FedUpUSA

I know it’s a difficult thing to stop lying when you’re in Washington DC where the easiest way to determine if someone is being untruthful is simply to observe if their lips are moving, but this is going too far:

And fifth, policymakers should ensure that consumers are protected from unfair and deceptive practices in their financial dealings.

You mean like The Fed has since a formal decision in 1998?

Under a policy quietly formalized in 1998, the Fed refused to police lenders’ compliance with federal laws protecting borrowers, despite repeated urging by consumer advocates across the country and even by other government agencies.

So let’s see, you have power, you formally and officially refuse to recognize and use it, then you say that “policymakers should” do the very thing you repudiated?

Why didn’t The Fed’s chair say “The Fed as a policymaker will ensure that consumers are protected from unfair and deceptive practices”?

The reason for that is simple: The Fed will do no such thing – in fact, according to The Washington Post The Fed adopted a formal policy to ignore such abuses in 1998 – more than 10 years ago!

Let’s move on:

To close this important gap in our regulatory structure, legislative action is needed that would subject all systemically important financial institutions to the same framework for consolidated prudential supervision that currently applies to bank holding companies.

Really Ben?  This is the same “framework” that has led to nearly 100 bank failures exposing dramatic and outrageous asset over-valuations!  Yet despite a two-year unbroken record on this account, with some of these “optimistic” valuations reaching levels that are truly ridiculous, such as Colonial’s sixty percent loss on their commercial lending book (and a nearly-40% hidden loss on their ENTIRE book of assets, all hidden until their failure) there has been zero reaction from The Fed to demand that realistic and proper asset valuations be recognized on bank balance sheets.

Or shall we talk about the “off-balance sheet” games, such as Wachovia’s practice of writing CDS against their own tranches of OptionARMs as inducement to get people to buy them – a toxic brew that has now landed on Wells Fargo and remains undisclosed as to the exposure it presents to Wells from possible (or even probable) defaults!  Wells has some $2 trillion of this off-balance sheet exposure and they’re hardly alone in the (ab)use of these “QSPEs” – indeed, those are the same sort of vehicles that a really great energy-related company called ENRON was (ab)using to hide mounting losses that ultimately blew them sky-high.

The Federal Reserve is already the consolidated supervisor of some of the largest and most complex institutions in the world. I believe that the expertise we have developed in supervising large, diversified, and interconnected banking organizations, together with our broad knowledge of the financial markets in which these organizations operate, makes the Federal Reserve well suited to serve as the consolidated supervisor for those systemically important financial institutions that may not already be subject to the Bank Holding Company Act.

It is certainly a good idea to give an institution that formally adopted a policy of ignoring consumer protection yet more responsibility (yes, that’s sarcasm.)

Given that The Fed has shown willful and intentional refusal to enforce existing laws along with willful blindness to off-balance sheet exposure and ridiculously-optimistic asset valuations The Fed should not be given any additional supervisory authority until and unless we have 100% transparency in Fed operations and write into law criminal penalties for the FOMC members and Fed District bank directors and officers that refuse to enforce consumer protection laws, allow off-balance sheet exposures that distort financial firm strength, and permit banks to carry assets at values that are materially above actual valuations.

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