The Longwave Group On Why The Fed Must Be Abolished

Tyler Durden's picture


Who’s In Charge? – The Regulators

Big Brother is alive and living in Washington, D.C. but he is not well.


A malaise of weaknesses and failures, unearthed during the recent credit crisis, continues to permeate through various regulatory agencies such as the Federal Reserve Board, as well as the Securities and Exchange Commission (SEC) and threatens the very survival of the American financial system.

The U.S. Federal Reserve System was established by an Act of Congress in 1913, directly as a result of the banking crisis and stock market crash of 1907. While Congress had no constitutional authority to pass the Federal Reserve Act, its intent was to erect a central bank “as a lender of last resort” in order to protect the assets of the bankers. Indeed, in his book, “Secrets of the Federal Reserve,” author Eustace Mullins purports that the Fed is actually owned by wealthy banking families, such as the Rothchilds, Rockerfellers, Goldmans, Morgans and other bankers. Naturally, this Act also established a fiat monetary system, empowering the Fed to create/print money out of thin air. Thus began the Federal Reserve’s long history of acting, primarily, in the best interests of its owners an under a shroud of secrecy. Indeed, in their book, “A Monetary History of the United States, 1867 – 1960,” authors Milton Friedman and Anna J. Schwartz argue that it was the Federal Reserve which actually exacerbated the economic situation at the outset of the Great Depression by maintaining tight credit conditions in early 1931 and raising its discount rate in two increments to 3.5% later that same year.

As another source, Dow Theory Letter publisher Richard Russell has recently unearthed the following excerpt of a manuscript from yesteryear. “Few Americans know of the betrayal that was plotted on Jekyll Island, Georgia, which was destined to defraud Americans of their wealth and opportunity, and would eventually lead to the subjugation of our great democratic experiment to a centralized global dictatorship. In November of 1910, after having consulted with the Rothschild banks in England, France and Germany, Senator Nelson Aldrich boarded a private train in Hoboken, New Jersey for his destination in Georgia; a hunting club owned by JP Morgan. Aboard the train were six other men: Benjamin Strong, President of Morgan’s Bankers Trust Co., Charles Norton, President of Morgan First National Bank of New York, Henry Davidson, Senior Partner of JP Morgan, Frank Vanderlip, President of Kuhn Loeb’s National City Bank of New York, A. Platt Andrew, Assistant Secretary of the Treasury, and Paul Warburg. The Secret meeting, as described by one of its architects, Frank Vanderlip, went as follows.

There was an occasion near the close of 1910 when I was as secretive, indeed as furtive, as any conspirator. I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System. We were all told to leave our last names behind us. We were told further that we should avoid dining together on the night of our departure. We were instructed one at a time … where Senator Aldrich’s private car would be in readiness, attached to the rear end of the train for the South. Once aboard the private car, we began to observe the taboo that had been fixed on our last names. Discovery, we knew, simply must not happen, or else all our time and effort would be wasted. The goal was to establish a private bank that would control the national currency. The challenge was to slip the scheme to the representatives of the American people. Earlier, it had been called the Aldrich Bill and received effective opposition.

The planners of the revised bill titled it ‘The Federal Reserve Act’ to mask its real nature. It would create a system controlled by private individuals who would control the nation’s issue of money. Furthermore, the Federal Reserve Board, comprised of twelve districts and one director (the Federal Reserve Chairman) would control the nation’s financial resources by controlling the money supply and available credit, all by mortgaging the government through borrowing. The plan worked. The Federal Reserve Bill was held until December 23rd. (two days before Christmas) before it was presented to the House and Senate. Only those senators and congressmen who had not gone home for the holidays – those who owed favors to, or were on the payroll of the bankers – were present to sign the legislation. The name ‘Federal Reserve Bank’ was designed to deceive and it still does. It is neither federal, nor is it owned by the government. It is privately owned. It pays its own postage like any other corporation. Its employees are not civil service. Its physical property is held under private deeds and is subject to local taxation, unlike government property.”

The U.S. Securities and Exchange Commission (SEC), established by the Securities Exchange Act of 1934, together with the Securities Act of 1933, was designed to promote stability in the American capital markets and to improve protection for investors, following the stock market crash in October, 1929. The Commission has a staff of 3,500 located in its Washington headquarters, as well as in eleven regional offices throughout the country. Within the Commission’s mandate is the responsibility to oversee the inspection of securities firms, brokers, investment advisors and rating agencies. It is in this area where the commission has experienced the most difficulty in recent times. Since the resignation of Chairman Harvey Pitt in November, 2002, after only a15-month tenure, the Commission’s effectiveness in this responsibility seems to have been steadily deteriorating. Indeed, this slippage culminated in the revelation of the Bernie Madoff ponzie scheme fraud of a year ago, wherein the SEC had been alerted to this situation many times, but neglected to investigate. The Commission’s website asserts that “In the wake of the Madoff fraud, the SEC’s Office of the Inspector General launched an internal investigation in December, 2008, to determine why the agency did not detect the scheme.” Long Wave Analytics suggests that the answer to that question lies in the staffing of too many junior personnel, not enough staff with investment experience and too many lawyers who never worked a day of their lives in the investment industry.

The current commission Chair, Mary Schapiro, has instituted “decisive and comprehensive steps to reduce the chances that such frauds will occur or be undetected in the future”, such as, revitalizing the enforcement division, revamping the handling of complaints and tips, as well as recruiting staff with specialized experience.

The Congress

In a recent confirmation hearing before the Senate Banking Committee, Federal Reserve Board Chairman Ben Bernanke was read the “riot act” by Kentucky Republican and major league baseball hall of famer, Senator Jim Bunning. Former Fed Chairman, “Alan Greenspan refused to look for (economic) bubbles, or try to do anything other than create them. Likewise, it is clear from your statements over the last four years that you failed to spot the housing bubble, despite many warnings. Instead of close supervision (regulation) of the biggest and most dangerous (U.S.) banks, Mr. Greenspan ignored the growing balance sheets and increasing risk. You did no better. In fact, under your watch, every one of the major banks failed, or would have failed had you not bailed them out. On derivatives, Mr. Greenspan and other Clinton administration officials attacked Brooksley Born when she dared to raise concerns about the growing risks. They succeeded in changing the law to prevent her or, anyone else from effectively regulating derivatives. After taking over the Fed, you did not see any need for more substantial regulation of derivatives, until it was clear that we were headed to a financial meltdown, thanks in part to those products. (Moreover,) you still refuse to provide details on the Fed’s bailouts last year and on all the toxic waste you have bought.

Mr. Greenspan sold the Fed’s independence to Wall Street through the so-called “Greenspan Put.” Whenever Wall Street needed a boost, Alan was there. However, you went far beyond that when you bowed to the political pressures of the Bush and Obama administrations and turned the Fed into an arm of the (U.S.) Treasury. Under your watch, the Bernanke Put became a bailout for all large financial institutions, including many foreign banks. Then, you put the printing presses into overdrive to fund the government’s spending and hand out cheap credit to your masters on Wall Street, which they used to rake in record profits, while ordinary Americans and small businesses can’t even get loans for their everyday needs. You have decided that just about every large bank, investment bank, insurance company and even some industrial companies, are too big to fail. Rather than making management, shareholders and debt holders feel the consequences of their risk taking, you bailed them out. In short, you are the definition of moral hazard. Instead of taking that money and lending (it) to consumers and cleaning up their balance sheets, the banks started to pocket record profits and pay out billions of dollars in bonuses. Because you bowed to pressure from the banks and refused to resolve them, or force them to clean up their balance sheets and clean out the management, you have created zombie banks that are only enriching their traders and executives. You (have) also admitted that you do not have an exit strategy for all the money you have printed and securities you have bought. That sounds to me like you intend to keep propping up the banks for as long as they want.

You told us AIG and its creditors had to be bailed out because they posed a systemic risk, largely because of their credit default swaps portfolio. Those credit default swaps, by the way, are over-the-counter derivatives that the Fed did not want regulated. Well, according to the TARP Inspector General, it turns out the Fed was not concerned about the financial condition of the credit default swaps partners when you decided to pay them off at par. From monetary policy to regulation, consumer protection , transparency and independence, your time as Fed Chairman has been a failure. You stated time and again during the housing bubble, that there was no bubble. After the bubble burst, you repeatedly claimed the fallout would be small. You clearly did not spot the systemic risks that you claim the Fed was supposed to be looking out for. I will do everything I can to stop your nomination and drag out the process as long as possible. We must put an end to your and the Fed’s failures and there is no better time than now.”

Other members of the Senate Banking Committee suggested at the hearing that Chairman Bernanke is likely to be confirmed for a second term as head of the central bank. Some lawmakers said the Fed had “failed” or done a “horrible job” as a regulator and indicated they would push ahead with a proposal that would strip much of the Fed’s regulatory authority. Mr. Bernanke acknowledged that the central bank had made regulator mistakes, admitting that the Fed had “certainly” not done a “perfect job” at regulating excessive risk-taking in the financial sector, a cause of the recent financial crisis. While Mr. Bernanke’s initial term as Fed Chairman expires on January 31, 2010, Committee Chairman Christopher Dodd stated that he didn’t know how soon the committee would hold a confirmation vote and whether or not it would occur before the end of the year.

Last month, the House Financial Services Committee passed a provision, sponsored by Texas Republican Representative Ron Paul, which would subject the Fed’s interest rate decisions to broader audit scrutiny by the Government Accountability Office (GAO), an arm of Congress. Mr. Paul explains that provisions in his amendment would limit interference in monetary policy. The measure, co-sponsored by Representative Alan Grayson, a Democrat from Florida, would exclude any unreleased transcripts, or minutes of Federal Open Market Committee (FOMC) meetings. It calls for an audit of the Fed and its 12 regional banks by the GAO within a year after enactment. In a November
29th.commentary in the Washington Post, Fed Chairman Bernanke stated that curbing the central bank’s authority to supervise the banking system and tampering with its independence would “seriously impair” economic stability in the United States. Furthermore, in a recent Bloomberg Radio interview, former Fed governor Frederic Mishkin argued that Ron Paul’s proposal is “incredibly dangerous in terms of promoting inflation. If you make the central bank beholden to politicians on a short-run basis, you get very bad outcomes: high inflation and less of the ability to deal with shocks like the ones we had recently.”

Taking his case to the next level, in his most recent book entitled “End The Fed”, Mr. Paul argues that “It is and should be a mainstream cause to end the power and secrecy of the Fed. It’s my own view that ending the Fed would address the most vexing problems of (the) politics of our time. It would bring an end to dollar depreciation. It would take away from the government the means to fund its endless wars. It would curb the government’s attacks on the civil liberties of Americans, stop its vast debt accumulation that will be paid by future generations and arrest its massive expansions of the welfare state, that has turned us into a nation of dependents. If you solve the money monopoly problem by ending the Fed, you solve many other problems, too. Essentially, you take away from the government the capacity to use financial trickery to expand without limit. It is the first step to restoring constitutional government. Without the Fed, the federal government would have to live within its means. It would still be too big and too intrusive, just like all state governments are today, but the outrageous empire at home and abroad would have to come to an end.”

The Banks

It is a well documented fact that a few big American banks have long fostered and enjoyed close relationships with U.S. regulators and agencies such as the Federal Reserve Board and the U.S. Treasury. History is also replete with Goldman Sachs executives attaining government postings such as the Secretary of the Treasury; including Robert Rubin and Hank Paulson of recent decades. These relationships of trust are developed and nurtured over time to the point where advice is sought and information exchanged regarding situations on a strictly confidential basis. It is difficult for Long Wave Analytics to believe, for example, that the Federal Reserve didn’t send up a trial balloon last February musing about the prospect of initiating a quantitative easing program involving new Treasury bond issues. How else could Goldman amass $27 billion (U.S.) in trading profits in the first nine months of the year. A 50 basis point move in yield on a 10-year maturity, for example, translates into a price change of $4.20 per $1,000 bond. On a long position of $1 billion (U.S.) of a 10-year Treasury bond, this means a capital gain of $42 million (U.S.).

Who’s in charge? We believe it to be the big American and European banks because, after all, they are the owners of the U.S. Federal Reserve.

Written By: Ian Gordon & Christopher Funston Ian

Full presentation

h/t Joe

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Ruth's picture

and they wonder if their policies need reviewed?   lol

Anonymous's picture

I blame it on play dough

AnonymousMonetarist's picture

The model as the perfect Form is why we're here Alice, hmmm ...Plato's play dough?

JohnKing's picture

Alternative currency is the only answer, it's legal and does an end run on the monetary fascist regime. We don't need their stinkin paper.

WaterWings's picture

I think the only reason Dr. Paul is still with us is because the media does a great job of making this honest man look like a looney. And that's if you're into politics. Otherwise you've 'never heard of him', so he must not be important - even though he has the spirit of Jefferson.

Anonymous's picture

Lincoln succeeded ... and was also killed.

Garfield argued against the banks and Jackson successfully got rid of the European owned US central bank avoiding several assassination attempts.

Powderful people who oppose the bank end up dead.

Anonymous's picture

And it's actually illegal. So good luck with that.

aint no fortunate son's picture

"The greatest trick the Devil ever pulled was convincing the world he didn't exist."

from The Usual Suspects

Daedal's picture

I thought that was from Devil's Advocate.

OutLookingIn's picture

I hear pitchforks rattling!

Gordon_Gekko's picture

The real question is who is in charge of those big American and European banks? The rabbit hole indeed goes deep...

faustian bargain's picture

Just hazarding a guess that it's the same families who owned them in 1913.

Anonymous's picture

not really a guess we have much more recent data than that.

as recently as 1967 James Stillman Rockefeller was president of Citi while his cousin David was Chairman of Chase (now JPMC).

now of course, those fine gentlemen must have been the two most qualified candidates, since the family had long since given away all of its money, and therefore could not have been in a position to influence the boards of those massive corporations...

and everybody remembers US Vice President Nelson Aldrich Rockefeller. named for the Senator who sponsored the original Fed legislation (but not the final), who married his son to Abby Rockefeller.

Ripped Chunk's picture

What is Nelson remembered for again??

Steak's picture

An organization can be corrupt and destructive without having strings being pulled by some nondescript upper echelon.  1000 Goldman bankers acting on their own greed and self interest are probably more destructive than the same number trying to act in unison under the orders of some aristocratic patriarch.

JohnKing's picture

Their compensation plan rewards psychopathic behavior. The more pain you cause, the more you make.


Miles Kendig's picture

Steak, I would say far more destructive.  Hence the reason I keep harping on one of my pet themes that questions IF those that created and loosed this structure have the capacity or will to reign it in knowing that their efforts may end in failure.

blindfaith's picture

Your 401K is !!!!!  we are like virsus who feed on the patient until dead.  The same 401K that sent your job to China so your 'paid to play' manager could look good when he sends you your report on how 'well' your 401K is doing!  You don't need to understand the business, you ARE the business.

Gordon_Gekko's picture

Good post. We need to see more such posts on ZH.

Miles Kendig's picture

And we can further discuss the issues of a gold based currency vs a colonial scrip patterned system of exchange.

Anonymous's picture

Who's the Longwave Group?

aaronvelasquez's picture

Longwave is some guy living in his mother's basement who just finished "The Creature From Jekyll Island."

mojine's picture

... and a cut and paste master!

Anonymous's picture

50 bps for $4.2 on $1000?

Does not seem right, shoud be 4.2% (42mm/1b)

50 bps * dur (~8) = 4%

Grifter's picture

Meanwhile our elected representatives tackle the tough issues and vote on eliminating the BCS:


Rusty_Shackleford's picture

Yeah, but where would this great nation be if we didn't know which professional baseball players were using steroids?


Gwynplaine's picture
Gwynplaine (not verified) Dec 9, 2009 4:44 PM

I think it is a cunning political trick to tie future inflation to Ron Paul's reform efforts.   We know that auditing the Fed will not produce future inflation, but if the Fed's lobbyists can make that lie stick, there may not be any reform in our lifetimes.  When the devaluation becomes obvious, the leaders of our country can say it's Ron Paul's fault.

SilverIsKing's picture

Haven't you heard?  CO2 emissions causes inflation and if we don't pass the heathcare bill, the big banks will fail.

bilbert's picture

I'm not sure that is correct - If I remember correctly, we need to pass the healthcare bill to reduce global warming.............

SilverIsKing's picture

I stand corrected.  Thank you.

geopol's picture

No, It was the spread of H1N1,

Anonymous's picture

This will not be paid for or settled until there are casualties in the street. Many of them.

Financial shananigans are always paid for in blood ultimately, and have been for centuries.

Take my advice and jump now, fuckers!

anynonmous's picture

And I always thought the Rockerfeller-Rothchild connection was the stuff of conspiracy clubs, you know black helicopters, Bilderbergers etc.; the kind of clubs where tinfoil hats adorn the members and they discuss how to store a year's worth of food. But then I read the article above and come across some current mainstream news items which advocate a type of eugenics and global government and talk about domestic surveillance drones as if they were reporting on the latest Yankee trade. Then bizarro stuff like the White House School Safety Czar as an advocate of things unspeakable or a President who says one thing about the TARP on Tuesday and on Weds his Treas. Sec. goes and does just the opposite. Then we have Tiger the paragon of all things good and pure only to find out that the guy is, and actually always has been a prick both on and off the course but that the media chose to keep quiet about it.

Where do I apply for my tinfoil hat?

Anonymous's picture

I can make one for you. All my friends are getting one for Christmas.

Privatus's picture

Obama's bumfuckery czar, Kevin Jennings, is a truly sickening freak. Who's next for Attorney General, Charles Manson?

chunkylover42's picture

The whole thing is being choreographed to recapitalize underfunded bank balance sheets.

SilverIsKing's picture

BINGO!  One more like that and you get to trade in your prize for the larger one.

Tour de France's picture

Well, it is not so much that fed needs to be abolished, but it should really be targeting inflation rates.

Anonymous's picture

It's hard to trust anyone whose believes that the 'big banks' own the fed.

A modicum of research shows that's simply bogus by any standard....

Sad really, most of these beliefs are based on on griffin's work of fiction - Jeykll Island.

Anonymous's picture

That's right. The Fed is not owned by anyone, and is staffed by priests who grow up meditating half-naked, eating forest insects, and chopping wood and carrying water, after taking lifelong vows of poverty. If you saw Ben Bernanke on TV in the Fed building, with the 30-foot ceilings, marble stairways, and gold-plated chairs, you know what I mean. The Fed exists only to serve.

Rusty_Shackleford's picture


Your ideas are intriguing to me and I wish to subscribe to your newsletter.
Anonymous's picture

First thing I'm gonna do when i build my time machine is travel back to 1910 and blow up that rail car. Imagine the fall out if the 5 most powerful bankers in the country were to be eliminated from 20th century history. We might be worse off...but dayum....odds are we would be in much better shape.

Anonymous's picture

The Federal Reserve has been working for 100 years to enslave you and it is almost there. It is just one economic collapse away from a suspension of the Constitution and martial law. Our Nation needs to turn to God and the Christian principles upon which it was founded before it is too late.

Prophet of Wise's picture

Just hazarding a guess that it's the same families who owned them in 1913.

To the last drop of Idumean blood. Let there be no doubt not one name has changed nor apprenticeship granted to any man outside the Synagogue. [Chart of who "owns" the Federal Reserve] [Court Rules Federal Reserve is Privately Owned] [Misconceptions Regarding the Federal Reserve One Man's Letter to the Editor] [The History of the House of Rothschild]