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Bernanke Says Fed Does Not Engage In Stock Market Or "Individual Stock" Manipulation; Some Loose Ends On FX Swaps

Tyler Durden's picture


In a response letter sent to Alan Grayson, the Fed chairman has the following brief retort to the question of whether "the Federal Reserve- alone or in concert with the Treasury Department or any part of the government- ever taken any action with the purpose or effect of supporting the stock market or an individual stock": "The Federal  Reserve has not intervened to support the stock market or an individual stock." Shocking. And we are confident that the fine people at Liberty 33 just sit all day, twiddling their thumbs now that the Fed is no longer in the MBS and UST monetization business. Furthermore, anyone who reads anything into the fact that the FRBNY is continuously ramping up its hiring of traders, both credit and equity, as posted in assorted public venues, is simply paranoid and does not understand that this is only due to Brian Sack's fascination in being surrounded by 400 traders daily. On the other hand, at this point pretty much everyone is aware of the sad state of FRBNY intervention, whether it is in the FX market or the gold market, and indirectly via the discount window and the repo system, in which banks purchase bonds at auction, using discount window or other zero cost capital, only to repo it back, and to use the proceeds to bid up stocks. Maybe Mr. Grayson can ask the Chairman whether the Fed is actively endorsing primary dealers to bid up risky assets to create the impression that since the market is ramping higher (on no volume, mind you, but who cares) that the economy is doing so as well (we will shortly have something to say that refutes this thesis, compliments of none other than Goldman Sachs). All cynicism aside, Grayson at least still continues to ask the right questions: among these are 1) How does the fed plan on dealing with the $1.7 trillion in MBS on the Fed's balance sheet, 2) Why Greenspan and Bernanke were so wrong in keeping the FF rate for so long, and how does the Chairman plan to reconcile the same bubble creation that blew up the economy last time ZIRP was around, with the deflationary threat to the economy, 3) Why does the Fed think a Tobin tax is bad (and, incidentally, why does the Fed even have an opinion on tax policy), 4) Why is the Fed failing at pushing unemployment lower even with ZIRP and QE, 5) How the Fed is lobbying on behalf of its, and Wall Street's interest, 6) How much gold should the US government own, and many others.

Yet the most interest question in our opinion is whether or not the Fed, via its prior and ongoing liquidity swap operations, is actively pumping dollars into foreign CB at the unwind of a swap that has differing entry and exit cross fixings. This is actually a great question which will demand much more thorough analysis, as during the last liquidity crisis, the Fed pumped over $500 billion in capital in foreign banks at a time when the DXY was at then-all time highs, only to unwind these swaps as the dollar subsequently crashed, resulting in a massive net flow of dollars from the Fed to foreign banks. As such liquidity swaps are far more than mere liquidity backstops - they are yet another shadow mechanism to pump money into foreign CBs. Furthermore, the money outflowing in this manner, far outweighs any interest earnings on swaps, which Bernanke determines amounted to about $2.1 billion in 2009.

Another wonderful question to which Bernanke, unless he had completely lost his mind, gives a negative anwer, is whether any foreign banks that were the recipients of FX swaps, used the proceeds to buy US Treasuries. Obviously, Bernanke's answer is no, as this would be yet another shadow monetization process. We do, however, wonder just how Bernanke knows precisely what foreign CBs did with all the excess cash: surely, this money thus created out of the Chairman's printer thin air, is completely fungible, and to say that foreign CBs did not use that money to purchase USTs, would mean that foreign central Banks did not buy USTs at all during the period in question. Bernanke surely sees this problem as in another question he himself notes: "Because money is fungible, in general it is not possible to determine whether a counterparty used funds obtained from loans or through other transactions for a specified purpose. It is not possible to specifically connect the extension of particular loans by the Federa Reserve with the acquisition of US government debt." And herein lies the rub - by outright denying that FX swaps were used to monetize debt, Bernanke may have cornered himself, as the next logical question is just what did foreign CBs buy with any FX lines that were not used up in further downstream liquidity facilitating operations. Does Bernanke in essence say that foreign Central Banks never purchase US Treasuries? That would be an amusing claim, and is certainly refuted by the definition of Indirect Bidders, conveniently provided by the Fed itself.

We surely do hope Mr. Grayson will take his line of questioning to the next logical step, which is catching the Chairman in outright lies. At this point, with so many loose ends over at Liberty 33 and the Marriner Eccles building, it is just a matter of time.

Full response by Bernanke to Grayson.


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Sat, 06/12/2010 - 20:35 | 409965 geopol
Sat, 06/12/2010 - 21:03 | 409988 nmewn
nmewn's picture

Maybe it's time for debt jubilee.

Sat, 06/12/2010 - 21:26 | 410010 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Is that a Brittney Spears song?

Sat, 06/12/2010 - 21:47 | 410031 geopol
geopol's picture

Who is BS....? .Look,,Alan needs to belly up to the bar and simply invoke his oath of office...ABOLISH THIS CREATURE......Coup from beginning to end..agree??

Audit the FED.. just gives it validity!!! No audit...abolish....

Sat, 06/12/2010 - 21:51 | 410032 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Hmmm....interesting...Brittney Spears is Ben Shalom is BS!

YES!  BURN THE FED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


STATE CHARTERED BANKS BACKED WITH GOLD, SWEAT, and TERRAS!  I mean tears.  Terra works too.  Terra firma.

Sun, 06/13/2010 - 15:05 | 410721 Currently Smoki...
Currently Smoking Cannabis's picture

If we do that, the terra-ists win.

Sat, 06/12/2010 - 22:02 | 410045 nmewn
nmewn's picture it's an old Biblical process of expunging debt from the system.

What is truely life and death is Miami vs. UF in the super regional college game ;-)



Sun, 06/13/2010 - 13:35 | 410638 knukles
knukles's picture

"The Federal Reserve has not intervened to support the stock market or an individual stock."

Probably the Truth and Nothing but the Truth.  They probably have Some Other Institution execute on their behalf. 
Gotta ask the Exact, Specific Question to Approach the Truth, to Extract the Exact Science.  

For example; Where from comes the Adverse Variation Margin Paid on all of the Short Gold Futures positions held by the likes of JPM and GS? 
Are the positions held on GS and JPM's books as Spec or Hedge....for thier Own Account or Another?  And if Another, what Institution might that be?

Has anyone discovered that information, as of yet?  Have we the knowledge to end our remedial speculations?

Sat, 06/12/2010 - 20:37 | 409966 sysin3
sysin3's picture


Sun, 06/13/2010 - 00:49 | 410222 Nihilarian
Nihilarian's picture

Well, yeah -- nothing can be more certain than when it has officially been denied.

Sun, 06/13/2010 - 14:01 | 410671 I need more asshats
I need more asshats's picture

We know what is going on. The import thing to remember is that the obvious action of manipulation is like spilling liquid bleach on cotton jeans. It stains the fabric, and more importantly damages the core fabric in an irrevocable manner.

The trust has been broken and light has been shed on the actions of the organizations that are suppose to generate and maintain integrity in the marketplace.

It's all down hill from here.

Sun, 06/13/2010 - 01:37 | 410267 septicshock
septicshock's picture

Perhaps, but his comment about gold being highly sensitive to even slight disruptions in the governments holdings, up or down... is very interesting.  Obviously, there is fear in the FED about gold prices climbing as they have been and the possibility of a further increase in price destabilizing FIAT money.

Sun, 06/13/2010 - 10:37 | 410492 Bam_Man
Bam_Man's picture

I think they are slowly coming to accept the fact that they will just have to get used to living with a sky-high Gold price as a result of perpetual global ZIRP and QE. An annoyingly high Gold price will be regarded as a "cost of doing business".

Sat, 06/12/2010 - 20:52 | 409975 junkyard dog
junkyard dog's picture

Why do we even ask him anything? He is lost. He no longer knows the truth. The problems we have have eaten him from the inside out. He is a shell. He cannot ask for directions because he would not be a man if he did. So we sit in the back seat of a rocket, watching the last exit go by with a sign  reading ' long bridge ahead, check your gas". But he does not see it because he is looking in the outside mirror- at himself.


Sat, 06/12/2010 - 21:37 | 410020 Inspector Asset
Inspector Asset's picture

That dosn't sound like Bend Over Bernake,,

He would of said something like this:

"Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counter-productive."

talking about CDS contracts .....

Sat, 06/12/2010 - 22:11 | 410057 TheGoodDoctor
TheGoodDoctor's picture

And he actually used the word "obviously" when stating the obvious. Man I wonder if there will be a religion made around his philosophy!

Sat, 06/12/2010 - 20:52 | 409977 ColonelCooper
ColonelCooper's picture

It's too bad Grayson is such a complete and utter fuckstick, because his efforts on this front are admirable.  As much as I would enjoy seeing his head explode as the result of a massive brain hemorrhage, he does deserve some credit for sticking to his principles, and having an overall large set of testes.

***All I know of him is from national coverage, and the updates from ZH.  Perhaps a constituent could offer more evidence that he is a complete douchenozzle, making me feel better about hating his guts.

Sat, 06/12/2010 - 23:11 | 410122 TuesdayBen
TuesdayBen's picture

The execrable Grayson is, near as I can tell, so far left (as evidenced nearly every time he opens his pie-hole) he is starting to come around on the far right (as evidenced by his efforts concerning the FRB).

Sat, 06/12/2010 - 20:59 | 409983 Mitchman
Mitchman's picture

Do we think that Grayson fully understands the implications of what he is asking and therefore has the savvy to follow up or is he just fronting for his staffers?

Sat, 06/12/2010 - 21:26 | 410008 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I think Alan Grayson and Matt Simmons should write a book, "How to Tell not the Whole Truth".

Sat, 06/12/2010 - 21:03 | 409987 sheeple
sheeple's picture

Bernanke Says Fed Does Not Engage In Stock Market Or "Individual Stock" Manipulation


Right, does JimCramer Rule applies here? [take the opposite side?]

Sat, 06/12/2010 - 22:14 | 410033 Fred Hayek
Fred Hayek's picture

Bernanke's thinking to himself after that response, "Well, we don't manipulate every single equity entity and we don't manipulate just one of them, so there's a way to look at that as being true.  Sweet!"

And it was a really slimy way to answer the question because Grayson asked for specifics and Bernanke just answered by playing word games with the language of the question. 

Sat, 06/12/2010 - 21:07 | 409994 Sisyphus
Sisyphus's picture

<Turd Ferguson>

Bernanke is a douchebag.

</Turd Ferguson>

Sat, 06/12/2010 - 23:07 | 410117 JLee2027
JLee2027's picture


Sat, 06/12/2010 - 21:14 | 409997 RockyRacoon
RockyRacoon's picture

Can't have it both ways folks.  Some above comments are critical of Grayson.  If it were not he who was checking up on this stuff, then who should?  It takes a borderline nut to pursue this line of questioning.   If Grayson were silent there would be hootin' and hollerin' about "somebody" needing to ask pertinent questions.  When somebody bucks the system and puts Ben's feet to the fire he is called a "fuckstick".   Who would you be comfortable with doing the inquisition?  Pick a name and write/email/fax this legislator and prod him/her until the legislator either does something or tells ya to leave them alone.   Dr. Paul comes across as a rather unconventional character (and I am being kind here), but he is DOING something.  You just can't have it both ways.   Neither Grayson nor Paul is doing any damage, and they may be setting an example for others in Congress.  Take what you can get... or do it yourself.

Sat, 06/12/2010 - 21:23 | 410006 Ned Zeppelin
Ned Zeppelin's picture

Agree; criticising the few who at least voice some semblence of sanity seems nutty in and of itself. I am fine with Grayson and Paul, would not refer to either as a fuckstick (Bernanke might fit that description; Hank Paulson certainly did; Tony Hayward fits the bill nicely; I could go on).

This has been a persistent thread here, pushing the notion that Grayson is somehow a useless legislator.  I question those who say such things, and ask who they are "for" in this war against the current idiocy.

Sat, 06/12/2010 - 21:35 | 410016 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Ned, I applaud Mr. Grayson for his pursuit of housing the Fed, but I didn't care for his insistence on the Health Care Bill.  I do believe we need better health care however, but that bill was fascist.

In Mr. Paul's case, I like him well enough, but I question his dedication to corporate entities; although I think Aynn Rand was a more than capable thinker and arguer, I find the notion of unrestrained corporate enterprise appalling.  Large corporations should have limits, as we can tell by this fascist government we have been swallowed by.  I feel both men offer justice to fiscal and monetary policy, but fail to see big government IS big corporation.  I think we should have small government and small corporations.  I hate the 14th amendment (men were free before it, and racism did not end with a swift jerk of a pen).  I think that we are now all of a mind to see that each man is fully capable of doing their own self justice, and that we are hampered by these huge and obnoxious entities.  That being said, I do like having both as Congressmen, but I feel both are a little of their mark.  Nobody is perfect however.

Sun, 06/13/2010 - 12:57 | 410595 dcb
dcb's picture

Grayson had another version of health care reform he wanted passed. don't blame the man for something happening he didn't want. he wanted people to be able to opt in to existing government programs at cost or a bit above. this would have been competition to the forced purchase of for profit insurance. Then people would have had some choice. Instead we got the rigged disgusting reform we got.

Sat, 06/12/2010 - 21:35 | 410015 Advoc8tr
Advoc8tr's picture

Neither Grayson nor Paul is doing any damage, and they may be setting an example for others in Congress.  Take what you can get... or do it yourself.

Touche ..... self evident common sense approach.

 From an external perspective the Ron Pauls and Allan Graysons stand out as the obvious sane ones inside a mental asylum and one scratches their head wondering why they do not garner immediate widespread support.

Sat, 06/12/2010 - 23:42 | 410152 Marvin_M
Marvin_M's picture

a possible answer to your question would be: because anyone who dares to discuss the real truth in Washington is labled a naive idiot by the media (or worse by some ZH commentators).  If I was elected (for a single term alas) to Congress, I would spend much of my time making a mockery of the corrupt, lying morons that inhabit the hallowed halls in perpetuity, not to mention the fools who inhabit The FED, the SEC and any of a hundred parasitic and corrupt agencies therein.  A close examination of Mr. Grayson's performances on the floor of the House of Representatives, in committee and in letters to the FED tells me that he is what I would be if I were him.  In this day and age, it seems only one of "liberal" or (in the case of Mr. Paul) "independent" persuasion could possibly fill this bill.  You aren't going to be hearing any truth from the mouth of the Honorable John Boehner (R-OH).

Sun, 06/13/2010 - 10:17 | 410475 RockyRacoon
RockyRacoon's picture

Good stuff!

Solution:  Term Limits.

If on the 2nd day of their term they were not already campaigning for the next election there might be some hope.  If they were not looking over their shoulder for the next back-stabbing "deal" that would cut them off at the knees, they could concentrate on some real legislation.   Fear runs Washington DC and that is not an environment conducive to sane law making.  If they didn't have to fear that every word they say (taken out of context as a rule) would be used against them in the next election....   You get the picture.

Sun, 06/13/2010 - 13:10 | 410598 Kali
Kali's picture

Playing devils advocate here.  Term limits.  Not having to worry about getting money for next election.  BUT, there is still the revolving door.  If one knew you only had a short time to milk the system, I think it may also be EASIER to corrupt, offering big bucks or a cushy job after a short stint.  I would add, to term limits, that one must return to the career/biz you came from and not "graduate" to a multimillion dollar Corporate Board position. I don't know. One cannot legislate ethics, morals or integrity.

Sun, 06/13/2010 - 14:08 | 410664 SRV - ES339
SRV - ES339's picture


Publicly funded elections (qualification based on documented public support, regardless of party affiliation)... funded through corporate election taxes, 8 week campaigns for all elections, and banning any and all professional lobbying.

Sorry but, IMO, Term Limits do not address the core issues.

Sun, 06/13/2010 - 15:02 | 410718 RockyRacoon
RockyRacoon's picture

Since they themselves have to concoct and pass the relevant laws, we won't be getting diddly anyhow.  We're just pissing up-wind.

Sat, 06/12/2010 - 21:47 | 410023 ColonelCooper
ColonelCooper's picture

Actually, in this case, I think I was being completely consistent in my having it both ways.

I applauded Mr. Grayson for having the balls to ask the questions he does.  I also gave kudos for his standing with his principles.  On the other hand, virtually every other word that comes out of his mouth (IMHO)  is belligerent, ignorant, and dismissive of dissent.  I disagree with him on nearly every issue I have ever heard him speak.  EXCEPT this one, where I acknowledged his effort.

This is a man who panders to the camera as a cross between some sort of stand up hack, an ambulance chasing lawyer, and Robin Hood.  His repugnant comments beginning with the "Die Early" quote from health care, to his wanting to jail those who disagree with him, qualify him for The Fuckstick of the Year Award.

You CAN have it both ways, IF you are honest and as objective as possible.  I give credit where credit is due.  Why do I have to like everything about him? 

Irregardless, in this case, the bigger point isn't what Grayson is doing on this front, it is what everyone else in Congress isn't. 

Sat, 06/12/2010 - 22:24 | 410074 RockyRacoon
RockyRacoon's picture

I understand.  It could very well be that Grayson's idiocy may be his asset.  He has built a platform of irascibility and it gets him attention.   Sometimes the craziest acting folks in the asylum are the sanest.

Sat, 06/12/2010 - 23:12 | 410127 Cursive
Cursive's picture

Sometimes the craziest acting folks in the asylum are the sanest.

Brilliant, RR, brilliant.  WRT, Alan Grayson, a long time ago a ZH poster said he was crazy, but he's our crazy.  That sums it up for me.  The good he does opposing the FRB far outweighs anything else he is doing.  Also, a belated hat tip to your handle; brings back good memories every time I get the song in my head....

Sun, 06/13/2010 - 10:27 | 410479 RockyRacoon
RockyRacoon's picture

I was 20 years old when the Beatles pressed that record.  Serving in the Air Force in Thailand at the time.

We blasted it on the flight line full blast.  Rockin' and rollin' with the F-4 Phantoms and the F-105 Thunderchiefs.  Ah, the good old days....   4 years of that shit was enough.

Sun, 06/13/2010 - 01:03 | 410240 Hephasteus
Hephasteus's picture

It worked for that hamlet fellow.

Sat, 06/12/2010 - 22:29 | 410080 Mitchman
Mitchman's picture

The problem with a Grayson is that since he is a fucktard-excuse me, fuckstick- on so many things, when he does focus correctly on something (who can forget his hilarious but well pointed Red Roof Inn gig?) he is easily written off and his serious questions are cast aside with the old "There he goes again".   

Sat, 06/12/2010 - 22:48 | 410091 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I wonder if him and Vince Vaughn are cousins?

Sat, 06/12/2010 - 23:27 | 410136 jimijon
jimijon's picture

Paul / Grayson in 2012 - Once the progressives and libertarians realize that together they can become strong, you will have the third party.


It could work....


Sun, 06/13/2010 - 09:30 | 410446 David449420
David449420's picture

Be careful what you wish for.  Alan Grayson has a dorsal fin that is as big or bigger than anyone he is playing against.  This man is dangerous.  He is new to this particular venue, so he is learning the ropes, so to speak.  In the past, unsettling times (such as the Russian revolution, the rise of the Nazi's, etc) produced aggressive, dangerous individuals (Josef Stalin, Adolf Hitler to name a few of the more prominent examples) that ran with a social/political movement  and had HUGE NEGATIVE  consequences for the majority of the populations involved. 

Alan Grayson has the opportunity right now to wrap his actions in the context of the right side or the moral high ground. This is a tool and a weapon and he will use it and is using it to the maximum.

Do not be deluded that this man has the best interests of the society he proports to represent as his motivation. This is ALL about POWER and ADVANTAGE. 

If this individual ever archives serious political power (think President) what would we be looking at?  Your current President has been a HUGE disappointment. Contrast the two. 

Ask yourself this.  IF Alan Grayson was President, what actions would he take to deal with the problems that beset us?

I would suggest, Pray you never find out. 

Unfortunately, historical precedent suggests that times of great social upheaval do bring dangerous individuals to those influential positions. This man is NOT a Nelson Mandela. Josef Stalin is what he reminds me of.

The next decade is NOT going to be boring.


Sun, 06/13/2010 - 09:47 | 410453 New_Meat
New_Meat's picture


Ask yourself this.  IF Alan Grayson was President, what actions would he take to deal with the problems that beset us?

Like Roosevelt and Wilson before him, many of us would be locked away for our own protection.

- Ned

Sun, 06/13/2010 - 00:01 | 410174 Rick64
Rick64's picture

Agree totally. We have to have unity otherwise there is no power. Nobody is going to please everybody, but on this issue I think everybody is in agreement.

Sat, 06/12/2010 - 21:21 | 410004 Alienated Serf
Alienated Serf's picture

Fed owned MBS has no counterparty risk because freddie/fannie guarantee??!?!? really?  so the treasury is on the hook for mtg defaults owed to the fed.  hell of a system.

Sat, 06/12/2010 - 21:24 | 410007 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

When BS lies, is it Treason?  The Fed being a separate entity from the Government and all....

Sat, 06/12/2010 - 21:34 | 410014 RockyRacoon
Sun, 06/13/2010 - 00:40 | 410208 qualia
qualia's picture

Classic, yes.  But the reality is the banks bail faster by borrowing cheaper than they lend.  So all water accumulates in the government boat.

Sun, 06/13/2010 - 15:23 | 410750 Implicit simplicit
Implicit simplicit's picture

Nice. Group emailed it to some friends

Sat, 06/12/2010 - 21:38 | 410021 Pooh-Bah
Pooh-Bah's picture

"All the truth in the world adds up to one big lie."  Bob Dylan

Sat, 06/12/2010 - 22:01 | 410044 Fred Hayek
Fred Hayek's picture

Brian P. Sack is the executive vice president of the Markets Group at the Federal Reserve Bank of New York. He is also the Manager of the System Open Market Account for the Federal Open Market Committee (FOMC). The Markets Group oversees domestic open market and foreign exchange trading operations and the provisions of account services to foreign central banks.

Sat, 06/12/2010 - 22:17 | 410064 TheGoodDoctor
TheGoodDoctor's picture

I didn't want to read this because I would get pissed. But I am glad I did. What I want to know from Ben Bernanke is what European banks the CB's of Europe gave the A. FX swaps too and B. where the money that we are on the hook for their bailout goes to.

That chart I saw seemed to indicate that France, Germany, and the UK banks were on the hook for quite a bit of the debt. Has anyone found out how much the US banks are on the hook for the European Debt?

It would be funny (not really) if the money came back to American banks via the European banks via the European Central Banks via the Treserve due to the insolvency of the US banks. Maybe I am off here. Just following the money.

Sat, 06/12/2010 - 22:55 | 410096 Snidley Whipsnae
Snidley Whipsnae's picture


" Has anyone found out how much the US banks are on the hook for the European Debt?"

About a year or so ago I heard the figure $197Billion. That sounded very lowball and I would take it with lots of salt...






Sat, 06/12/2010 - 22:22 | 410070 Snidley Whipsnae
Snidley Whipsnae's picture

"Another wonderful question to which Bernanke, unless he had completely lost his mind, gives a negative anwer, is whether any foreign banks that were the recipients of FX swaps, used the proceeds to buy US Treasuries. Obviously, Bernanke's answer is no, as this would be yet another shadow monetization process."

Ben and Tim got screwed at the last G20 meeting, imo. Ben's swap lines were not used by Euro banks for more QE but instead the Euro soverigns said 'no more QE, we are going the austerity route'...but they kept the Ben's dough or bought PIIGS bonds (or US Ts, or bucked up their own currencies against the Euro in the case of USD/CHF with swaps). Who really believes that CHF spent 40+% of their GDP in a few days buying Euros? That is why little Timmy squealed like a stuck pig when he heard no more QE. I believe in hindsight the last G20 meeting will be seen as a parting of the ways...Ben and Timmy got screwed at their own game and there are no cops to call. Just my hunch on whats up.

Sat, 06/12/2010 - 22:24 | 410075 JR
JR's picture

An outstanding article, Tyler.

One factor alone enables the Fed Chairman to answer untruthfully these outstanding, courageous questions. That factor is secrecy.  And since as the song goes “The Federal Reserve is not federal,” the Chairman is not under any official directive to report honestly on the distribution of the people’s money.  What investor now believes that the equity markets are not often adulterated and innoculated to serve the purposes of the owners of the Federal Reserve System, and I don’t mean the citizens of the United States?

One additional question that Grayson could pose to the Chairman:

As there is widespread speculation that the Federal Reserve and the Treasury do participate in ramping up the capital markets using select exchange members to handle certain transactions and as this speculation is having an adverse effect on the integrity of the markets, would you now favor an Executive Order by the President rescinding Ronald Reagan’s Executive Order 12631 establishing the Working Group on Financial Markets--known infamously as the “Plunge Protection Team” of which you are a member--that gives the group authority to enhance “the integrity, efficiency, orderliness, and competiveness of our Nation’s financial markets”?

Sat, 06/12/2010 - 22:46 | 410089 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The first rule of the Federal Reserve is you do not talk about the Federal Reserve.

That being said, can I be next?  BS, fight me.  C'mon!

Sat, 06/12/2010 - 23:02 | 410109 Boston
Boston's picture

Speaking of secrecy, I wonder if someone--working for Sack at the FRBNY--could possibly come forward and perhaps leak some info explaining what's really going on at the FRBNY.

Someone there--presently or in the recent past--knows the truth.  Why keep beating your head against the Bernanke wall?  It's not going to work.

Let's hear from a disgruntled, and of course, anonymous employee at the FRBNY!


Sun, 06/13/2010 - 01:14 | 410250 assembler
assembler's picture

Whistleblower "suicides" deter this

Sat, 06/12/2010 - 22:49 | 410094 Calculated_Risk
Calculated_Risk's picture

The fact this question is asked in the first place is evidence enough The "Federal" Reserve must be audited and shut down. No transparency = no confidence, nothing will be fixed.


Sat, 06/12/2010 - 22:59 | 410106 anony
anony's picture

'....DOES NOT engage..."   Present tense. Active voice.


Technically telling the truth as of this moment, says nothing about the past or the next moment.


Tricky little clintonesque fucker, ain't he?

Sat, 06/12/2010 - 23:06 | 410115 Calculated_Risk
Calculated_Risk's picture

"Tricky little clintonesque fucker, ain't he?"

This means we'll have to define the word "does"? or "engage"? How about "manipulation"?




Sun, 06/13/2010 - 15:10 | 410729 Implicit simplicit
Implicit simplicit's picture

Good point. He uses the present tense because the past and future makes him too tense(a teepee and wigwam);>o 

Sat, 06/12/2010 - 23:07 | 410118 the grateful un...
the grateful unemployed's picture

and the Fed has become an extension of US government Treasury action, for what purpose, to consolidate their debts in one place, and blow the whole damn thing to smithereens. 

Sat, 06/12/2010 - 23:12 | 410119 tony bonn
tony bonn's picture

in detail the asshole is telling the truth but in the large the asshole is lying.....of course the fed does not manipulate the stock market....its chief agent goldman sachs does or the president's working committee on markets does the manipulation...

the piece of crap fed chairman sickens me....

don't forget former vice-asshole of the fed alan blinder's famous words about the duty of the fed to tell the truth being the last of its priorities...and that asshole is a highly paid professor at one of the ivy league schools from whence all of this financial crap originated - after being ordered by the plutocrats to invent it...

Sun, 06/13/2010 - 09:52 | 410454 bada boom
bada boom's picture

Yes that is 100% right tony.  All the fed does is create money for all their close friends.  I am sure not one dime of the trillion in Fed swaps ever made back into the stock market.  Gee, now that I have real asset that can be leveraged, I wonder what I should do with it?

It's the similar of idea of selling arms to foreign nations and stating you had no direct role in the conflict.   Of course those foreign nations just happen to have your same interests at heart.

Sat, 06/12/2010 - 23:19 | 410130 Cheyenne
Cheyenne's picture

"Another wonderful question to which Bernanke, unless he had completely lost his mind, gives a negative anwer, is whether any foreign banks that were the recipients of FX swaps, used the proceeds to buy US Treasuries. Obviously, Bernanke's answer is no, as this would be yet another shadow monetization process. We do, however, wonder just how Bernanke knows precisely what foreign CBs did with all the excess cash..."

Great question, as Bernanke himself admitted last summer that he didn't even know which banks the foreign CBs lent to (@1:20):

Sat, 06/12/2010 - 23:35 | 410146 Mark Beck
Mark Beck's picture

Well, Mr Sack had this to say about TALF:

I especially like this FRBNY Quant Job;


The Financial Stability Market Monitoring (FSMM) staff seeks an experienced analyst to assess systemic risk through quantitative methods.  The FSMM staff helps facilitate and implement the Markets Group’s analysis of systemic risk issues for policy makers in the Federal Reserve Bank of New York and across the Federal Reserve System.  The candidate will develop quantitative tools that help identify and measure risks in financial markets and institutions that could lead to disruptions in leverage, funding patterns, and asset prices.  The analyst’s work will help facilitate the Federal Reserve's analysis of systemic risk issues and help inform the broader policy community in its supervision of large financial institutions.

Because my friends to a Quant with any HFT background, this job is a piece-o-cake. I could layout a risk model in about two weeks with the appropriate access. What makes this easy, in my opinion, is there is no time dimension, as can be compared to a dynamic trading model.

What most Quants will do is look at the fidelity of the incoming data to see if it is possible to forcast with any certainty. If the data is pre-scrubbed, essentially you will not be able to provide meaningful projections. Basically, garbage in garbage out. What you will be able to do is have perfect hind sight, and get paid for it.

Mark Beck


Sat, 06/12/2010 - 23:55 | 410169 palmereldritch
palmereldritch's picture

I always wondered what Jonestown would have been like with a concierge.  Thanks to Bernanke, now I know.

Sun, 06/13/2010 - 02:13 | 410297 Fish Gone Bad
Fish Gone Bad's picture

Back in 2005, Homer Simpson does a late night surreal commercial for Mr. Plow.  It is right where Dada-ism meets Surrealism in a snow storm.  Marge asks Homer, "Is that your commercial?" and Homer looking like he just bought a pig in a poke, says, "I don't know.."

That said, exactly what is Bernanke's downside if he gets caught lying?  NOTHING AT ALL.

Sun, 06/13/2010 - 00:06 | 410176 Rick64
Rick64's picture

Tyler excellent post.

Sun, 06/13/2010 - 00:11 | 410178 killben
killben's picture

why listen to this conniving scoundrel.

in the first place he should not have been re confirmed

in the second place he is a blatant liar


fourthly he is an self-seving, incompetent idiot..




Sun, 06/13/2010 - 00:47 | 410217 Brett in Manhattan
Brett in Manhattan's picture

"...indirectly via the discount window and the repo system, in which banks purchase bonds at auction, using discount window or other zero cost capital, only to repo it back, and to use the proceeds to bid up stocks."


You really nailed it here, Tyler. I've made this point on previous threads. The big bank exchange members have virtually unlimited credit. So, they can brake any advance or decline, if needed.

Sun, 06/13/2010 - 06:44 | 410391 Ned Zeppelin
Ned Zeppelin's picture

Yup. Not mention repoing the Ts back, and buying another set of Ts, and so on.

Sun, 06/13/2010 - 00:59 | 410235 SilverIsKing
SilverIsKing's picture

The push to audit the Fed should be discarded and the focus must be on ending the Fed altogether.  The "Audit the Fed" effort, while a positive step, only serves to reinforce the perception that the Fed is a necessary institution that may only have gone too far in its efforts to administer monetary policy.

If the call for an end to the Fed gains traction, the clueless masses may begin to understand how the very existence of the Fed helped to create many of our fiscal/economic problems and putting an end to the Fed is not only possible, but would be to everyone's benefit (other than the banksters themselves.)

Right now, I think most people think the Fed is essential to the country's well being and/or existence.  Of course that's not true but not everyone reads ZH.

Sun, 06/13/2010 - 02:16 | 410300 JR
JR's picture


Sun, 06/13/2010 - 01:59 | 410286 boeing747
boeing747's picture

Who is fighting to keep Dow above 12000 before and above 10000 now.

Sun, 06/13/2010 - 02:22 | 410303 Fish Gone Bad
Fish Gone Bad's picture

It is all a game and the game is for keeps, but it is still just a game.  The trick is not to let the other side know what positions you have.  If they find out that you are "All in", then they will push whatever particular stock up or down to create the most number of losers.


Sun, 06/13/2010 - 15:53 | 410289 cowdiddly
cowdiddly's picture

After drinking several Samuel Adams and 21 year rum it makes me ponder

Sun, 06/13/2010 - 02:14 | 410298 RicardoM from T...
RicardoM from Temecula CA's picture


Why is Zero Hedge the only web site I read 90% of the time?

Because it is the Fight Club, Tyler. We are in a vicious fight for truth. Zero Hedge gives us the edge. No pussies here. (Begging your pardon beautiful Marla. If you would take some time to stop processing those Euro sell orders, perhaps we could get to know one another.)

F Ben Bernanke. We all know that he is a lying sack of [garbage] (politically protected speech here folks; he is a public figure; open season on public figures; if they can call my wet dream Sarah Palin a skanky Caribou Barbie, I can call Ben Bernanke a sorry piece of [garbage]. How dare you call my wet dream skanky. Now...those are fighting words.)

Ben Bernake = market manipulation = impossible to ever pay-off bailouts = skanky (I am using the "S" word here folks) lying sack of shit (there I go, unleashing another, more graphic "S" word).

Tyler, thankfully, I have nothing more to say. It was such a 1st Amendment relief to get it off my chest.

Sun, 06/13/2010 - 05:26 | 410374 Grand Supercycle
Sun, 06/13/2010 - 06:42 | 410389 Ned Zeppelin
Ned Zeppelin's picture

By the way, Bernanke  - to me somewhat elusively - tersely says only "The Fed does not engage in market manipulation." He does not answer whether the Treasury or anyone else does. A very legalistic answer. Almost certainly the rest of the answer is "and you'll have to figure out how we do it." For instance, if you refer to another response by Bernnake, he says that cash is fungible, and therefore you can't say whether your cash was used for a particular purpose (of course you can, but I get the "I did not have sex with that woman" logic.) A completely true, yet what we'd call a "smartass" answer in this house. So the Fed loaned money to an entity that does manipulate the market, one which is housed within its gates.

Sun, 06/13/2010 - 08:42 | 410426 nmewn
nmewn's picture

And again Thomas Jefferson is proven correct;

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Sun, 06/13/2010 - 09:13 | 410438 Rider
Rider's picture

Is evident nobody cares about Thomas Jefferson.

The country is going to get what is desperately looking for; another economic disaster courtesy of the FED.

Sun, 06/13/2010 - 12:19 | 410554 JR
JR's picture

Exactly. Robert Rubin himself acknowledged a few years back during a high level financial meeting that the Fed intervenes to stabilize stock markets via phone calls to major stock investors with instructions on “short-term” injections. And,  in 2007, Hank Paulson fessed, in different terms, to the same.  This manipulation is performed by "the plunge protection team," a colloquial term originated by the WSJ.  The point is, it looks criminal until proven otherwise, and if they don't allow their statements to be checked, then based on the outcomes that we see, we are going to go with "criminal" for now.

Sun, 06/13/2010 - 09:33 | 410447 Quinvarius
Quinvarius's picture

He did not actually answer the first question.  He made a statement that did not include reference to any of the details of the question.  To say the Fed did not intervene itself, is not to say the Fed did not facilitate an intervention using Fed money by someone else.  The briefness of that answer and its wording tell me it was wrtten with the aid of a lawyer.

Sun, 06/13/2010 - 12:14 | 410548 Implicit simplicit
Implicit simplicit's picture

Exactly. Just look to Olie  Bankblood (nickname of Oligarchial) Fedies half  blood brother not far removed.

Sun, 06/13/2010 - 15:43 | 410786 defender
defender's picture

I almost thought that I was the only one that had caught that.  No discussion at all about influence being used on third parties....I smell a rat.

Sun, 06/13/2010 - 10:11 | 410467 Inspector Asset
Inspector Asset's picture

In regard to the SEC and the NYSE for that matter.

How about we list every single security traded on every exchange, on

No spreads, no middlemen and no market manipulation. Ya, it might take a week to sell a stock but who says we need instant liquidity. I think 5 business days is plenty of liquidity.


And if could just figure out how to put the whole political process on Craigslists, and get rid of all those momo's, we would have all our problems solved.  Each law could be voted on directly by the people, again without the middlemen.


And then it might be time to call on Craig to be President of the US in 2012.

How about a Craig/Ron Paul ticket for 2012?


Sun, 06/13/2010 - 10:19 | 410476 buzzsaw99
buzzsaw99's picture

 "The Federal Reserve has not intervened to support the stock market or an individual stock."


Blatant in-your-face lie. We all know the list.

Sun, 06/13/2010 - 13:23 | 410620 chancee
chancee's picture

No, no, no... Stocks?  FUTURES!!!!

Sun, 06/13/2010 - 14:00 | 410668 aztrader
aztrader's picture

During Bernake's testimony, part of one of his replys was that "We must PURSUADE THE MARKETS" and this absolutely sounds like manipulation to me.  Using swaps to support currency's that in effect rally the markets is outright manipulation.   The Congress needs to shut the Fed right now.  They think that they are above the law and the Constitution, but eventually every ponzi dies an ugly death.......................

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