The Stuff Conspiracy Theories Are Made Off: The Emergence Of A Secret Banking Cabal
Bloomberg's David Reilly puts to paper what everyone watching this week's Geithner grilling was all too aware of.
The idea of secret banking cabals
that control the country and global economy are a given among
conspiracy theorists who stockpile ammo, bottled water and
peanut butter. After this week’s congressional hearing into the
bailout of American International Group Inc., you have to wonder
if those folks are crazy after all.
Wednesday’s hearing described a secretive group deploying
billions of dollars to favored banks, operating with little
oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York,
whose role as the most influential part of the federal-reserve
system -- apart from the matter of AIG’s bailout -- deserves
further congressional scrutiny.
The New York Fed is in the hot seat for its decision in
November 2008 to buy out, for about $30 billion, insurance
contracts AIG sold on toxic debt securities to banks, including
Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale
and Deutsche Bank AG, among others. That decision, critics say,
amounted to a back-door bailout for the banks, which received
100 cents on the dollar for contracts that would have been worth
far less had AIG been allowed to fail.
Perhaps the catharsis of writing about it will make the pain from the ever more obvious realization of what is going on behind the scenes finally go away. Or maybe not.
“In fact, when the information was finally released, under
pressure from Congress, nothing happened,” Towns said. “It had
absolutely no effect on AIG’s business or financial condition.
But it did have an effect on the credibility of the Federal
Reserve, and it called into question the Fed’s penchant for
Now, I’m not saying Congress should be meddling in
interest-rate decisions, or micro-managing bank regulation. Nor
do I think we should all don tin-foil hats and start ranting
about the Trilateral Commission.
Yet when unelected and unaccountable agencies pick banking
winners while trying to end-run Congress, even as taxpayers are
forced to lend, spend and guarantee about $8 trillion to prop up
the financial system, our collective blood should boil.