Rand Paul Rages "The Fed Is Crippling America"

Tyler Durden's picture

Authored by Senator Rand Paul and Mark Spitznagel, originally posted at Time.com,

The country deserves to understand the extent of its balance sheet

On Jan. 12, Congress is scheduled to vote on the “Audit the Fed” legislation (H.R. 24/S. 264), which, if passed, would bring to an end to the Federal Reserve’s unchecked—and even arguably unconstitutional—power in the financial markets and the economy.

We aren’t the first to be wary of the powers of central banks. Founding Father Thomas Jefferson viewed the powers of central banks as being contrary to the protections of the Constitution. As Jefferson wrote:

“I sincerely believe that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

In a similar vein, the great Austrian economist Ludwig von Mises also recognized that limiting government power in the realm of money was a matter of liberty, not merely economics. Mises explained that

“the idea of sound money … was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”

How far we have come as a country that these words from Jefferson and Mises sound so foreign today. Perhaps we have all been blinded by the credit and equity bubbles that surround us. But what better wake-up call to rally support for legislation that would shine a bright light on the government institution that today has created these bubbles, subsidizes small subsets of the population (thus amplifying wealth inequality), and enables endless government debt?

The Fed was intended to be an apolitical body, a concession to placate the naysayers. But today, the Fed isn’t even shy about entering the political fray: witness Federal Reserve Chair Janet Yellen’s income inequality speech riddled with Democratic talking points during the 2014 elections.

The Fed is, indeed, a political, oligarchic force, and a key part of what looks and functions like a banking cartel. During the 2007-08 financial crisis, the Fed’s true nature was clear to anyone paying attention. As the Treasury began bailing out the investment banks from the consequences of their profligate risk-taking (and in some cases fraudulent schemes), the Fed moved in tandem, further purchasing the underwater assets of these institutions, as well as actually paying interest to the commercial banks (hemorrhaging from risky loans) for reserves they kept parked at the Fed.

To be sure, Fed officials came up with opaque jargon to describe such operations, but the stark reality is that the Fed was treating risky assets as good collateral, and in the fall of 2008 began literally paying banks to not make loans to their customers.

Even today, the recent policy announcement has doubled the rate of this massive implicit taxpayer subsidy to the banks - what they call “interest on reserves.” In the textbook rate-hike case, the Fed sells off assets (or slows the rate of purchases) in order to reduce the supply of reserves. Then, the equilibrium price of borrowing reserves (i.e., fed funds rate) rises. In contrast, now and for the foreseeable future, as indicated by the Fed’s guidance statements, the Fed is raising rates by increasing interest on reserves.

As of Dec. 17, the Fed is paying 50 basis points on both required and excess reserves. So the Fed, itself, is increasing how much it will pay to “borrow” reserves from the commercial banks. Given the estimated $2.6 trillion in excess reserves, at 50 basis points that means the Fed will be paying commercial banks some $13 billion in annual income. Right now, the Fed is paying the same on required and excess reserves, though that in principle could differ.

As the Fed keeps raising interest rates through this same mechanism, the amount paid to commercial banks will only mushroom. You can forgive analysts for not discussing this; it was not even mentioned in the Fed’s Dec. 16 announcement.

As the Fed pays commercial bankers more in interest payments, there is dollar-for-dollar less for the Treasury; in other words, for a given level of federal expenditures, the deficit is that much higher. Therefore, the U.S. taxpayer is subsidizing commercial banks to not make loans to their customers—or rather bribing them to charge their customers higher interest rates on loans. And, the U.S. taxpayer is going deeper into debt to provide this bank subsidy.

This is but one aspect of the farce that is today’s Fed policy. In addition, we actually don’t know the full extent of or the precise recipients of the Fed’s asset purchases and bailouts as its balance sheet exploded from about $900 billion in August 2008 to almost $4.5 trillion today.

Now, the Fed has painted itself into a corner. It can’t sell off its bloated balance sheet for fear of crashing the mortgage-backed securities market—and, indirectly, real estate—and it can’t sell off its treasury holdings because that would push up treasury yields and increase the servicing cost of U.S. debt. This is partly the reason the Fed has chosen to raise rates by paying bankers more.

If treasury yields rise, then the market value of existing treasury securities goes down. The Fed currently holds about $2.5 trillion (all maturities) of treasuries. At the same time, the Fed’s capital is at most $67 billion or so. Given that the Fed is levered to the hilt, if treasury yields go up too much, Fed is bankrupt in an accounting sense.

Most dangerous of all, global credit and equity markets have been manipulated by central bank policies to levels that are unsustainable and highly crash-prone.

Clearly, the country needs to understand fully the extent of the Fed’s balance sheet: what it holds and from whom it was acquired, as well as all of the Fed’s other activities and conceivably even more dangerous shenanigans afoot.

We can’t really know what we don’t know until we look. We owe it to the “swindled futurity” of the next generation to take a long, hard look through a full and independent audit of the Fed.

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Quebecguy's picture


BullyBearish's picture

Thanks for your downvote Janet...What a prize if captured:

Imagine if you will that you are a private concern such as the FED is and you have the machine to make all the money in the US and no one is going to audit or check up on you. You are not answerable to anyone, not the President, Congress or the Supreme Court.


No wonder they will fight to the death (ours)  to not give it up...

The Saint's picture
The Saint (not verified) BullyBearish Jan 11, 2016 9:46 PM

Rand's just mad he got kicked to the "kiddie" debate so he's taking his marbles and going home with a few angry comments on the way out.

Whodathunkit's picture

Hey you, White House
Ha ha, Charade you are
You house proud town mouse
Ha ha, Charade you are
You got to stem the evil tide
And keep it all on the inside

philosophers bone's picture

The sponsors of Fox Business News disagree.

WayBehind's picture

No kidding. The got fucked once again and won't be allowed to participate in the GOP debate. Fuck them all, these liberal cocksuckers. 

Prairie Dog's picture

Yawn yawn yawn. same old same old same old

Quebecguy's picture

Keep up the burn China, we're WAITING!!

sleigher's picture

"arguably unconstitutional"


Show me where in the Constitution it says Congress can delegate power and then we can argue whether it is constitutional.

Quebecguy's picture

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." -Woodrow Wilson, after signing the Federal Reserve into existence

Dark Daze's picture
Dark Daze (not verified) Quebecguy Jan 11, 2016 8:52 PM

So why did he do it? Does anybody know?

BullyBearish's picture

Yes...he was an academic reliant upon his "friend", Colonel Edward Mandell House

Dark Daze's picture
Dark Daze (not verified) BullyBearish Jan 11, 2016 10:00 PM

Thanks. I have a read about him. But I think I already pretty well know what I'm goign to find out.

So here's the thing. The day Nixon broke Bretton Woods, the day that it was discovered that Regan lied about Iran/Contra, the day that Bush II signed the Patriot Act and the day that Obama re-created it (whatever it is called now), were the days when Congress and/or the Supreme Court should have acted to remove them, immediatetly, because the broke their oaths. If Congress won't stand for the Constitution then they have all lied, they have all committed treason, each and every one of them.

ultraticum's picture

Those so-called quotes from the worst president in history, Woodrow Wilson, about his supposed anguish about creating the Fed, are FALSE.  He thought it was one of his crowning achievements.

KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) ultraticum Jan 11, 2016 10:26 PM

"So why did he do it? Does anybody know?"


Plain old fashioned blackmail. They had the 'scandal' goods on WW going back to Princeton.

UncleChopChop's picture

The Fed was intended to be an apolitical body, a concession to placate the naysayers. 



The Fed was intended to deceive the masses into thinking it was an apolitical body.



Chupacabra-322's picture

The Criminal Federal Reserve. A Private, CORP. INC Entity.

The Criminal Fraud UNITED STATES, aka "Federal Government." Another CORP. INC. Entity.

- - - - - -'s picture
- - - - - - (not verified) Jan 11, 2016 8:07 PM

well thats all what the fed is about

odatruf's picture

Therefore, the U.S. taxpayer is subsidizing commercial banks to not make loans to their customers—or rather bribing them to charge their customers higher interest rates on loans. And, the U.S. taxpayer is going deeper into debt to provide this bank subsidy.

I call bullshit on this ^^. If I buy a regular coffee one day and toss the four bucks and change left over from the fiver I paid with in a homeless cup and then the next day buy a mocha latte a chino with soy milk and toss the leftover 11 cents into the same homeless bucket, did the homeless guy subsidize the coffee shop or my caffeine fix?

Fucks sake, of course not.


Dark Daze's picture
Dark Daze (not verified) odatruf Jan 11, 2016 9:05 PM

Whatever shit you are using, stop using it.

Duc888's picture


Odatruf: If I buy a regular coffee one day and toss the four bucks and change left over from the fiver I paid with in a homeless cup and then the next day buy a mocha latte a chino with soy milk and toss the leftover 11 cents into the same homeless bucket, did the homeless guy subsidize the coffee shop or my caffeine fix?


You volunteered to give it away.  Can I opt out?

TheReplacement's picture

You may opt out for a re-education/extermination camp as soon as we have sucked all of your wealth and productivity from you. 

See, you are free.

herkomilchen's picture

Unless it was the homeless guy's $5 you took from him in the first place.

two hoots's picture

Not  counting Reverse Repo payments, the 6% divy to member banks and their 5 Star $1.6B operating budget (unaudited).     And payments to "research analyst"  along value of insider information/speech  content/time, which is certainly shared within the family/clan/connections.

Dimons jock's picture

Auditing the fed is the equivelant of demanding to see your mothers vagina. You don't want to know what it looks like ;)

db51's picture

Well, at one time during the birthing process your lips were probably all over it...just saying.

Dimons jock's picture

Haha yup & my dick too. Been over 40 years so like the balance sheet - much has changed. I know you get my point. Fed has done some crazy shit & i for one don't want to know. Life would change for the worse if it ever came to light, imo.

Clowns on Acid's picture

Yeh... for you presently but not for others in the future

WTFUD's picture

I've seen your ma's baz jock and you're a good judge.

db51's picture

If Rand Paul Rages in the Forest, does he make a sound?

Wahooo's picture

Is Rand ready to take on the Jewish kingpins? Or is his Fed code for just that?

commishbob's picture

I wish I could believe in this, but it'll be no different than each attempt to repeal ObamaCare.

Even if it passes and becomes law, it will be more watered-down than a drink at Applebee's. 

And the shredding that will take place at the Eccles building will make Arthur Andersen blush. 

two hoots's picture

Is the Fed political?  Obama/Yellen agreed to have this committee established:

The Community Advisory Council (CAC) was formed by the Federal Reserve Board in 2015 to offer diverse perspectives on the economic circumstances and financial services needs of consumers and communities, with a particular focus on the concerns of low- and moderate-income populations.

Lordflin's picture

I went to see Ron Paul speak at a small venue in Spokane in 2011. He came across as quite sincere and very much a gentleman and a statesman. His son, on the other hand, appears to be another politician.

I was reading an article today suggesting that as AI increases capability it will eventually be able to solve the worlds problems. And I know some of you will take exception to this, and while I can respect that, I will state my opinion anyway. Man's difficulty is not lack of intelligence, or rather greater intelligence will not help. If man were a moral creature we would have a very different world. As man is by nature a sinful creature the more power placed into his hands the greater the evil he will enact.

It is for that reason that I pray for a collapse sooner rather than later. At the rate we are gaining technological know how the sky is the limit when it comes to the nightmare unfolding at the hands of the ruling banking class.

That said, my children are all off to grad school in the sciences... The sins of the father...

Clowns on Acid's picture

"If man were a moral creature we would have a very different world." - NO shiite Dick Tracy. Thats why the smart lads configured the Constitution.

Can't recreate the Constitution with AI.

Dark Daze's picture
Dark Daze (not verified) Clowns on Acid Jan 11, 2016 9:51 PM

But what they didn't do, and it was a monstrous error, was provide for what they all knew was the case. That greed and men are best friends, always. So one by one, each supposedly indepdent institution has been subjugated and the Constitution has been overturned without so much as a wimper from the SC. THat is how bad it is. It's the worst I have ever seen.

TheReplacement's picture

We just need on amendment to fix it all. 

Each year to total wealth of each and all will be tallied.  Those in the top .01% will be executed.  This includes foundations and corporations and everyone employeed and benefitting financially from them. 

Corps are people and people can be corpses.

Ms No's picture

I think their biggest mistake was failing to write it in clear enough language and repeating themselves in a variety of ways so that there is no doubt to the intentions.  They should have stated things like....



Hail Spode's picture

System sending a message



The vote is tomorrow and today the lead Sponsor was voted out of the grown-up Presidential debates. 

Your Creator's picture

is the irs apolitcal?!?

Number 9's picture

Yeah sure Rand what ever.. Maybe you should try getting Israeli cock out of your mouth first and maybe someone might believe you actually mean it.

TheReplacement's picture

I distinctly heard him say he would cut all foreign aid, all in order to get debt under control.  When asked about Israel, he still said all.

Ace Ventura's picture

That's just it......"cut" does not mean "cease and desist altogether". And given Rand has shown he is a political animal, by "cut", he probably means "reduce the level of next year's increase".

He has bowed at the AIPAC altar if memory serves, something his father never did.


coast's picture

Seems Ron's homeschooling is working

Number 9's picture

You're kidding right? Did Ron school him on how to backstab your flesh and blood and support Romney?

BeerMe's picture

Pretty sure that was after Romney won the nomination.

Number 9's picture

How soon you forget:

CNN's Wolf Blitzer just interviewed Rand Paul and gave him the opportunity to comment on the fact that the Republican National Committee failed to announce from the podium the votes Ron Paul received during the nomination roll call.

Blitzer called the RNC move as small, disrespectful, and unfair. Rand failed to answer the question and comment on the RNC disrespect. Instead, Rand did the politician thing and answered a different question about what was in the platform.

Blitzer went on to say it was disrespectful that the RNC failed to give his father a speaking spot. He tried to get comment from Rand, but Rand did the political thing and not back up Blitzer on his comment but went into a monologue on how much better Romney-Ryan was then Obama-Biden.

Rand sounded like a bought and paid for tool of the establishment, putting the establishment ahead of his father, even though Blitzer was giving Rand every opportunity to support his father against RNC and its clear bias against Ron Paul.


That is called pitching papa under the bus. 


highwaytoserfdom's picture


these elitist are lost in an information world....    Randy  apples not supose to fall to far from the tree grow a pair and take the gloves off...      Cruse is dangerous Goldman puppet  and Trump  well don't trust him but as you know Dad won Iowa, Massachusetts delegates, probably NH....      Been hard working on delegates and the Rove Romney Bush Clinton PNAC crime syndicate is having a hard time on both DNC/RNC time....  


Grow a pair Randy  

bunnyswanson's picture

The assignment was Destroy America financially.  And it has been accomplished.  Grow a pair like JFK?  We cannot protect our heroes.  We deserve this.