If you ever wondered just how independent the Federal Reserve is, wonder no more. A recently declassified transcript of a July 16, 1974 phone conversation between Henry Kissinger and then-Fed Chairman Arthur Burns, demonstrates just how very involved in global financial bailouts the Federal Reserve gets under duress of the administration. In the span of about a minute Kissinger advises Burns to do whatever he must to "not let Italy go down the drain." The facility with which the Federal Reserve throws around US taxpayer capital to bail out the "chosen ones" is simply beyond reproach. We are confident that the Fed is currently preparing a comparable bail out package for Greece as a measure of last resort. There is no way that Ben Bernanke will allow Greece to fail, killing the euro and sending the dollar into the stratosphere, destroying all hope of inflating the trillions in bad debt saddling America's banks and the Federal Reserve (which is now the world's biggest bank holding company).
Full memo below, here selection presented:
Kissinger: I called you yesterday about the possible assistance to Italy if that becomes necessary and I understand that one idea is to use the swap line and that you are a little reluctant to do it. I don't want to get into fiscal details which I don't fully understand. I just want to point out from a foreign policy point of view we cannot let Italy go down the drain. Whether that is the way to do it or some other way, I don't know.
Burns: I agree and I have been actively trying to get other countries to contribute a package but what we can do through the swaplines is very limited. The amount could be large but it is a three month loan and that is not what they need.
K. Yes. My people tell me you would not approve more than $300 million.
B. As a start.
K. Yes. Look, on financial things I am not somebody - I cannot get into a debate on numbers. All I wanted to stress to you is to really give this - if it arises - very high priority.
B. I agree and I was active in getting the credit line extended. Also in a meeting with the finance ministers I went around and pushed the Germans and Japanese to contribute to a package for Italy. It is a loan of medium term duration and the swap line does not serve that purpose. That is the essential point.
K. If you can five any other thought to that problem I would appreciate it.
B. You bet I will.
Recently, the Fed had no problem arranging over $500 billion in swaplines to bail out the world. We are confident the same is true right now as the Fed is looking at a comparable bail out plan for Greece. Additionally, as we have pointed out in the past, a back up plan for the Fed is to simply purchase Greek debt, which without any ability to refute, we can safely assume it is currently doing.
Document courtesy of Operations Officer