Yesterday, I quoted
an economist with the U.S. House of Representatives Financial Services
Committee for eleven years who assisted with oversight of the Federal
Reserve to show that there might be some basis for Ron Paul's questions
to Ben Bernanke about the Federal Reserve's alleged shipment of money
Here is some more information.
In July 2009, Congressman Henry Waxman stated:
In a 13 month period from May 2003 to June 2004, the Federal Reserve sent nearly $12 billion in cash, mainly in $100 bills from the United States to Iraq. To do that, the Federal Reserve Bank in New York
had to pack 281 million individual bills ... onto wooden pallets to be
shipped to Iraq. The cash weighed more than 363 tons and was loaded
onto C-130 cargo planes to be flown into Baghdad...
The Fed starting shipping the money a month after
Saddam went into hiding (but long before he was captured), so the money likely did not go to Saddam. However, it shows how well the
Fed can move money around the world.
And an interesting New York Times op-ed
written in 2004 by Martin Mayer, a prolific financial journalist,
Brookings Institution scholar, and the author of more than 30 books on
financial market issues, argues:
[Saddam] Hussein's possessions when he was captured was three-quarters
of a million dollars in United States currency in crisp new bills.
Whence came the gentleman's stash?
Answering this question would
help our understanding of terrorist financial networks. And if the cash
is sequentially numbered, as is likely, then the question could be
All United States currency is printed
by the United States Mint, to the order of one of the 12 banks of the
Federal Reserve system. It comes into circulation through a bank that
has an account at the Fed for which it was printed. The Fed deducts the
face value of the bills from that account, and an armored car takes
them to their new owner.
That regional Federal Reserve
Bank keeps a record that identifies the purchasing bank. And the
purchaser knows how it disposed of the bills. When they are found all
together, it means that the bank that bought the bills did not feed
them out from the teller window or the cash machine, but delivered them
to a single customer.
And the bank knows who that
customer was. Between, say, Philadelphia and Iraq, there is no doubt a
chain, perhaps involving banks in the Cayman or Channel Islands, in Abu
Dhabi or Dubai. Still, each bank in the chain can give the name of the
customer to which it gave these bills.
Hussein's government had many sanctions against it, it may well be that
no laws were broken in the passage of the Federal Reserve notes from
the mint to Tikrit. But it would be interesting to know which banks
were collaborators in getting that cash to the tyrant of Iraq.
Unfortunately, the search for these witting or unwitting collaborators
cannot even get started, because the Federal Reserve Board will not
permit regional banks to reveal the identity of the purchasers of large
blocks of United States currency. There is no law that prohibits such
disclosure; it's simply a Fed policy. Yet in this age of payroll
services and electronic payments, there are few legitimate uses outside
the banking system for very large orders of hundred-dollar bills.
The Fed has always resisted placing American banks under obligation to
reveal skulduggery, whether it involves drug smuggling, commercial
fraud, terrorism or other international conspiracy. Banks are not, the
Fed insists, law enforcement agencies. It may be that the F.B.I. has
access to the Fed's records -- a spokesman for the Fed, after checking
with the main office, would not say yea or nay -- but it is not clear
that the F.B.I. has authority to continue such searches beyond American
The Fed's manual on the Bank Secrecy Act still
says that ''know your customer''rules, while desirable, are ''not
presently required by regulation or statute'' -- though the Patriot Act
has spawned some rules on the identification of new customers. At any
rate, the manual says rather mysteriously, such rules ''should not
interfere with the relationship of the financial institution with its
Senators Charles E. Grassley and Max
Baucus, chairman and ranking member, respectively, of the Finance
Committee, complained to the Treasury Department last year that not
enough has been done to keep the financiers of terrorism from paying
their bills through the American financial system. Perhaps Congress
should tell the Fed to release its hold on information about which
banks supply the bundles of cash that facilitate international crime.
The head of the UN office on drugs and crime says
that drug money kept the global banking system afloat during the height
of the financial crisis. Former Managing Director and board member of
Wall Street investment bank Dillon Read, Catherine Austin Fitts, has
long alleged that the American banking system launders huge amounts of drug money. I have no idea whether or not she is right.
In fact, I
don't know anything about money laundering, drug trafficking or
terrorist networks. But I might be able to guess who could track that
kind of information: the Fed.