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Here Is Your Chance To Demand Answers From The Fed's General Counsel, Scott Alvarez

Tyler Durden's picture


For all Zero Hedge readers who have long waited for their chance to ask Mr. Scott Alvarez of "Have The Federal Reserve Or Prime Brokers Ever Tried To Manipulate The Stock Market?" fame a question about life, the universe or why the CME decides to hike ES margins in an environment of rising realized vol, here it is. Tomorrow, at 2PM, Ron Paul will lead a hearing by the Financial Services Committee, which will luckily be carried by C-SPAN meaning one will be actually able to hear the dialog (alas, the House continues to believe that investing in microphones for their internal webcasts is a bad idea), titled: "Federal Reserve Lending Disclosure: FOIA, Dodd-Frank, and the Data Dump." The witnesses will be Mr. Thomas C. Baxter, Jr., General Counsel, Federal Reserve Bank of New York, and the one and only Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System. While the usual heeming and hawing will follow each and every question, what is unique about this session is that the FSC actually allows anyone to submit questions for the honorable lawyers. The link to submit questions is here: we urge Zero Hedge readers to take advantage of this opportunity and have Mr. Paul read their questions to the two general counsels, even if no legible answers will be (ever) forthcoming.

As a reminder, Baxter is the same lawyer who a year and a half ago said that it was the Fed's actions to bail out Goldman Sachs, pardon, AIG, that prevented the end of the world:

The actions taken by the Federal Reserve and its New York office to rescue American International Group Inc. (AIG) were necessary to avoid the "potentially catastrophic consequences" of a failure by the insurer, a top official plans to tell lawmakers Wednesday.

Thomas Baxter, the general counsel for the Federal Reserve Bank of New York, defended the actions by government officials to stem a major cash bleed at the insurer in November 2008 by reaching agreement with over a dozen banks to tear up $62 billion in insurance contracts.

In prepared remarks for a Wednesday hearing before the House Committee on Oversight and Government Reform, Baxter said officials had little time and leverage as they scrambled to prevent AIG from spiraling towards bankruptcy. After stepping in to rescue the insurer in September 2008, officials could not let the insurer collapse weeks later, Baxter contends.

"This abrupt reversal of course would not only have triggered all of the adverse consequences for the U.S. and global economies that prompted the initial intervention, it would also have undermined the public's trust in the U.S. government's commitment to the broader range of extraordinary financial stability initiatives."

Kinda like the whole debt ceiling thing...

As for Scott Alvarez, who can forget this memorable exchange:

Alan Grayson: I would like to know whether it is within the Federal
Reserve's legal authority to try to manipulate the stock market or the
futures market.

Federal Reserve GC Scott Alvarez: I don't believe the Federal Reserve tries to manipulate the stock market...(Yoda: Do or do not, there is no try.)

Alan Grayson: Does the Federal Reserve actually possess all the gold that's listed on their balance sheet.

Scott Alvarez: Yes...

Alan Grayson: Who actually executes the trades for the Federal Reserve in the markets?

Scott Alvarez: The Federal Reserve Bank of New York, which executes trades through Primary Dealers.

Alan Grayson: Can you name one Primary Dealer?

Scott Alvarez: JP Morgan Chase

: Do you mind if we have a GAO audit to see if there has been
front-running or insider trading by them? Do you mind? Is that ok with

Scott Alvarez: I am not sure if I have that authority...

Perhaps it is time to paraphrase those same questions.



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Tue, 05/31/2011 - 17:00 | 1326549 Winston Were Wolf
Winston Were Wolf's picture

Question in the form of a Rap, bitchez.

Tue, 05/31/2011 - 17:12 | 1326603 camaro68ss
camaro68ss's picture

Q. bernake are you a D bag

A. Yes

This is going well

Tue, 05/31/2011 - 23:01 | 1327446 TruthInSunshine
TruthInSunshine's picture

Not bad, but here's a technical question I'd really love an answer to, as it has economic, legal and social implications:


Q:     Why should the U.S. Government borrow Federal Reserve Notes from the Federal Reserve & pay interest upon those borrowed sums, rather than borrow no Federal Reserve Notes from the Federal Reserve and pay no interest to it?


Here are some follow up questions:


Q:    Can you please cite legal authority that allows the United States Congress to delegate the 'coinage of money' to the Federal Reserve Bank, without referring to the Federal Reserve Act of 1913?

Q:    Is the Federal Reserve Bank an agency of the United States Government?  If your answer is yes, is it subject to all legal obligations that any agency of the United States Government is subject to? If your answer is no, could you please why the U.S. Supreme Court recently decided that The Federal Reserve Bank is obligated to respond to information, documents and materials requested pursuant to The Freedom of Information Act?

Q:    If a dollar is printed, is that same dollar instaneously owed to another, and if so, to whom?

Q:    If a Federal Reserve Note is printed, is that same Federal Reserve Note instaneously owed to another, and if so, to whom?

Q:    Can the U.S. economy grow if new debt is not issued?

Q:    For each Federal Reserve Note of a $1 denomination that is created and interjected into the banking system by the Federal Reserve, how many additional units of that fiat currency are ultimately added to the monetary base of the United States, and ultimately, how many additional units of that fiat currency are added to the monetary base of the global economy (this is not the simple 'money multiplier' being inquired about)?

Q:    What came first, the chicken or the egg?

Wed, 06/01/2011 - 05:40 | 1327836 rsi1
rsi1's picture

Because that is what Zimbabwe did, and look at how it turned out. In any case, it is almost interest free debt, since the majority of interes earned by the fed goes back to the US treas.

Wed, 06/01/2011 - 08:54 | 1328059 Cthonic
Cthonic's picture

Can you please cite legal authority that allows the United States Congress to delegate the 'coinage of money' to the Federal Reserve Bank, without referring to the Federal Reserve Act of 1913?

The Federal Reserve coins no money.  That function is still held exclusively by the U.S. Mint.  The Bureau of Engraving and Printing produces Federal Reserve Notes under contract with the Federal Reserve System.  There is no law against circulating tax payment coupons amongst the proles as 'legal tender' currency.

Section 16. Note Issues 1. Issuance of Federal Reserve Notes; Nature of Obligation; Where Redeemable

Federal reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are hereby authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.

[12 USC 411. As amended by act of Jan. 30, 1934 (48 Stat. 337). For redemption of Federal reserve notes whose bank of issue cannot be identified, see act of June 13, 1933.]


Tue, 05/31/2011 - 17:04 | 1326559 SeanJKerrigan
SeanJKerrigan's picture

"Have The Federal Reserve Or Prime Brokers Ever Tried To Manipulate The Stock Market?"  That's an easy yes.  In fact that was the stated mission of QE2 in Bernanke's WSJ editorial last year.  The key to good interviewing is to give the interviewee no easy escape.

Tue, 05/31/2011 - 17:43 | 1326674 Rainman
Rainman's picture

Scotty escape : What is your definition of manipulate ? What is your definition of the stock market?

Tue, 05/31/2011 - 17:06 | 1326576 Eireann go Brach
Eireann go Brach's picture

Does Bernanke use lube when he meets with the bankers?

Tue, 05/31/2011 - 17:06 | 1326577 PaperBear
PaperBear's picture

Who are the private owners of the Federal Reserve ?

Rothschilds ?

Tue, 05/31/2011 - 17:14 | 1326596 SilverDosed
SilverDosed's picture

I wonder what would happen if this actually got answered, or even acknowledged?

Tue, 05/31/2011 - 18:03 | 1326733 Ratscam
Ratscam's picture

as a private company why dont they pay tax?

why was the FED never audited ....

could go on and on ....

Tue, 05/31/2011 - 17:06 | 1326578 buzzsaw99
buzzsaw99's picture

Alvarez is a greasy little puke maggot. Why the hell would I want to ask him anything?

Tue, 05/31/2011 - 17:11 | 1326586 fuu
fuu's picture

Mr. Alvarez,


When did you stop raping little children?

Tue, 05/31/2011 - 17:22 | 1326624 Robot Traders Mom
Robot Traders Mom's picture

Follow that up with a question regarding murdering puppies...

Tue, 05/31/2011 - 17:15 | 1326602 GeneMarchbanks
GeneMarchbanks's picture

I would love this opportunity! I have so many concise, well thought out questions which I will submit as soon as my rectal bleeding stops.

Tue, 05/31/2011 - 17:17 | 1326608 SilverDosed
SilverDosed's picture

Mr Alvarez.... if that is your real name... have you ever said anything at all that can be considered even a half-truth?

Tue, 05/31/2011 - 17:17 | 1326609 vote_libertaria...
vote_libertarian_party's picture

Can I get Ron Paul to ask my question using the voice of Monty Python members in drag?...just asking.

Tue, 05/31/2011 - 17:18 | 1326612 equity_momo
equity_momo's picture

TD , he has already been asked this question

Also was asked about gold holdings.

The guy is a third rate laywer. He cant even outwit a second rate lawyer like Grayson.


Tue, 05/31/2011 - 17:15 | 1326614 Tyler Durden
Tyler Durden's picture

Uhm, did you see the post and/or clip above?

Tue, 05/31/2011 - 17:18 | 1326621 equity_momo
equity_momo's picture

Ooops. My ADD kicked in and i went straight to google.

Tue, 05/31/2011 - 17:49 | 1326698 hugovanderbubble
hugovanderbubble's picture

Thanks Tyler for an excellent piece (video) of the real Scam US investors  are living with The Fed Manipulation


I wish i could help but im the smallest mosquito on earth...


Tue, 05/31/2011 - 20:12 | 1327102 Yen Cross
Yen Cross's picture

 I caught it!  The clip was an overlay.

Tue, 05/31/2011 - 17:20 | 1326617 augie
augie's picture

I can't do this right now.

Tue, 05/31/2011 - 17:20 | 1326628 Ancona
Ancona's picture

I want ten minutes with those fucking lying, pussy communist fucktards. I swear by God Almighty I would not ask a single question, rather, I would break their fucking kneecaps with a fungo bat.

Tue, 05/31/2011 - 17:36 | 1326668 XitSam
XitSam's picture

I learn something new every day. Today I learned that fungo bats exist and what they are used for.

Tue, 05/31/2011 - 22:03 | 1327328 sgorem
sgorem's picture

WEBSTERS DEFINITION: fungo bat, pron; fun-go bat. primary diet are misquitoes. also known to eat kneecaps, also, fucking kneecaps.

Tue, 05/31/2011 - 22:20 | 1327375 ColonelCooper
ColonelCooper's picture

This is not the first time that I have suspected this place is not swarming with athletes.

Tue, 05/31/2011 - 17:21 | 1326631 gwar5
gwar5's picture

I demand to know who owns and profits from the Federal Reserve, and what will the Federal Reserve do if/when the next president-elect says he/she wants to abolish the Fed and revert to a sovereign gold backed currency?

Tue, 05/31/2011 - 17:38 | 1326673 JW n FL
JW n FL's picture


JFK assassination: Secret Service Standdown


Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.


so the answer to your question is that whomever orders an end to the FED will be Killed and then slandered by right wing republican conservative hell fire end of the world Rapture crowd christians!


so dead and their good named smeared for the fucking effort!

Tue, 05/31/2011 - 20:09 | 1327086 Yen Cross
Yen Cross's picture

  JW, I have a Jet to catch. I respect you. look @ the governing parties in the Pan Pacific area. Trade well.

Tue, 05/31/2011 - 17:22 | 1326634 gwar5
gwar5's picture


Tue, 05/31/2011 - 17:26 | 1326640 surfersd
surfersd's picture

Do you have any knowledge where the Federal Reserve participated in or provided funding directly or through a third party for the purchase of any security be it equities or bonds of another country?  


If so, what were they, when were they made and for how much?

Tue, 05/31/2011 - 17:51 | 1326701 efiniti
efiniti's picture

Haha, yes.  Please tell me you submitted.

Tue, 05/31/2011 - 17:27 | 1326641 surfersd
surfersd's picture

They are just going to smile, deny and move on. 

Tue, 05/31/2011 - 17:25 | 1326642 clymer
clymer's picture

I can't believe the Florida district around Orlando didn't keep him in - for no other reason than this beautiful piece of comedy. I could watch over and over..

Tue, 05/31/2011 - 17:28 | 1326649 Mae Kadoodie
Mae Kadoodie's picture

Mr Alvarez, why did the Federal Reserve provide more than $26 billion in credit to an Arab intermediary for the Central Bank of Libya? The Fed made at least 46 emergency, low-interest loans to the Arab Banking Corp., in which the Central Bank of Libya owns a 59 percent stake.

Why were the Libyan-owned bank and two of its branches in New York City exempted from sanctions that the United States imposed several weeks ago on Libyan businesses controlled by Colonel Moammar Gaddafi and the dictator’s associates?  I await your response Mr. Alaverez.

Tue, 05/31/2011 - 17:44 | 1326655 Life of Illusion
Life of Illusion's picture


Will you disclose all documents, policy sent from/to FSB?

Tue, 05/31/2011 - 17:39 | 1326667 ColonelCooper
ColonelCooper's picture

Let's play the MEOW game with 'em.

Tue, 05/31/2011 - 17:51 | 1326678 Yen Cross
Yen Cross's picture

  I have a defining question! 

       What if? 

   Update ! Anyone look at volumes lately? I took small profits from aud/jpy and usd/jpy . I'm flatttt as a pancake!

Tue, 05/31/2011 - 17:56 | 1326708 camoes
camoes's picture

How does Bernanke keep his beard so well trimmed?

Tue, 05/31/2011 - 18:10 | 1326763 dark pools of soros
dark pools of soros's picture

it's fur.. but he has to shave off the rest of his red-riding hood eating wolf face everyday

Tue, 05/31/2011 - 18:02 | 1326712 edotabin
edotabin's picture

Overall two problems with Grayson:

He is acting too smart for his own good. He has "noob" written all over his forehead. He allows that sarcasm to come across and his rhetorical questions are quite damaging to him. That stupid grin doesn't help either. Sometimes the presentation is more important than the message. How do you think the Fed got away with it for so many years? Slick presentation.

If we all looked deep within ourselves, I am certain the euphoria of "let it all come crashing down" would subside. I do not want anything to crash. Rather, I propose a smooth transition to a newer and more fair system. It is my sincere hope that this is the outcome.  Grayson's approach backs them into a corner where the only thing that will satisfy him is an answer that goes like this: " Yes we are a scam. We are crooks and we have now locked up the Fed. Gone fishing! The end!"

While I realize we are not headed to green pastures as it is, should someone provide the answers Grayson is openly looking for we will immediately create scenarios that would make Darth Vader look like the tooth fairy.

In my estimation, it is apparent he has not thought this through all the way. We know the problem. Solutions would be nice.

Tue, 05/31/2011 - 18:11 | 1326756 ColonelCooper
ColonelCooper's picture


Tue, 05/31/2011 - 18:07 | 1326755 dark pools of soros
dark pools of soros's picture

Uncle Bennie, how come I used to buy candybars for 25 cents when i was a kid and now they are over a dollar??  how come how come??


Tue, 05/31/2011 - 18:13 | 1326764 camoes
camoes's picture

WHO GOT THE MONEY? SHOW ME THE MONEY! SHOW ME THE MONEY! HELP ME HELP YOU (can the question be done by Cuba Gooding Jr. plzzzz?)

Tue, 05/31/2011 - 20:11 | 1327091 Yen Cross
Yen Cross's picture

 When you GROW up. Reality! Ask the question again.

Tue, 05/31/2011 - 18:13 | 1326765 Dave Thomas
Dave Thomas's picture

The House financial committee does a Larry King Live almost constantly where they toss the Fed softballs. It's time we had dick query these theives. Even if he is a self serving schmuck. So far we've had a lisping reprobate, a dottering ,grandfatherly figure, and now sort of a dickish Penn Gilette query these fools. What we need next is Tailgunner Joe.


Damn the Tooth Fairy!

Tue, 05/31/2011 - 18:19 | 1326790 anony
anony's picture

Do you think real men should wear Ear rings? Or any other kind of ring that requires penetration of a body part in order to secure it?

Is the Mullet an appropriate hair-do---or don't?

If you had the chance to spend one night using both hands till your skin falls off, playing with Sofia Vergara's bodacious ta-tas would you do it?

Would you please stick out your tongue so that we can see how many tines it has in it?


Tue, 05/31/2011 - 18:22 | 1326792 ZackLo
ZackLo's picture

I would like to submit a couple of questions.

1. During the series of Pomo operations the federal reserve has conducted over the last couple years, what could potentially be the ramifications of "Mis-pricing" perceived risk across the yield curve.

2. When risk on the treasury curve is mis-priced does this lead to expanding Primary dealer balance sheets to the upside (as in allowing more credit expansion that otherwise wouldn't happen)

3. Would these "Primary Dealers" by any chance at any time during or after the  Pomo operations be using said excessive credit expansion to buy stocks ,bonds ,futures to mis-price risk across the broader market and the world.

4. Would the federal reserve be selling put options on treasury bonds to alleviate any potential tensions that buyers of treasury bonds may have in taking on excessive risk they otherwise wouldn't be acquiring under normal market conditions.

5. Who will ultimately foot the bill if those put options do get "into the money" (taxpayers?)

6. How does the fed expect to unwind it's balance sheet onto a market with ever dwindling amounts of bidders? 

7.when the fed does unwind it's balance sheet , how does it expect said put options to not get "into the money"?

8. As the fed has used open market operations over the last 100 years to  in stealth monetize debt what have been the consequences to the US Dollar?

9. How does the fed explain the currency devaluation over the last 100 years and the consequential destruction of wealth on a mass scale due to the material input cost push suppressing wages ? Don't try and say it doesn't I'm 20 but, I'm not stupid banks have played the excessive credit stealth monetary expansion games for 400 years and history is lined with the bodies of world wars caused by this little "game".

thank you for your time

Tue, 05/31/2011 - 22:33 | 1327403 sgorem
sgorem's picture

very good Zacklo................

Tue, 05/31/2011 - 18:23 | 1326798 Catullus
Catullus's picture

Under what authority granted by Congress is the Federal Reserve allowed to purchase any security rated anything less than the highest quality? 

Under what authority granted by Congress is the Federal Reserve allowed to accept anything other than the highest credit quality security in use as collateral for a loan?

Does the Federal Reserve have in place an auditable process to ensure that none of the member banks violates the Foreign Corrupt Practices Act?


Tue, 05/31/2011 - 18:28 | 1326815 Apocalypse Now
Apocalypse Now's picture

Tyler, I think you meant to say lowers margin with increased volatility per your other post.

Tue, 05/31/2011 - 18:47 | 1326863 I am a Man I am...
I am a Man I am Forty's picture

until congress stops asking questions and starts dictating to the FED what they are going to fucking do, it is all one big waste of fucking time

Tue, 05/31/2011 - 19:12 | 1326946 Prometheus418
Prometheus418's picture

Do you prefer synthetic rope, or the more traditional hemp?


Tue, 05/31/2011 - 19:51 | 1327056 Miss Expectations
Miss Expectations's picture

Why did JP Morgan cancel his passage on the Titanic?

Tue, 05/31/2011 - 19:53 | 1327059 Tic tock
Tic tock's picture

I'm not sure what this piece of theatre is for? The FED is an autonomous entity, it is the crown of International Finance; as such the sovereign nature of the US Government is wholly distinct. There is only a partnership between the two - and that is a matter of convenience, the FED gives the US an unlimited budget and in return the US provides various services, to whomsoever governs the FED.

 Really, what are Congress going to do, what are they able to do? Annull the charter? Move the issuance of currency back to Treasury? New York would cease to exist as a financial centre later that afternoon. What would happen to the US Military machine, who would pay for it? The US would be blocked from raising capital -- right now, the only friend the US has is its heroin dealer; guess who's stealing the family silver.

General counsel for the Board, hmm, how do you negotiate with a military-backed sociopath to stop destroying 'the middle class' when he controls your money supply?? The FED are doing this because if they didn't they would be dead ducks. The entire world is sick to death of this Insect capitalism -and these guys just keep getting bigger and bigger.

 The Banks have not been particularly well-run. Indeed, they have blown-up the US economy, and many others, and economic growth and opportunities have been impeded over the last decade. Currently, after supporting the Board' policies, the US is unable to raise funds from foreign sources. They have dug the hole and the US has been put in it. At the very least they could change their model of Banking.


Tue, 05/31/2011 - 22:12 | 1327348 sgorem
sgorem's picture


Tue, 05/31/2011 - 20:13 | 1327097 Yen Cross
Yen Cross's picture

 Bullets, an Numerals? You can try to write.

      You can't trade though! Yen Cross!

Tue, 05/31/2011 - 20:42 | 1327176 DavosSherman
DavosSherman's picture

Here is what I sent the AH's:


You "people" are effing MORONS.


You've robbed me blind.  


You've robbed the American public blind.  


Moron Greenspan muzzled Brooksly Born (watch PBS's "Warning"), she wanted to regulate derivatives before they became a household word, MORON Greenspan objected, then told Congress, "Oops, I was wrong, I didn't expect there would be that much greed."




Your member banksters (according to the alleged rapist DSK (watch "Inside Job" at the 1:19 hr/min point) the banksters told the Fed and Paulson that "You should have regulated us better we are too greedy, it's your fault.)


Takes 2 @$$holes.


@$$holes. EFFING @$$HOLES.  


You morons blew up the economy with this BS.  


You tossed the consumer under the bus - and that is why there is no economy now.


Now you effers lie.  Well news flash morons: This is a depression.  Unemployment is 22%, and MENA (Middle East and Northern Africa) are melting down because of Ben Bernanke's monetization of the debt.


QE can not stop, if it does we'll have a default.  They'll use the stocks and flows and do a stealth QEIII.


So here is my question to you effing morons:  What the eff is your problem? Why haven't you figured out which way is up yet? Why haven't you re-valued the dollar, wiped the debt away, and backed it temporarily and loosely to gold?  In other words, why are you morons too effing stupid to fix the GD problem?


The problem that you effing morons created?


You effing idiots - and that is exactly what you are - effing idiots, - have laughed in your FY 2005 FOMC minutes about exploiting workers vis a vis off shoring, laughed about how housing would crash (while Bernanke lied and told CNBS that there housing had never declined on a nationwide basis - yeah AH some student of the great depression - IT DECLINED in GD I you EFFING @$$HOLE MORON).  Then your collective AH MORONS joke about which party borrows more.  Because of you @$$HOLES we have 128 trillion in debt.  Forget about the 14 trillion.  Add that cr@p to Social Security, Medicare, Medicaide, Perscription drugs the off balance GSE debt.


44 million on food stamps, a "dollar" worth .03 cents since the inception of the Fed in 1913, low income jobs now account for 41% of ALL US jobs, (joke some more in the FOMC minutes about exploiting LCD workers and off shoring more jobs AH's),  1 out of 6 American's on Medicaid, 66% of American men were employed in FY2010.


And you don't get that the FRN's don't work?


Money loaned into existence with interest REQUIRES more money to be loaned each year - or it implodes.


For the sake of humanity admit you are total and absolute EFFING FAILURES and lets move the EFF on.  The only thing your collective AH moron idiots have succeeded at doing is changing the income gap between the top 1% of American's.  The top 1% of Americans now own 33% of all the wealth in the US, the poorest 50% collectively own 3%.


So, in short JUST HOW EFFING STUPID ARE YOU MORONS?????????????????????????????


Have you ever read what happened in the past to countries that have done this BS?  Rome? The barbarians were welcomed by the peasants.  Do you think this won't end in pitch forks and torches?

Tue, 05/31/2011 - 20:45 | 1327181 SOLnow
SOLnow's picture

I thought I caught a tweet from Ron Paul saying no C-Span coverage.

Tue, 05/31/2011 - 21:13 | 1327242 Amish Hacker
Amish Hacker's picture

Please explain the enormous (and ever-growing) entry on the Fed's books called "Other Assets."

Tue, 05/31/2011 - 21:19 | 1327243 Bansters-in-my-...
Bansters-in-my- feces's picture

Does Bernanke have Rothschilds cum on his backside dripping down his legs....

And does he always swallow...???

This whole thingy is a fucking joke.....


Tue, 05/31/2011 - 21:40 | 1327279 Libertarian777
Libertarian777's picture

I think a simple question would be

"what is the legal definition of a US$?"

followed up with

"what is a Federal Reserve Note, and why is it denominated in $?"

Tue, 05/31/2011 - 22:49 | 1327422 sgorem
sgorem's picture

RYAN: "first of all let me advise you that Seal Team 6 has your mother, wife and children in an undisclosed location with RPG's pointed directly at their heads. This was done so that maybe we could have a fair playing field here today and get some truthful answers for the American Taxpayer."

ALVAREZ: "whatever, how long is this going to take?"

RYAN: " Mr. Alvarez, I don't think you understand your family's dire situation. All we want is some truthful answers."


Tue, 05/31/2011 - 22:58 | 1327472 Tapeworm
Tapeworm's picture

Gary North had these for the Bernank. They are still good.

The Federal Reserve System is on the defensive. This has not happened before in my lifetime.

On Wednesday, April 28, Ben Bernanke will hold a press conference. This has never happened before. Journalists will be allowed to ask questions. It will be held at 2:15 in the afternoon, Eastern Daylight Time. The Bankrate site has set up a reminder program so that you won't miss it. It will be broadcast on their site.

We are beginning to see lists of questions that people would like to see asked. These tend to be hostile questions.

I have 16 questions. I hope at least one of them gets asked and answered.

Here is what the session will not be. It will not be open to all journalists.

Each journalist will not submit one 3x5 card with his question.

Bernanke will not shuffle the cards and answer them in order for the duration of the session.

When he submits to that sort of inquiry, I will be impressed. Not until then.

Here are my questions.


For two years, Bernanke spoke about a proposed exit strategy. The monetary base has soared. This is the FED's balance sheet. Nothing like this had ever taken place in the era of the FED, not even in World War II. The exit strategy is the FED's plan to reduce the monetary base. He never said what number is the goal.

Here is his testimony to the House Banking Committee in February 2010. It promised an exit strategy.


In mid-February 2010, the FED began a policy of reducing the monetary base. This was a faint hint of the promised exit strategy. It was maintained until early January 2011. Then it was abandoned with a vengeance. The chart issued by the Federal Reserve Bank of St. Louis reveals the extent of the reversal.

Not only is there no exit strategy in 2011, there has been a massive reversal. So, what happened to the exit strategy?


There must have been a reason. What was this reason? What did the staff economists report that persuaded the Federal Open Market Committee (FOMC) to reverse the tentative exit strategy of 2010?


The FOMC announced on November 3, 2010, that the expansion of the FED's balance sheet would total $600 billion at a rate of $75 billion per month.

What was the basis of this figure? Why not $500 billion? Why not $800 billion?


Under what conditions might it not end?


So far, no Federal Reserve official has testified before the United States House Financial Services Subcommittee on Domestic Monetary Policy and Technology. Under what conditions will you agree to testify before this subcommittee?


America's commercial banks have over $1.3 trillion in excess reserves on deposit with the Federal Reserve System. This money is not being lent.

What are commercial bankers afraid of? Why are they refusing to lend money? They cannot earn enough money at the FED – slightly over zero percent – to meet operating costs with this unused capital.


Rising excess reserves offset increases in the adjusted monetary base. M1 has not doubled. The M1 money multiplier has fallen. Price inflation has been subdued ever since 2008.

M1 will rise when commercial banks begin reducing excess reserves and begin lending again. Why won't this raise consumer prices?


The Federal Funds rate is the rate at which commercial banks lend overnight money to each other. They lend overnight money to banks that temporarily fall below legal reserve requirements.

Because most banks have no need to borrow overnight money, because the system has over $1.3 trillion in excess reserves, what does it matter what the FedFunds rate is? The FED can raise the FedFunds rate, but why would this have any effect on commercial bank policy? If they are not lending money to each other, why should they care what the rate is?

The FED shrank the monetary base in 2010, yet the FedFunds rate did not budge. It has inflated in 2011, but the FedFunds rate has not budged. What can the FED do to affect monetary policy if commercial banks maintain $1.3 trillion in excess reserves?


The phrase, "pushing on a string," refers to the inability of the Federal Reserve System to stimulate economic growth by expanding its purchase of Treasury debt or other forms of debt. We read on Wikipedia:

Crucially, central banks can limit money creation by either limiting the amount of base money extended, thus denying reserves and preventing commercial banks from extending further loans, or by raising the price of base money extended by increasing interest rates and thus making loans less profitable for the bank (raising the hurdle rate), and while relaxing these constraints can encourage money creation, central banks cannot force commercial banks to extend credit – monetary policy can pull but not push.

Isn't this what has taken place in the United States since 2009? Commercial banks are piling up excess reserves with the FED rather than lending.


Since the FED can no longer affect commercial banking's lending policies by increasing the monetary base or by decreasing it, what is its present tool for directing the business cycle?

Is its purchase of T-bonds in 2011 an attempt to get around the recent impotence of the FED's only previous tool of business cycle manipulation?


The stated official goal of the new policy is this:

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The actual result of this policy has been to push up medium-term T-bond rates and mortgage rates.

In what ways do rising rates on medium-term Treasury debt "promote a stronger pace of economic recovery"? How do they "help ensure that inflation, over time, is at levels consistent with its mandate"?

At what rate for the 10-year T-bond will the present policy on monetary expansion cease?


If the FOMC adopts a policy of "no further purchases," in order to keep T-bond rates from rising, how will this not produce a replay of 2008?

If the monetary base is stable, won't short-term T-bill rates rise and long-term rates fall, as people seek to lock in high rates in T-bonds? Doesn't that move the yield curve closer to an inverted yield curve? If this takes place, won't this foster the return of recession?

In other words, if the present expansionary policy is necessary to keep the economy from faltering, how can the economy grow after the FOMC stabilizes the monetary base?

How can the FOMC ever reduce the monetary base back to the mid-2008 level? Won't this produce a major recession?


The balance of payments deficit is in the $500 billion a year range. If exports rise and imports fall, this will move America closer to balance. How will a rising dollar increase exports? Exports will be more expensive. How will a rising dollar reduce imports? Imports will get cheaper.

So, how can the FOMC stabilize the monetary base without dramatically increasing the payments deficit?


There will be a presidential election in 2012. In the year preceding election years, Federal Reserve policies are usually expansionary.

If the new policy ends in June, as announced in November 2010, what will be the likely result for the economy in November 2012?


Fixed mortgage rates have risen in 2011. Housing prices continue to decline. If the present policy is extended beyond June, how will this affect mortgage rates?

On the other hand, if the FOMC stabilizes the monetary base by ceasing to buy any more Treasury debt, will this cause a return of 2008? If not, why not?

If banks refuse to lend, how can housing recover? How can commercial real estate recover?

If there is a recession in 2012, how can real estate recover?

In short, how can real estate recover?


According to documents that the FED refused to release to the government or the public until the U.S. Supreme Court said it had to, about 70% of the money lent by the FED through the discount window went to foreign banks.



The Federal Reserve is being dragged into public scrutiny. It has fought this every step of the way. It is now doing its best to present the illusion of transparency. This is like watching a dancing bear. It is not ready for "Dancing with the Stars."

Bernanke should do more of these. I think the experience will do him no good, but it will do the public a great deal of good.

The days of wine and roses are over for Gentle Ben. He has no props to deflect scrutiny. He has neither a pipe, as Arthur Burns had nor cigars, as Paul Volcker had. He has no gift of gobbledegook, which sustained Greenspan. All he has is his beard. It may have protected him at Princeton. It will not protect him from YouTube.

April 27, 2011

Wed, 06/01/2011 - 07:33 | 1327882 sgorem
sgorem's picture


Tue, 05/31/2011 - 23:27 | 1327539 Cammy Le Flage
Cammy Le Flage's picture

Liars talking to themselves on the teevee in a building full of liars. What a joke.

Wed, 06/01/2011 - 04:00 | 1327764 unirealist
unirealist's picture

All right, here's the one I sent:

"One of the Federal Reserve's two mandates is to maintain "stable prices."  However, the current stated policy of the Fed is to target a 2% annual rate of inflation.   Since there is no existing dictionary in which a definition of the word "stable" allows for change--any change at all--in that which is "stable," do you think that Congress should pass a law redefining the word "stable" to mean "gradually changing," or do you think that the Fed should admit that it is disregarding its mandate and begin targeting a 0% inflation rate?"


I think the general counsels are going to be hating ZH tomorrow. 

Wed, 06/01/2011 - 23:21 | 1331393 BanksterSlayer
BanksterSlayer's picture

The CSPAN web site now has the video posted. My favorite part was when Ron Paul trapped Alvarez over the question of all those gold assets sitting on the balance sheet valued at $42/ounce. This came at the very end of the video, around the 55-minute mark. Paraphrased:

Ron Paul says: "You keep saying that gold is not money. And yet you have millions of ounces of it in storage at the US Treasury. And your balance sheet always shows this gold at its 1934 value, only $42 per ounce. This makes no sense at all. If you're not ever going to use that gold --and you say it's not money but just some asset gathering dust -- then why don't you sell it back to the people??"


Alvarez says: "I have no position on that at all.... go ask the Treasury department."
Thu, 08/04/2011 - 23:06 | 1525524 season0123
season0123's picture

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