End the Fed? David Korten Responds

"The Dodd-Frank financial reform bill signed into law by President Obama on July 21, 2010 included a mandate for a one-time Government Accountability Office audit of the emergency lending facility the U.S. Federal Reserve established in response to the 2008 Wall Street financial crash. The audit revealed that the Fed had secretly made $16 trillion in financial commitments to a long list of the world’s largest financial institutions and corporations, many based in other countries. It was all done entirely in secret, at the Fed’s own discretion, and based on nothing more than computer key strokes."

"The U.S. Federal Reserve System [the Fed’s primary functions are carried out by a system of 12 regional Federal Reserve Banks] is a study in obfuscation. It appears in the organization chart of the U.S. government and presents itself to the world as an independent government body, but its highly complex governance structure assures its operations are in fact controlled by the big banks whose interests it faithfully serves. It piously reports that its accounts are subject to extensive internal and external audit, but only the special one-time audit ordered by the U.S. Congress in the Dodd-Frank financial reform bill signed into law by President Obama on July 21, 2010 under vigorous Fed protest revealed the amount and the beneficiaries of its $16 trillion post-crash handouts.

There are angry calls from both left and right to shut down the Fed. The anger is justified. The call to shut it down, however, ignores the reality that a national money/banking system requires oversight and management by a central bank or its institutional equivalent. The choices center on that institution’s degree of transparency, to whom it will be accountable, and what its priorities will be.

The Federal Reserve System under Allan Greenspan and Ben Bernanke has used its power to maximize Wall Street profits by suppressing wages, inflating financial bubbles, facilitating predatory financial games that should be illegal, and bailing out the losers—all behind a veil of strict secrecy. It can and should be restructured to be transparent and publicly accountable for using its power to support full employment and maintain stable asset valuations."

http://www.yesmagazine.org/blogs/david-korten/now-that-is-real-power