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I love it when Pseudo-Democrats lie to me.

Treasury Secretary Timothy Geithner says that the banks have not captured the Federal Reserve.  He does point out that there is a "perception" problem.  He insists that this perception problem of banks dominating the Federal Reserve has been a problem of the Federal Reserve since its formation, but folks like J.P. Morgan Chase CEO Jamie Dimon are not the tail that wag the dog.

Complete and utter bullshit.

It has been a while since I read William Greider's Secrets of the Temple: How the Federal Reserve Runs the Country,  but if memory serves, the Federal Reserve was set up in its present structure in order to -wait for it- make a political compromise with J.P. Morgan.  Bankers wanted to make all the appointments to the Federal Reserve system.  J.P. Morgan and his friends "compromised" with then President Wilson.  The Board of Governors were to be appointed by the President and approved by the Senate.  

However, the Federal Open Market Committee (FMOC) and the twelve Reserve Banks are made up of bankers.  And the FMOC's function is to "advise" the Board of Governors.  And as far as I can tell, there is supposed to be federal oversight of the Reserve Banks, but who gets to run the Reserve Banks is left up to the regional bankers.

According to Greider, the FMOC and Reserve Bank members are not the least bit shy in advising the Board of Governors either.  In fact, the Federal Reserve considers its constituents to be the banks, not the American public.  Naturally, the Federal Reserve system is designed to serve the banks.

As for perception problems with the Federal Reserve system, Greider and others have pointed out how secretive the Federal Reserve is.  Information on Board of Governor meetings is hard to come by.  The public definitely can't find out what is going on behind those closed doors in the Federal Reserve until many years after the fact.

This serves the Federal Reserve and the banks very well.  If the general public could read those meeting minutes, it would just piss them off.  Once again, Greider got a hold of Board of Governor discussions during the late Carter/early Reagan Administrations.  Those old enough to remember that period know that there was high inflation and two recessions during that time.

The Federal Reserve was responsible for tanking the economy during both those recessions.  The Fed was more concerned with taming the inflation beast, so Paul Volker and the Board decided to adopt Milton Friedman's monetarism.  Interest rates went through the roof, and the economy went into a recession in 1980, and later again in 1981-1983.

During those meetings, the Board of Governors members would insist that all the economic pain of the recession was necessary to ring inflation out of the American economy.  It did not matter how high unemployment got, the Board of Governors had to be "tough."  When some of the major banks started to go under though, the Fed changed course and dropped the interest rates.  The bank failures were the key to the Fed dropping the sky high interest rates, not the suffering of the unemployed.

But Geithner says that the banks don't run the Federal Reserve.  History shows Geithner to be one hell of a liar.

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