Monday, July 21, 2014

Big Banks Hit With Monster $250 Billion Lawsuit in Housing Crisis

Photo by Clexow (CC BY-SA 2.0)

By Ellen Brown, Web of Debt
This piece first appeared at Web of Debt.
For years, homeowners have been battling Wall Street in an attempt to recover some portion of their massive losses from the housing Ponzi scheme. But progress has been slow, as they have been outgunned and out-spent by the banking titans.

In June, however, the banks may have met their match, as some equally powerful titans strode onto the stage.  Investors led by BlackRock, the world’s largest asset manager, and PIMCO, the world’s largest bond-fund manager, have sued some of the world’s largest banks for breach of fiduciary duty as trustees of their investment funds. The investors are seeking damages for losses surpassing $250 billion. That is the equivalent of one million homeowners with $250,000 in damages suing at one time.

The defendants are the so-called trust banks that oversee payments and enforce terms on more than $2 trillion in residential mortgage securities. They include units of Deutsche Bank AG, U.S. Bank, Wells Fargo, Citigroup, HSBC Holdings PLC, and Bank of New York Mellon Corp. Six nearly identical complaints charge the trust banks with breach of their duty to force lenders and sponsors of the mortgage-backed securities to repurchase defective loans. 

Why the investors are only now suing is complicated, but it involves a recent court decision on the statute of limitations. Why the trust banks failed to sue the lenders evidently involves the cozy relationship between lenders and trustees. The trustees also securitized loans in pools where they were not trustees. If they had started filing suit demanding repurchases, they might wind up sued on other deals in retaliation. Better to ignore the repurchase provisions of the pooling and servicing agreements and let the investors take the losses—better, at least, until they sued. 

Beyond the legal issues are the implications for the solvency of the banking system itself. Can even the largest banks withstand a $250 billion iceberg? The sum is more than 40 times the $6 billion “London Whale” that shook JPMorganChase to its foundations. 
 Who Will Pay – the Banks or the Depositors?

The world’s largest banks are considered “too big to fail” for a reason. The fractional reserve banking scheme is a form of shell game, which depends on “liquidity” borrowed at very low interest from other banks or the money market. When Lehman Brothers went bankrupt in 2008, triggering a run on the money market, the whole interconnected shadow banking system nearly went down with it. 

Congress then came to the rescue with a taxpayer bailout, and the Federal Reserve followed with its quantitative easing fire hose. But in 2010, the Dodd Frank Act said there would be no more government bailouts. Instead, the banks were to save themselves with “bail ins,” meaning they were to recapitalize themselves by confiscating a portion of the funds of their creditors – including not only their shareholders and bondholders but the largest class of creditor of any bank, their depositors.  

Theoretically, deposits under $250,000 are protected by FDIC deposit insurance. But the FDIC fund contains only about $47 billion – a mere 20% of the Black Rock/PIMCO damage claims. Before 2010, the FDIC could borrow from the Treasury if it ran short of money. But since the Dodd Frank Act eliminates government bailouts, the availability of Treasury funds for that purpose is now in doubt

When depositors open their online accounts and see that their balances have shrunk or disappeared, a run on the banks is likely. And since banks rely on each other for liquidity, the banking system as we know it could collapse. The result could be drastic deleveraging, erasing trillions of dollars in national wealth. 

Phoenix Rising

Some pundits say the global economy would then come crashing down. But in a thought-provoking March 2014 article called “American Delusionalism, or Why History Matters,” John Michael Greer disagrees. He notes that historically, governments have responded by modifying their financial systems:
Massive credit collapses that erase very large sums of notional wealth and impact the global economy are hardly a new phenomenon . . . but one thing that has never happened as a result of any of them is the sort of self-feeding, irrevocable plunge into the abyss that current fast-crash theories require.

The reason for this is that credit is merely one way by which a society manages the distribution of goods and services. . . . A credit collapse . . . doesn’t make the energy, raw materials, and labor vanish into some fiscal equivalent of a black hole; they’re all still there, in whatever quantities they were before the credit collapse, and all that’s needed is some new way to allocate them to the production of goods and services.

This, in turn, governments promptly provide. In 1933, for example, faced with the most severe credit collapse in American history, Franklin Roosevelt temporarily nationalized the entire US banking system, seized nearly all the privately held gold in the country, unilaterally changed the national debt from “payable in gold” to “payable in Federal Reserve notes” (which amounted to a technical default), and launched a series of other emergency measures.  The credit collapse came to a screeching halt, famously, in less than a hundred days. Other nations facing the same crisis took equally drastic measures, with similar results. . . .
Faced with a severe crisis, governments can slap on wage and price controls, freeze currency exchanges, impose rationing, raise trade barriers, default on their debts, nationalize whole industries, issue new currencies, allocate goods and services by fiat, and impose martial law to make sure the new economic rules are followed to the letter, if necessary, at gunpoint. Again, these aren’t theoretical possibilities; every one of them has actually been used by more than one government faced by a major economic crisis in the last century and a half.
That historical review is grounds for optimism, but confiscation of assets and enforcement at gunpoint are still not the most desirable outcomes. Better would be to have an alternative system in place and ready to implement before the boom drops. 

Posted on Jul 17, 2014
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Friday, July 18, 2014

California Death Penalty System Is Unconstitutional, Federal Judge Rules

LA QUINTA, Calif. — A federal judge ruled Wednesday that California’s death penalty system is so arbitrary and plagued with delay that it is unconstitutional, a decision that is expected to inspire similar arguments in death penalty appeals around the country.

The state has placed hundreds of people on death row, but has not executed a prisoner since 2006. The result, wrote Judge Cormac J. Carney of United States District Court, is a sentence that “no rational jury or legislature could ever impose: life in prison, with the remote possibility of death.”

That sense of uncertainty and delay, he wrote, “violates the Eighth Amendment’s prohibition against cruel and unusual punishment.”

About 40 percent of California’s 748 death row inmates have been there more than 19 years.

Judge Carney, who was appointed by President George W. Bush, issued the 29-page order vacating the death sentence of Ernest Dewayne Jones, convicted in 1995 of raping his girlfriend’s mother and stabbing her to death.

Calling it “a stunningly important and unprecedented ruling,” Elisabeth A. Semel, the director of the death penalty clinic at the University of California, Berkeley, law school, said that the “factually dense” and “well reasoned” opinion was likely to be cited in other cases in California and elsewhere.

But its legal sweep will depend on the outcome of the state’s likely appeal to the United States Court of Appeals for the Ninth Circuit, she said.

Douglas A. Berman, a sentencing expert at the Ohio State University law school, said the ruling could generate appeals in any of a dozen states with large backups on death row and no recent executions or infrequent ones, as well as the federal system, which has had no execution in more than a decade.

“California is the most extreme example, but Pennsylvania is pretty darned close,” Professor Berman said. He questioned the logic, however, of granting a prisoner “a windfall” because of a state’s inaction.
Professor Berman suggested that California could address the court’s ruling by saying, “ ‘We’ve got to get our act together and move forward with executions.’ ”

“But,” he added, “that’s a heck of a lot easier said than done.”

California voters affirmed the death penalty by a narrow margin in 2012, with 48 percent of voters favoring replacing it with life in prison without parole. That vote, Professor Berman said, “may reflect that they’re comfortable with a system that doesn’t get around to executing somebody.”

The death penalty has been effectively under a moratorium in the state since 2006, when Judge Jeremy Fogel of United States District Court in San Jose ordered changes in the state’s execution methods. In 2008, Ronald M. George, then the chief justice of California, called the system for handling appeals in capital cases “dysfunctional.” A state-appointed commission reached a similar conclusion that year, stating the system was “plagued with excessive delay” in appointing lawyers and in reviews of appeals and petitions before the State Supreme Court.

Mr. Jones’s lead lawyer, Michael Laurence, said in a statement that the legal team was grateful for the decision, adding, “The execution of Mr. Jones, and the others like him whose meritorious legal claims have gone unheard for decades, serves no valid state interest.”

Mr. Jones’s trial for the killing in 1992 of Julia Miller, an accountant, got little attention at the time. It took place down the hall from the murder trial of O. J. Simpson, and The Los Angeles Times published an article comparing the “mundane murder trial” with the nearby “trial of the century.”

Eric M. Freedman, a professor at the Hofstra University law school, said that he doubted the case would make it to the Supreme Court or set national policy on the death penalty, but that it would still resonate.

“The decision is incredibly important in bringing to public consciousness that this has been a political shell game,” he said, with politicians endorsing the death penalty but unwilling to provide the funds for defense lawyers and efficient courts that would keep the system working.

Judge Carney was scathing in his description of California’s administration of capital punishment and said the flaws stemmed mainly from state deficiencies, not abuse of the system by prisoners.

“When an individual is condemned to death in California, the sentence carries with it an implicit promise from the state that it will actually be carried out,” he wrote. It is a promise to the people of the state, who pay for the justice system, and to the jurors who see “evidence of undeniably horrific crimes” and participate in the “agonizing deliberations,” and to the victims and their loved ones. Not the least, he added, “it is made to the hundreds of individuals on death row, as a statement their crimes are so heinous they have forfeited their right to life.”

However, Judge Carney wrote, “for too long now, the promise has been an empty one,” and the result is “a system in which arbitrary factors, rather than legitimate ones like the nature of the crime or the date of the death sentence, determine whether an individual will actually be executed.”

Thus, he concluded, the death penalty system in California “serves no penological purpose.”
“Such a system,” he said, “is unconstitutional.”

A prominent supporter of the death penalty, Kent S. Scheidegger of the Criminal Justice Legal Foundation, disagreed. Mr. Scheidegger said he found the decision “kind of surprising” since the argument that delays are unconstitutional has been rejected by the Supreme Court. The reason a majority of Americans support the death penalty, he said, “is that the very worst murderers just plain deserve it — that remains true even after long delays.”

Judge Carney, however, wrote that the Supreme Court cases focused on each inmate’s individual delay. 

Instead, he noted, Mr. Jones argued that his long-delayed execution would be arbitrary and serve no state purpose “because of systemwide dysfunction in the post-conviction review process.”

The state attorney general, Kamala D. Harris, is reviewing the decision, a spokesman said.

Tuesday, July 15, 2014

PBI National Conference East / National Conference West

Hi  -  You are invited to a public banking conference near you!  Santa Fe is considering a public bank for the city!

PBI National Conference East / National Conference West

The public banking movement is spreading like wildfire!  From San Francisco to Santa Fe, from Colorado to Wisconsin, from Detroit to Philadelphia, from Washington DC to Vermont, the grassroots support of public banks grows daily as people recognize the power they have to revitalize local economies. To empower the movement nationwide, PBI is hosting two regional events this fall as our national conference. We are calling them PBI National Conference West (Santa Fe), and PBI National Conference East (Philadelphia).

Come and learn more about how public banking is moving forward and making news all over the country! Join us in Santa Fe on September 27th and in Philadelphia on October 18th to experience the on-the-ground efforts being made to establish public banks at the local and regional levels. For those interested in the process of establishing public banks at the state level, Vermont will be the site of our national conference next spring - stay tuned for more details.

The lessons from Pennsylvania and New Mexico are important and inspiring for all of us - come and learn more as we work to reclaim our money and banking system.

The convention center in Santa Fe will be the site of a Symposium called Banking on New Mexico: Funding Sustainable, Local Economies.
The Santa Fe Symposium, titled Banking on New Mexico, will be featuring Richard Wolff and Ellen Brown as speakers. The PBI Board of Directors and staff will also be on hand to offer several workshops on everything from the ABCs of Public Banking, the advantages for the business community, to mobilizing public support. See the story below for the news about the mayor of Santa Fe exploring the feasibility of establishing a public bank for the city. Their findings may well be available in time for the conference - stay tuned for more news. Click here to register. Go to these web sites for more information: &

The Philadelphia conference and workshop, Public Banks for Public Works: Banking on the Common Wealth, will take place Saturday, October 18th in the historic Friends Center in Philadelphia. Harold Meyerson, columnist from the Washington Post and Editor at Large, the American Prospect will be the keynote speaker. The conference will focus on the missions and public purposes that public banks can enable, and present a workshop on actions that advocates can take in their communities to make public banks a reality. The forum will be preceded by a Friday evening gathering for political, business, and community leaders from the region. There will be a post conference banquet on Saturday evening to honor Ellen Brown, founder of the public banking movement and Chairman Emeritus of the Public Banking Institute. For more information, 

The Friends Center in Philadelphia will be the site for the conference titled Public Banks for Public Works: Banking on the Common Wealth

Santa Fe Mayor to Study Public Bank!

In June, The mayor of Santa Fe, New Mexico heard from Mike Krauss and Gwendolyn Hallsmith of PBI, who were invited to the city to talk about the potential benefits of a municipal public bank.  You can read more about it by clicking here.

“We need to see what public banking would mean here before we can even go to the next level,” he said, referring to the feasibility study. “And maybe at that point when it’s completed, we determine we can’t go any further. But we’ve studied it. I think the people of Santa Fe want us to look at every means possible to make sure that we’re able to grow this economy in a way that helps all families.”

Rethinking Economics Conference in NYC

The Rethinking Economics New York 2014 conference is an entirely student-run conference to be held in New York City from September 12-14 at The New School and Columbia University. PBI is sponsoring the conference and will be exhibiting and providing speakers.

Rethinking Economics is a global movement to create fresh economic narratives that challenge and enrich the predominant narratives in economics. The movement unites all who support new ways of thinking. We believe that the mainstream approach to understanding our economy, while definitely valuable, is far too narrow. We value pluralism: the belief that economics should be a more interdisciplinary subject that embraces useful ideas from various schools of thought and subject fields.

Consultants Wanted

Harry Ohls, a public banking activist in California, is working to identify teams of people who are willing to volunteer for the Public Banking Institute as part of a group of development teams to tackle some of the difficult issues communities, regions, and states face when they start the process of investigating a public bank.  Please email Harry by clicking on this link if you are interested in working on one of these teams:
  1. State Requirements.  What are the “State Requirements” for acquiring a bank in your area.  This typically involves (1) Known experienced Board of Directors,  (2) an experienced Management Group,  (3) a “banking business plan”,  and (4) sufficient capitalization.
  2. Legality.   Is it legal to establish a local, regional or County “public bank”  in your state. 
  3. Capitalization.   For your size City, County, Region, how much capitalization is required, and where are your deposits coming from?
  4. Financial Analysis.   How do you figure out how much your regional can save with a public bank.  (CAFR analysis,  Treasurer’s Report, etc.) 
  5. Credit Exchange.   Establishing a credit or exchange system in your area that is similar to a public bank, if public banks seem like they will take a long time.

Donate to PBI!  

We need your support to keep moving public banking forward in the US!  Become a member and make a real difference!  Click the button below to learn about the benefits of membership -  help us keep the momentum going!
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Monday, July 14, 2014


PDF ~ 9 Cir USDC of APPEALS LAUREN J PAULSON, Plaintiff-Appellant<<

Lauren Paulson, Pro Se
Note New Address
827 C Ransom Ave
Brookings, OR 97415
503 470 9709


LAUREN PAULSON, Plaintiff-Appellant

Arthur C. Dove, Artist

DEAR MR. PRAY  —Please provide the relevant reports as to the performance  and results of this program.  This is a FOIA request.  Thank you.  Lauren Paulson
OREGON Housing and Community Services
North Mall Office Building 725 Summer St NE, Suite B Salem, OR 97301-1266
PHONE: (503) 986-2000 FAX:
! (503) 986-2020 TTY:! (503) 986-2100
November 15, 2012
New Legal Assistance Program for Low-Income Households Facing Foreclosure
Oregon Housing and Community Services and Legal Aid Services of Oregon launch new program providing no-cost legal assistance to eligible households facing foreclosure.
Salem, OR – Low-income homeowners and renters affected by foreclosure now have access to new a statewide service that provides free legal assistance from an attorney to help address urgent foreclosure issues.
Oregon Housing and Community Services (OHCS) has contracted with Legal Aid Services of Oregon (LASO) to develop and deliver the new program. The statewide service will be offered both over the phone and in person from offices in Portland, Medford, Hillsboro, Eugene and Bend.
Interested households can call 1-855-412-8828 toll-free or 503-227-0198 in Multnomah, Washington and Clackamas counties to learn more about the program. Intake specialists will screen callers for income eligibility and will refer qualified households to an available attorney. Program phone lines are staffed between 9:00 a.m. to 12:00 p.m., and 1:00 p.m. to 4:30 p.m., Monday through Friday. Assistance can be provided in English and Spanish, with additional translation services available if necessary. Program phone lines are not staffed by attorneys and intake specialists cannot give legal advice.
The program is funded by a May 2012 legislative appropriation, utilizing proceeds from the National Mortgage Settlement, settled in part by the State of Oregon’s Department of Justice.
In addition, OHCS and LASO are developing a referral program to provide legal assistance to moderate income households, utilizing sliding-scale and pro-bono assistance from private attorneys. This component of the program will provide moderate income households the opportunity to have a free one hour consultation with an attorney, with additional representation offered at a discounted rate. Information about the program will be posted as it develops at
Interested households can learn more about accessing legal assistance and other foreclosure prevention programs by visiting For additional foreclosure prevention assistance interested person can also visit the above website or dial 211 toll-free from any phone in Oregon.
Ben Pray 503.986.2079

Lauren Paulson
503 470 9709


LOST BIRD | of WOUNDED KNEE | Clara Bewick Colby

Clara Bewick Colby                                    

Clara Bewick was born in England on Aug. 5, 1846. She spent her early childhood in England with her grandparents while her parents and siblings endured poverty and hardship after emigrating to America. When she was 9, her family sent for her.

After a childhood of much hardship, but with the support of her grandparents who also emigrated, she went to college and met a dashing military man, Leonard Colby. They married on June 23, 1871.

She founded the Women’s Tribune in Beatrice, Neb., in 1883 and moved the paper, which became the leading women’s suffrage publication in the nation, to Washington, D.C., in 1886.

She spent several months in Washington each year working on the Tribune and for suffrage. She and Leonard had no children of their own, but she gracefully took on the job of raising Lost Bird when her husband adopted the child in 1891.

She struggled to raise her child and continued to be very active over the years in the suffrage movement in the U.S. and in Great Britain, despite being left impoverished by her husband, who left her for Lost Bird’s nursemaid. She counted among her friends Susan B. Anthony and Elizabeth Cady Stanton, the leaders of the suffrage movement; Dr. Mary Walker, the Civil War physician who was the first woman to win the Medal of Honor; plus the wives of presidents and other prominent leaders, connections that her husband would make use of over the years to promote his own career.
She made many mistakes as she reared Lost Bird. Clara tried to raise her Lakota daughter to be an independent-minded white woman - a copy of herself. But Clara ended up with an unruly unhappy child who fit into neither Lakota or white culture.

Sinking further into poverty, unable to get her husband to pay alimony or contribute more to the support of their adopted daughter, she closed the Women’s Tribune in 1909. Eventually, Clara was forced to campaign and lecture to support herself, no matter what the weather and despite her declining health. She died of pneumonia on Sept. 7, 1916, penniless and unable to help her struggling daughter in San Francisco. The 19th Amendment, a goal to which she gave her life, was ratified on Aug. 26, 1920.
Sources: "Lost Bird of Wounded Knee: Spirit of the Lakota" by Renee Sansom Flood, Nebraska State Historical Society, Gage County Historical Society.

Sunday, July 13, 2014

Two Federal Judges Lay Smackdown on IRS Over “Lost” Emails, Lily Dane, The Daily Sheeple

 emails 2

Two federal judges aren’t buying “the dog ate my emails” bs story the IRS is trying to sell.

Finally, we might be getting somewhere with this ridiculous scandal. Congress has been working on this for a year without much success, but on Thursday and Friday, the two U.S. District court judges ordered the IRS to start providing some answers.

On Thursday, U.S. District Judge Emmet G. Sullivan ordered the IRS to provide – within a month – a declaration explaining exactly how the agency managed to “lose” two years’ worth of emails belonging to Lois Lerner.

Sullivan issued the order as part of a Freedom of Information Act lawsuit by Judicial Watch, a non-partisan watchdog group. He said the IRS declaration must be signed, under oath, by the appropriate IRS official.

“I’m going to hold tight to that Aug. 10 declaration,” Sullivan said.

Judge Sullivan also assigned John Facciola, a federal magistrate, to conduct his own query into whether there may be another way to obtain Lerner’s emails.

From The Daily Signal:

    In the Judicial Watch case, Judge Sullivan ordered the IRS and the watchdog group to work cooperatively with another federal judge to recover Lerner’s emails, which IRS officials have said were destroyed when a computer hard drive crashed.

    Judicial Watch President Tom Fitton called the decision  “a victory for public accountability.” Fitton expressed optimism about eventual recovery of emails, calling Judge John Facciola “an expert in e-discovery.”

On Friday, in a hearing examining a lawsuit brought by True the Vote, Judge Reggie Walton gave the IRS until July 18 to find out what happened to the crashed hard drive responsible for erasing two years worth of Lerner’s emails. He also wants to know if the hard drive is traceable through a serial number.

If the information is gone, Walton said he wants an affidavit written under penalty of perjury by an IRS IT professional with “firsthand knowledge” of the situation, reports Politico.

Things aren’t looking good for Lerner at all, especially in light of two recent developments:

From Legal Insurrection:

Darrell Issa has tweeted out an email exchange involving Lois Lerner in April 2013, in which she attempts to scope out what email records get retained, and cautions that because Congress may seek emails, “we need to be cautious about what we say in emails”.

Here is that email exchange:

Lois Lerner April 9 2013 Email re electronic records

This portion of the exchange suggests that emails point to IRS officials using instant messages:

    Lawmakers investigating the Internal Revenue Service’s treatment of conservative groups released new emails Wednesday suggesting that top IRS officials communicated through an instant-messaging service that wasn’t routinely archived.

    The revelation adds to lawmakers’ concerns about the agency’s handling of documents related to their current inquiry into the agency’s alleged targeting of conservative tea-party groups for burdensome scrutiny as they sought tax-exempt status. Republicans already have criticized the IRS for losing about two years’ worth of emails that could be important to the probe, largely because a computer hard drive belonging to a former top IRS official, Lois Lerner, crashed in mid-2011. Backup tapes also were routinely reused after six months.

    The latest emails suggest that IRS officials had a separate instant-messaging system that also wasn’t preserved. (source)

Oops. Lerner isn’t the sharpest tool in the shed, is she?

To add to her troubles, on Thursday, Texas Republican Rep. Steve Stockman filed a resolution demanding that the House use a little-exercised power to arrest Lerner.

From his press release:

    “Asking the Justice Department to prosecute Lois Lerner for admittedly illegal activity is a joke.  The Obama administration will not prosecute the Obama administration.  How much longer will the House allow itself to be mocked?  It is up to this House to uphold the rule of law and hold accountable those who illegally targeted American citizens for simply having different ideas than the President.

    Democrats have openly stated the House has the powers to arrest those in contempt of Congress and imprison them in the Capitol.  I don’t want to go as far as Democrats in exercising the House’s powers to arrest.  Ms. Lerner will be held in the D.C. jail.

    Under the resolution Lerner would be held in the D.C. jail and would have full legal rights and access to an attorney.

    It’s time to for House to stop tacitly endorsing this administration’s illegal activity by refusing to hold him accountable.  I expect Democrats to defend and even praise criminal activity.  The question is whether Republican leadership will join them in mocking the House and breaking the law.”

Finally, the pressure is on the IRS to provide answers – and hopefully, be forced to answer TO – the allegations of targeting certain groups.

Delivered by The Daily Sheeple

Contributed by Lily Dane of The Daily Sheeple.
- See more at:

Friday, July 11, 2014

How to Starve the Illuminati Beast | Dean Henderson

2014 5-29 Strawberries(Excerpted from Chapter 6: Mercenary Shopping: Stickin’ it to the Matrix)

Shopping for frivolous and unnecessary items consumes way too much of most people’s time and budget, while chaining the new owner of this junk to a cluttered garage, a storage unit and general sedentary misery.

Still there are certain tools and entertainments we wish to procure and there are many good ways to get them other than at a store.

Again it is all about attitude. You must develop a resistance to shopping. It should be viewed as morally reprehensible. When you need to attain an item, do your research and find out where to get it at the best price, preferably – except, I would argue, in the case of electronics – used. Remember, the system has declared war on your family. Don’t shop much. And fight like a mercenary of the revolutionary army when you must shop.

Barter is an ancient and excellent system which should be taken up across the land. Here, the palpable stench of their bloody fiat currency is absent.

When we lived on that 20 acre place near Peace Valley, we always had a bumper strawberry crop.

Everyone likes strawberries, so we traded our excess for pasture-raised poultry, eggs and honey.

We also did a community-supported agriculture swap with a local dentist, whereby we exchanged a weekly run of in-season fresh vegetables from our garden for a good amount of dental work.

Most people have been trained to be timid when it comes to asking a “professional” to barter their service for your goods/services. In doing so, you are undervaluing your own efforts. It doesn’t hurt to ask.

Remember, be audacious.

This spring, my wife organized a seed swap where gardeners from all over the area came to trade seeds and plants. The 35-40 people in attendance all came away with lots of free garden seeds and plants, while passing on their extras to others! We met some great new people and got to hang out with some old friends.

And the matrix was shut out.

On another recent occasion our good friends Phil and Amber got a bunch of trees from the Missouri Conservation Department. Phil then proceeded to dislocate his knee. Unable to plant all those trees and being the generous guy he is, he organized a tree giveaway. A handful of people showed up and each of us in turn brought various plants of our own to give way. Some of us brought food to share. Phil shared his excellent home-brewed dark brown ale. Everyone came away with something new to plant. No money was exchanged.

When we lived in Missoula, MT there was an event every May which came to be known as Hippy Christmas. This was the time when all those college students left their dorms and apartments to go home for summer break or move elsewhere. The alleys, parking lots and streets near the University of Montana would gradually fill up with all manner of goodies that these youngsters had left behind.

Since college has become very expensive, the kids that do attend universities nowadays are sadly from increasingly wealthy families. As a result, chances are good that their parents have bought them everything they could possibly need – and more – to fill their college abode, so what do these trustafaris care if some of these almost brand new pieces of furniture, appliances and gadgets go sitting curbside come summer break because it wouldn’t fit in their shiny new Subaru Forester?

Dumpster diving is always above average in college towns because of this ongoing gentrification of our higher education system. But keep your eyes open in any town.

Another good opportunity for “ground scores” occurs when people move out of an apartment. They usually can’t fit everything in their vehicle, so they tend to leave many excess items sitting beside the apartment complex dumpster. Look for the big piles.

I’ve known people who made a living off of this phenomenon, scooping up these unwanted items and selling them on Craigslist or at a yard sale.

We helped pioneer Missoula’s anarchist market in the mid 1990’s. Anyone could set up a table and sell whatever for free. It may have been the biggest of its kind in the country. It was too free for the white fathers on City Council and has since been corralled and added to the city balance sheet.

Our friend Erin used to dumpster dive stuff and bring it to the market to sell. How’s that for audacious?

Speaking of Craigslist, if you need a specific item, it is often a good place to get it at less than half the store price. It is an even better place to sell unwanted items, since there is no commission like there is on EBay.

A good rule is, if you need to buy a more expensive item, go through your house and find something to sell to offset the purchase. You’ll be surprised how easy it is to find such an item.

Auctions can be another great place to get things on the cheap. My wife and I had just moved into our new place here last fall and had previously been traveling ultra-light.

After we sold the Alton place, we ditched nearly everything. I bought us a series of one-way tickets that took us from Chicago-Dublin-Abu Dhabi-Johannesburg-Katmandu-Bangkok-Vancouver.

We fulfilled a lifelong dream of going on a safari in South Africa’s Kruger National Park and during our five-country tour of southern Africa, also got to visit the majestic Victoria Falls on the Zimbabwe/Zambia border.

After another 8-month stint in Thailand, Laos and Malaysia, followed by consecutive summers in Missoula and Spearfish, we were ready to get back to the land.

We arrived at our new place with literally a couple of backpacks. I had never owned less in my life and it felt great. But now we needed to furnish our new home.

In October, we went to an auction nearby. I bid on five different lots of stuff. We jammed it into the car and still had to tie some things on top. We got numerous pieces of furniture, blankets, Corning Ware, baking sheets and pans, dishes and all kinds of other stuff for a grand total of $8.

There are a couple of things to remember at auctions. You have to realize that the auctioneer is trying to maximize his/her commission by pushing up the prices on items. Though a friendly dance, you must realize that he is your adversary for this day.

Show up early so you can survey the entire premises and see what’s for sale. If you see boxes of stuff you want you can nudge those different boxes together. If you do so, the auctioneer may very well sell those boxes as a single lot.

Once you’ve lined out your bid targets, move well away from those items so as not to draw the interest of other bidders or the auctioneers. Stay extra cool and disinterested because you don’t want either other bidders or the auctioneer to think you really want those items.

Otherwise, there could be a bidding war or the auctioneer could activate a straw bidder, and the price goes up. Wait until well into the bid process on that item has commenced to cast your first bid. Let at least one other person bid first.

If a bunch of people start bidding, walk away. The item will sell too high. If it’s just you and one other person, let time pass before your second bid. Slow the process down. Sometimes if you wait long enough to cast that first bid, no one else bids. Then the auctioneer will say, “Who wants it all for $1?”

You do! Score!

In this area we have several radio stations that do shows with names like Tradio and Swapline, where people call in to buy, sell and give away their items. This is another excellent way to sell and procure items outside the matrix store system.

Bulletin boards at libraries, universities and stores are also excellent places to sell big ticket items that won’t fetch enough money at a yard sale. Make a list of items you wish to sell on a sheet of paper. Write “Must Sell!” at the top. Beside each item give a short description and your asking price. Write your phone number on the main sheet, then also write your number sideways on several little tear-offs at the bottom.

Bulletin boards can also be great places to find deals on stuff you need. Again, check university bulletin boards at the end of semesters when students have burned through their cash and want to lighten their moving load.

A major benefit of all of the above ways to acquire stuff is that you don’t have to pay sales tax.

No store represents the evils of the matrix more than Wal-mart. As such, you should avoid shopping there.

But it is an excellent place to “borrow” things.

How often do you need a certain tool or whatever for one project? You buy the thing, use it once and it sets it your garage taking up space and gathering dust for the next fifty years.

This is where the Chinese sweat shop, otherwise known as Wal-mart, comes in.

This particularly nefarious beast just happens to offer a 90-day return policy on most items. Make sure to keep your receipt. With it, you get cash back and won’t need an ID. Without it, you’ll get a Wal-mart store card for the amount and a bad mark on the matrix “naughty kids” list.

Get what you need, use it and return it with receipt for a cash refund. There is nothing illegal about it. It is Wal-Mart’s policy and was their idea, not yours or mine.

You can abuse other Big Box stores in a similar manner. During that first meager Ozarks stint, I bought a mower at Walmart, used it for a full three months, returned it in totally hammered condition for cash; then bought one at Kmart and did the exact same thing three months later.

It is very important that you NEVER do this to a Mom & Pop store. This should go without saying, but it’s amazing how many people don’t get that distinction. Mom & Pop are not the owners of the matrix. In fact, they are clobbered by it daily, just as you are.

When you abuse these matrix corporate stores – who have gutted every Main Street in this country – you actually help the smaller stores by taking a bite out of Wal-Mart’s bottom line. Equally important, you are also helping to set yourself free from the matrix.

The only better policy than mercenary shopping is no shopping. Chronic shopping will only take you further into the matrix prison. My wife and I go to town once a week. For us, it’s not, “Buy Nothing Day”, it’s “Buy Nothing Week”– EVERY week.

It’s not just that shopping keeps you in debt, penniless and anchored to the grid via a job. Material possessions also severely limit your mobility, increase your worries (since with each new item purchased you now have more to lose), and have a generally dampening effect on your potentially revolutionary spirit.

As Henry David Thoreau so eloquently put it, “Material possessions are a positive hindrance to the elevation of mankind”.

Dean Henderson is the author of five books: Big Oil & Their Bankers in the Persian Gulf: Four Horsemen, Eight Families & Their Global Intelligence, Narcotics & Terror Network, The Grateful Unrich: Revolution in 50 Countries, Das Kartell der Federal Reserve, Stickin’ it to the Matrix & The Federal Reserve Cartel.  You can subscribe free to his weekly Left Hook column @

Federal Reserve System | Creative Commons | FIAT (IE NOT REAL) EG FEDERAL RESERVE 'NOTES' | U.S.D.C. Operates In This System as "Checks & Balances" !!!!!

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9.3 The Federal Reserve System

Learning Objectives

  1. Explain the primary functions of central banks.
  2. Describe how the Federal Reserve System is structured and governed.
  3. Identify and explain the tools of monetary policy.
  4. Describe how the Fed creates and destroys money when it buys and sells federal government bonds.
The Federal Reserve System of the United States, or Fed, is the U.S. central bank. Japan’s central bank is the Bank of Japan; the European Union has established the European Central Bank. Most countries have a central bank. A central bank performs five primary functions: (1) it acts as a banker to the central government, (2) it acts as a banker to banks, (3) it acts as a regulator of banks, (4) it conducts monetary policy, and (5) it supports the stability of the financial system.

For the first 137 years of its history, the United States did not have a true central bank. While a central bank was often proposed, there was resistance to creating an institution with such enormous power. A series of bank panics slowly increased support for the creation of a central bank. The bank panic of 1907 proved to be the final straw. Bank failures were so widespread, and depositor losses so heavy, that concerns about centralization of power gave way to a desire for an institution that would provide a stabilizing force in the banking industry. Congress passed the Federal Reserve Act in 1913, creating the Fed and giving it all the powers of a central bank.

Structure of the Fed

In creating the Fed, Congress determined that a central bank should be as independent of the government as possible. It also sought to avoid too much centralization of power in a single institution. These potentially contradictory goals of independence and decentralized power are evident in the Fed’s structure and in the continuing struggles between Congress and the Fed over possible changes in that structure.
In an effort to decentralize power, Congress designed the Fed as a system of 12 regional banks, as shown in Figure 9.8 "The 12 Federal Reserve Districts and the Cities Where Each Bank Is Located". Each of these banks operates as a kind of bankers’ cooperative; the regional banks are owned by the commercial banks in their districts that have chosen to be members of the Fed. The owners of each Federal Reserve bank select the board of directors of that bank; the board selects the bank’s president.
Figure 9.8 The 12 Federal Reserve Districts and the Cities Where Each Bank Is Located
Several provisions of the Federal Reserve Act seek to maintain the Fed’s independence. The board of directors for the entire Federal Reserve System is called the Board of Governors. The seven members of the board are appointed by the president of the United States and confirmed by the Senate. To ensure a large measure of independence from any one president, the members of the Board of Governors have 14-year terms. One member of the board is selected by the president of the United States to serve as chairman for a four-year term.

As a further means of ensuring the independence of the Fed, Congress authorized it to buy and sell federal government bonds. This activity is a profitable one that allows the Fed to pay its own bills. The Fed is thus not dependent on a Congress that might otherwise be tempted to force a particular set of policies on it. The Fed is limited in the profits it is allowed to earn; its “excess” profits are returned to the Treasury.

It is important to recognize that the Fed is technically not part of the federal government. Members of the Board of Governors do not legally have to answer to Congress, the president, or anyone else. The president and members of Congress can certainly try to influence the Fed, but they cannot order it to do anything. Congress, however, created the Fed. It could, by passing another law, abolish the Fed’s independence. The Fed can maintain its independence only by keeping the support of Congress—and that sometimes requires being responsive to the wishes of Congress.

In recent years, Congress has sought to increase its oversight of the Fed. The chairman of the Federal Reserve Board is required to report to Congress twice each year on its monetary policy, the set of policies that the central bank can use to influence economic activity.

Powers of the Fed

The Fed’s principal powers stem from its authority to conduct monetary policy. It has three main policy tools: setting reserve requirements, operating the discount window and other credit facilities, and conducting open-market operations.

Reserve Requirements

The Fed sets the required ratio of reserves that banks must hold relative to their deposit liabilities. In theory, the Fed could use this power as an instrument of monetary policy. It could lower reserve requirements when it wanted to increase the money supply and raise them when it wanted to reduce the money supply. In practice, however, the Fed does not use its power to set reserve requirements in this way. The reason is that frequent manipulation of reserve requirements would make life difficult for bankers, who would have to adjust their lending policies to changing requirements.

The Fed’s power to set reserve requirements was expanded by the Monetary Control Act of 1980. Before that, the Fed set reserve requirements only for commercial banks that were members of the Federal Reserve System. Most banks are not members of the Fed; the Fed’s control of reserve requirements thus extended to only a minority of banks. The 1980 act required virtually all banks to satisfy the Fed’s reserve requirements.

The Discount Window and Other Credit Facilities

A major responsibility of the Fed is to act as a lender of last resort to banks. When banks fall short on reserves, they can borrow reserves from the Fed through its discount window. The discount rate is the interest rate charged by the Fed when it lends reserves to banks. The Board of Governors sets the discount rate.

Lowering the discount rate makes funds cheaper to banks. A lower discount rate could place downward pressure on interest rates in the economy. However, when financial markets are operating normally, banks rarely borrow from the Fed, reserving use of the discount window for emergencies. A typical bank borrows from the Fed only about once or twice per year.

Instead of borrowing from the Fed when they need reserves, banks typically rely on the federal funds market to obtain reserves. The federal funds market is a market in which banks lend reserves to one another. The federal funds rate is the interest rate charged for such loans; it is determined by banks’ demand for and supply of these reserves. The ability to set the discount rate is no longer an important tool of Federal Reserve policy.

To deal with the recent financial and economic conditions, the Fed greatly expanded its lending beyond its traditional discount window lending. As falling house prices led to foreclosures, private investment banks and other financial institutions came under increasing pressure. The Fed made credit available to a wide range of institutions in an effort to stem the crisis. In 2008, the Fed bailed out two major housing finance firms that had been established by the government to prop up the housing industry—Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Mortgage Corporation). Together, the two institutions backed the mortgages of half of the nation’s mortgage loans.Sam Zuckerman, “Feds Take Control of Fannie Mae, Freddie Mac,” The San Francisco Chronicle, September 8, 2008, p. A-1. It also agreed to provide $85 billion to AIG, the huge insurance firm. AIG had a subsidiary that was heavily exposed to mortgage loan losses, and that crippled the firm. The Fed determined that AIG was simply too big to be allowed to fail. Many banks had ties to the giant institution, and its failure would have been a blow to those banks. As the United States faced the worst financial crisis since the Great Depression, the Fed took center stage. Whatever its role in the financial crisis of 2007–2008, the Fed remains an important backstop for banks and other financial institutions needing liquidity. And for that, it uses the traditional discount window, supplemented with a wide range of other credit facilities. The Case in Point in this section discusses these new credit facilities.

Open-Market Operations

The Fed’s ability to buy and sell federal government bonds has proved to be its most potent policy tool. A bond is a promise by the issuer of the bond (in this case the federal government) to pay the owner of the bond a payment or a series of payments on a specific date or dates. The buying and selling of federal government bonds by the Fed are called open-market operations. When the Fed buys or sells government bonds, it adds or subtracts reserves from the banking system. Such changes affect the money supply.

Suppose the Fed buys a government bond in the open market. It writes a check on its own account to the seller of the bond. When the seller deposits the check at a bank, the bank submits the check to the Fed for payment. The Fed “pays” the check by crediting the bank’s account at the Fed, so the bank has more reserves.

The Fed’s purchase of a bond can be illustrated using a balance sheet. Suppose the Fed buys a bond for $1,000 from one of Acme Bank’s customers. When that customer deposits the check at Acme, checkable deposits will rise by $1,000. The check is written on the Federal Reserve System; the Fed will credit Acme’s account. Acme’s reserves thus rise by $1,000. With a 10% reserve requirement, that will create $900 in excess reserves and set off the same process of money expansion as did the cash deposit we have already examined. The difference is that the Fed’s purchase of a bond created new reserves with the stroke of a pen, where the cash deposit created them by removing $1,000 from currency in circulation. The purchase of the $1,000 bond by the Fed could thus increase the money supply by as much as $10,000, the maximum expansion suggested by the deposit multiplier.

Figure 9.9
Where does the Fed get $1,000 to purchase the bond? It simply creates the money when it writes the check to purchase the bond. On the Fed’s balance sheet, assets increase by $1,000 because the Fed now has the bond; bank deposits with the Fed, which represent a liability to the Fed, rise by $1,000 as well.
When the Fed sells a bond, it gives the buyer a federal government bond that it had previously purchased and accepts a check in exchange. The bank on which the check was written will find its deposit with the Fed reduced by the amount of the check. That bank’s reserves and checkable deposits will fall by equal amounts; the reserves, in effect, disappear. The result is a reduction in the money supply. The Fed thus increases the money supply by buying bonds; it reduces the money supply by selling them.
Figure 9.10 "The Fed and the Flow of Money in the Economy" shows how the Fed influences the flow of money in the economy. Funds flow from the public—individuals and firms—to banks as deposits. Banks use those funds to make loans to the public—to individuals and firms. The Fed can influence the volume of bank lending by buying bonds and thus injecting reserves into the system. With new reserves, banks will increase their lending, which creates still more deposits and still more lending as the deposit multiplier goes to work. Alternatively, the Fed can sell bonds. When it does, reserves flow out of the system, reducing bank lending and reducing deposits.
Figure 9.10 The Fed and the Flow of Money in the Economy
Individuals and firms (the public) make deposits in banks; banks make loans to individuals and firms. The Fed can buy bonds to inject new reserves into the system, thus increasing bank lending, which creates new deposits, creating still more lending as the deposit multiplier goes to work. Alternatively, the Fed can sell bonds, withdrawing reserves from the system, thus reducing bank lending and reducing total deposits.

The Fed’s purchase or sale of bonds is conducted by the Open Market Desk at the Federal Reserve Bank of New York, one of the 12 district banks. Traders at the Open Market Desk are guided by policy directives issued by the Federal Open Market Committee (FOMC). The FOMC consists of the seven members of the Board of Governors plus five regional bank presidents. The president of the New York Federal Reserve Bank serves as a member of the FOMC; the other 11 bank presidents take turns filling the remaining four seats.

The FOMC meets eight times per year to chart the Fed’s monetary policies. In the past, FOMC meetings were closed, with no report of the committee’s action until the release of the minutes six weeks after the meeting. Faced with pressure to open its proceedings, the Fed began in 1994 issuing a report of the decisions of the FOMC immediately after each meeting.

In practice, the Fed sets targets for the federal funds rate. To achieve a lower federal funds rate, the Fed goes into the open market buying securities and thus increasing the money supply. When the Fed raises its target rate for the federal funds rate, it sells securities and thus reduces the money supply.

Traditionally, the Fed has bought and sold short-term government securities; however, in dealing with the condition of the economy in 2009, wherein the Fed has already set the target for the federal funds rate at near zero, the Fed has announced that it will also be buying longer term government securities. In so doing, it hopes to influence longer term interest rates, such as those related to mortgages.

Key Takeaways

  • The Fed, the central bank of the United States, acts as a bank for other banks and for the federal government. It also regulates banks, sets monetary policy, and maintains the stability of the financial system.
  • The Fed sets reserve requirements and the discount rate and conducts open-market operations. Of these tools of monetary policy, open-market operations are the most important.
  • Starting in 2007, the Fed began creating additional credit facilities to help stabilize the financial system.
  • The Fed creates new reserves and new money when it purchases bonds. It destroys reserves and thus reduces the money supply when it sells bonds.

Try It!

Suppose the Fed sells $8 million worth of bonds.
  1. How do bank reserves change?
  2. Will the money supply increase or decrease?
  3. What is the maximum possible change in the money supply if the required reserve ratio is 0.2?

Case in Point: Fed Supports the Financial System by Creating New Credit Facilities

Well before most of the public became aware of the precarious state of the U.S. financial system, the Fed began to see signs of growing financial strains and to act on reducing them. In particular, the Fed saw that short-term interest rates that are often quite close to the federal funds rate began to rise markedly above it. The widening spread was alarming, because it suggested that lender confidence was declining, even for what are generally considered low-risk loans. Commercial paper, in which large companies borrow funds for a period of about a month to manage their cash flow, is an example. Even companies with high credit ratings were having to pay unusually high interest rate premiums in order to get funding, or in some cases could not get funding at all.

To deal with the drying up of credit markets, in late 2007 the Fed began to create an alphabet soup of new credit facilities. Some of these were offered in conjunction with the Department of the Treasury, which had more latitude in terms of accepting some credit risk. The facilities differed in terms of collateral used, the duration of the loan, which institutions were eligible to borrow, and the cost to the borrower. For example, the Primary Dealer Credit Facility (PDCF) allowed primary dealers (i.e., those financial institutions that normally handle the Fed’s open market operations) to obtain overnight loans. The Term Asset-Backed Securities Loan Facility (TALF) allowed a wide range of companies to borrow, using the primary dealers as conduits, based on qualified asset-backed securities related to student, auto, credit card, and small business debt, for a three-year period. Most of these new facilities were designed to be temporary. Starting in 2009 and 2010, the Fed began closing a number of them or at least preventing them from issuing new loans.

The common goal of all of these various credit facilities was to increase liquidity in order to stimulate private spending. For example, these credit facilities encouraged banks to pare down their excess reserves (which grew enormously as the financial crisis unfolded and the economy deteriorated) and to make more loans. In the words of Fed Chairman Ben Bernanke:

“Liquidity provision by the central bank reduces systemic risk by assuring market participants that, should short-term investors begin to lose confidence, financial institutions will be able to meet the resulting demands for cash without resorting to potentially destabilizing fire sales of assets. Moreover, backstopping the liquidity needs of financial institutions reduces funding stresses and, all else equal, should increase the willingness of those institutions to lend and make markets.”

The legal authority for most of these new credit facilities came from a particular section of the Federal Reserve Act that allows the Board of Governors “in unusual and exigent circumstances” to extend credit to a wide range of market players.

Answer to Try It! Problem

  1. Bank reserves fall by $8 million.
  2. The money supply decreases.
  3. The maximum possible decrease is $40 million, since ∆D = (1/0.2) × (−$8 million) = −$40 million.
How can the FEDERAL 'BENCH' justify destroying itself with the CRIMINAL FRAUD of "Fiat Money!"