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Former Head of the FDIC Sends a Torpedo into Bernanke

Written by Gary North on April 17, 2012

Sheila Bair was the head of the FDIC, which insures our bank accounts. She understands what interest rates at zero mean. In this essay, she pokes fun at Bernanke and the FED.

Are you concerned about growing income inequality in America? Are you resentful of all that wealth concentrated in the 1 percent? I’ve got the perfect solution, a modest proposal that involves just a small adjustment in the Federal Reserve’s easy monetary policy. Best of all, it will mean that none of us have to work for a living anymore.

For several years now, the Fed has been making money available to the financial sector at near-zero interest rates. Big banks and hedge funds, among others, have taken this cheap money and invested it in securities with high yields. This type of profit-making, called the “carry trade,” has been enormously profitable for them.

So why not let everyone participate?

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)

Think of what we can do with all that money. We can pay off our underwater mortgages and replenish our retirement accounts without spending one day schlepping into the office. With a few quick keystrokes, we’ll be golden for the next 10 years.

Of course, we will have to persuade Congress to pass a law authorizing all this Fed lending, but that shouldn’t be hard. Congress is really good at spending money, so long as lawmakers don’t have to come up with a way to pay for it. Just look at the way the Democrats agreed to extend the Bush tax cuts if the Republicans agreed to cut Social Security taxes and extend unemployment benefits. Who says bipartisanship is dead?

And while that deal blew bigger holes in the deficit, my proposal won’t cost taxpayers anything because the Fed is just going to print the money. All we need is about $1,200 trillion, or $10 million for 120 million households. We will all cross our hearts and promise to pay the money back in full after 10 years so the Fed won’t lose any dough. It can hold our Portuguese debt as collateral just to make sure.

Because we will be making money in basically the same way as hedge fund managers, we should have to pay only 15 percent in taxes, just like they do. And since we will be earning money through investments, not work, we won’t have to pay Social Security taxes or Medicare premiums. That means no more money will go into these programs, but so what? No one will need them anymore, with all the cash we’ll be raking in thanks to our cheap loans from the Fed.

Come to think of it, by getting rid of work, we can eliminate a lot of government programs. For instance, who needs unemployment benefits and job retraining when everyone has joined the investor class? And forget the trade deficit. Heck, we want those foreign workers to keep providing us with goods and services.

For the rest of the article, click the link.

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5 thoughts on “Former Head of the FDIC Sends a Torpedo into Bernanke

  1. delmar jackson says:

    gary, I am liking your new blog. The most enjoyable have been your tips a person can use. like the oil filter article, etc.

    we all know the ship is sinking, how can bubba build a lifeboat.

  2. Bair’s column is amazing to me: a mainstream Republican skewering the Fed’s money printing in the most mainstream (i.e., stage-managed) newspaper in existence.

    This is proof to me that change is afoot here in America, when even mainstream Republicans are turning on The Machine.

  3. YEAH!! FINALLY!!
    I HAVE BEEN WATCHING AT THE FED GIVE AWAY FREE
    $$$$$$ TO THE CENTRAL BANKS ETC. AND THEN WATCH
    THEM TURN AROUND AND FINANCIALLY TAKE ADVANTAGE OF AMERICANS.
    CD'S AND SAVINGS ACCOUNTS????? DESSIMATED!!! THE FED AND BO – THRILLED!!!
    THIS IS WHAT TIM "THE RAT" GEITHNER AND BO THINK OF ALL OF US. DISGUSTING.

  4. Why has my military retirement lost 30% of value in 36 years since retirement?

  5. 1776again says:

    Same reason the Federal Reserve has taken a real dollar worth 100 pennies in 1913, turned it into a unconstitutional counterfeit Federal Reserve note, the original derivative, done away with the gold standard, created 2 depressions and 2 world wars, in order to make themselves and their owners richer through fiat money as the only legal currency. That amounts to a loss of value of what used to be a gold backed dollar, which is why gold is gaining in value at a rate comparable to the loss of value of the FRN (Federal Reserve note).

    The only value which is given to these debt certificates is what they admit is "confidence ". Does that tell you where the term "con man" came from ?