Bernanke's Folly or Hiding Maiden Lane

Today the Senate, in a rare but refreshing bipartisan move, received an amendment to the Financial Reform bill that would require the Federal Reserve to be audited regularly. Ben "I want transparency" Bernanke fired off letters and made phone calls to oppose this.

His reasoning: "Such amendments, if enacted, would seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation."

Huh? I thought he has testified many times that all of his actions were directed towards preventing such things. So why the obvious fear of a public look under the hood of the Fed? Could there be stuff he was not supposed to do? Maybe trillions of our dollars to his pals?

There is his steadfast refusal to identify the banks that took zero percent loans on the grounds that it is not our business and we might question those banks' stability. Why does he want to hide these transactions? Perhaps there is more there than normal business? Or perhaps he is far more interested in protecting his Wall Street pals than in protecting the American people.

And let's not forget Maiden Lane, LLC. All 3 of them.

What's Maiden Lane? Well, that is the dirty little secret Bernanke and Geithner have struggled to hide. Remember how TARP was going to take all those nasty 'toxic assets' off the banks' hands so they could free up capital for lending? Remember how Paulson, Bernanke and Geithner gifted Bear Stearns to Jamie Dimon at JP Morgan without the bad assets on the books? Remember how AIG suddenly had none of those?

Well, it is because the New York Fed under Geithner, with Bernanke's blessing created Maiden Lane. Actually they created 3 of them. The first took to $30 billion in garbage off of Bear's hands so that Dimon wouldn't have to take any losses on buying a losing company. Those assets have lost at least $2 billion thus far.

Maiden Lane 2 took the assets off of the books of AIG. Almost $200 billion there and Maiden Lane 3 another $30 billion off of AIG. That last $30 billion had credit default swaps against it. The same credit default swaps that AIG paid Goldman Sachs $13 billion - of our money! - to satisfy at 100 cents on the dollar when nobody else was getting par.

The assets held by Maiden Lane are all mortgages. Some have defaulted. Maiden Lane (and therefore the Fed) now owns a shopping mall and holds the defaulting mortgages of several resort hotels - some outside the US. I am pretty sure that this is way outside the Fed's charter. This is only some of what Bernanke does not want you to know he did with our money.

Seeing the pattern here? Things they don't want you to know. But, wait! Bernanke's Folly gets better. In the name of saving American jobs and businesses, Maiden Lane hired CT Corporation as its registered agent. CT is a wholly owned subsidiary of Wolters Kluwer, a multi-national information services company based in the Netherlands. Yep, the Netherlands. As in not a US company. Why take this offshore? Perhaps Bernanke will be asked that at some point, but I would not hold my breath.

Regardless of his tough talk about transparency, the harsh truth is that Bernanke has perverted the intent of the Fed from central bank to a huge off balance sheet hidey hole for his pals on Wall Street. Geithner knows this since he was there. And they are terrified that we will get to see just how corrupt and disingenuous this little empire is.

Which brings me to the president. Obama renominated this guy. And he made Geithner Treasury Secretary. This is like putting Tattaglia and Corleone in charge of the FBI. The 2 guys most responsible for hiding the misuse of trillions of our dollars are put in charge of our dollars. I am not saying Obama knew this. I am saying that he chose the same tired, failed folks to fix the system they broke. And in that he failed us. The only change evident are the new business cards everyone got.

And now, faced with audits and transparency, Bernanke has obviously broken into a cold sweat. And even more so because there is huge bipartisan support for this. If only there was a way we could dump Bernanke in November.