the Federal Reserve Act.

Sincerely,


Shah

5 Responses to Still At Large: The Guilty and the Gullible of the 2008 Crash

  1. Observer says:

    So true, but how do you get rid of the FED when they own all the politicians? Even if they break this country, they will still survive like cockroaches, and rule the pieces that are left with all the wealth they managed to steal during the good times. In fact, every country is run by the wealthy, or a murderous dictator. Democracy is merely an illusion. When this country goes down, you will see how many wealthy oligarchs turn into murderous dictators to establish their “Order” over the masses. Bill of Rights – forget about it. Then, there will be rebellion and civil war: the people versus the establishment of the oligarchs. 1776 all over again, except that King George has a different last name.

  2. Daniel L O'Connor says:

    The real evil dunce who was the pusher who wrote up a bill that was passed by a bought congress
    and signed by the president was non-other than Barney Frank! His damn bill told the big banks that
    the Federal Government [ U.S. taxpayers] would guarantee that the banks could make mortgage loans to anybody who could fall through the door and speak could get the mortgage loan in spite
    of their financial condition. This is where the term, ‘liars loans’ came from, the banks began a
    stampede of giving mortgage loans to everyone who asked for one knowing that if this deadbeat failed to make the mortgage payments, the tax-payers would pay the bank. So many of these sub-
    prime loans were made that the whole system crashed when tens of thousands of these lousy
    loans defaulted. The blame has been spread all over Washington and many greedy bastards are
    guilty but the prime cause is still the law that the Queer, Barney Frank pushed through our corrupt congress right before the 2008 debacle!

  3. James Welge says:

    Shah

    Do you remember the movie “its a wonderfull Life” with Jimmy Stuart, circa 1946?? In it, on the day of a bank run during very early 1930’s, Jimmy Stuart has just closed the Bailey Building and Loans doors for the day and is counting whats left of the banks cash and says “Heres Moma Dollar, and heres Popa Dollar and lets hope they have a lot of childen!!!”””

    In the late 1800’s and early 1900’s when bank had runs and ran thru all of their cash and had sold all of their Government Securities for cash, they either closed their doors, or called all the loans they had resulting in worse financial conditions because the borrowers had to sell their assets to pay back the banks loans!!!!

    In theory the Fed was a “Bankers Bank”, a banker of last resort, which loaned to banks which were short on cash, and were “Reserve Short” and were close to having only Loans on their books as Assets. Banks used the loans on their books as collateral for loans from a local Federal Reserve Bank. The loans from the local Fed District bank were repaid to the Fed when the bank collected on their loans!!!!

    If as you propose, the Fed is eliminated, the Federal Reserve Act repealed, exactly who will perform the function of Lender of Last Resort to banks which are “Reserve Tight” and short of cash?????????

  4. Alan Flett says:

    Very interesting article with which I totally agree.
    Can not, however, see any obvious simple ways to “drain the swamp”because of the degree of power and influence at the top of this system unless some very imaginative ideas could be used to repeal the Federal Reserve Act but there may be just too much power at the top of this system for it ever to happen.

  5. Gordon Jones says:

    Thinking it through, I am inclined to go along with your thoughts, especially increasing the minimum capital reserve requirements, and also requiring bank officers to share in any losses incurred by their actions. aka known as derivatives. Large depositers need to have some skin in the game, only insure smaller amounts

Leave a Reply

Your email address will not be published. Required fields are marked *