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Is the Federal Reserve Behind the European Bailout? Audit the Fed!! [UPDATED with video]

Posted by Larry Doyle on May 10, 2010 12:52 PM |

Is the American taxpayer ultimately bailing out the European Union? Far fetched? Don’t be so sure.

While the focus of the European bailout has been on the European Central Bank, the European Union, and the IMF, little attention is being given to swap lines which were reopened between the Federal Reserve and the European Central Bank.

The ECB has steadfastly fought the idea of breeching the principles which formed the European common currency (the Euro) in order to fashion a bailout for the EU. Did the ECB crater to political pressure by the EU? Or, did the risks of the bailout shift from the ECB to another large central bank? Such as? The Federal Reserve!

Adding fuel to this fire is the fact that the Fed reopened swap lines with the ECB and other central banks just yesterday. The Wall Street Journal reports, Fed’s Swap Decision Could Ratchet Up Political Pressure:

The U.S. Federal Reserve’s decision to reopen swap lines with the European Central Bank and central banks in Japan, Switzerland, England and Canada puts it in a delicate political position.

The U.S. Congress is in the midst of rewriting a financial regulatory overhaul that could rein in the Fed amid sharp criticism of its actions before and during the financial crisis. The overseas lending program it reopened Sunday in response to pleas from Europe has been among the programs lawmakers have criticized, with some suggesting it is bailing out foreign banks and other saying the Fed is too secretive about details.

Is the American taxpayer ultimately bailing out the EU? While the German populace is livid at the idea of providing bailout funds for the wastefulness and fiscal follies in other EU countries, has the wool just been pulled over the American public’s eyes?

Will the America public ever learn what is going on here?

Audit the Fed!!!

UPDATE: Hat tip to loyal Sense on Cents reader Matt for providing the following video from last summer:


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  • Matt

    Larry –

    In July of last year, Congressman Alan Grayson grilled Ben Bernanke on this very topic (the Fed’s currency swaps with European Central Banks). Bernanke openly admits that he has no idea where $500 billion went exactly, he has no idea which private European banks received this money, and how much those each of those private banks received. All he will say is that the ECB received $500 billion from the Fed and then they in turn give that money to European banks in their respective juristictions. Grayson asks under what legal authority does the Fed have the right to do this without Congressional authorization (everything the Fed has done today with regards to Europe has also been done without any Congressional authorization), and Bernanke’s answer is the Federal Reserve Act of 1914. I couldn’t agree more with you Larry in terms of auditing the Fed, and I think that is a very necessary first step. I would also go further however and say that the Federal Reserve Act of 1914 needs to also be critically reviewed as it might be fundamentally unconstitutional. Here is the hearing with Grayson & Bernanke from July of last year in which Bernanke discusses these currency swap lines:


    • LD


      Great clip!! Thanks for sharing. Having just watched the video, one does not have to think too hard to believe the risks embedded in banks across the EU were just transferred to the Fed through a conduit provided by the European Central Bank.

      American citizens are bearing the risk of bailing out Europe. Marshall Plan II . . . although our government does not want to share that fact with us. WOW!!!

  • Mike

    Wow, reopened the swap lines on a SUNDAY?? This is getting all too obvious.

    This is us delaying Lehman 2.0

    Clearly, Bernanke’s goal right now is to prevent the currency fromg getting too strong. The only way out of our debt is to make it weaker. EUR/USD can’t fall to parity and this is exactly how we’re going to try to save it. How much of the IMF is our money? They’ll probably end up playing a larger role too.

    • LD

      The US represents approximately 17% of the IMF.

  • Patriot

    Does anybody in the country truly know the full extent of exposures the Fed is holding?

    Does anybody truly trust this private bank? Why don’t the cowards in Congress immediately mandate the Fed to submit to an audit? Enough of the posturing.

  • Red State

    You really do not have to study Bernanke’s manner too hard in that clip to see what he is holding back.

    No doubt the same vehicle is being used now for the Fed to provide the funds for the ECB to support the European banks.

    Backdoor bailout? Sounds like a front door bailout to me.

    American taxpayers are getting taken to the cleaners, but would American taxpayers even know the difference.

  • Patrick

    Who in Congress or the media has the courage to pointedly ask this question of the Fed and DEMAND an answer?

  • Steve

    Obama, Larry Summers and Tim Geithner are the drivers behind the bailout. Obama put maximum pressure on Merkel to go along. These traitors are bailing out Lord
    Jacob Rothchilds Inter- Alpha group along with the Bank of England.Obama is not an American patriot but a tool of the British Empire. He and his cohorts are
    trying to stop the tabling of a Glass- Steagall the only solution to clean up this bankrupt system and put the swindlers out of business. The Fed will pump
    U.S. Dollars into these Banks till 2011.

    • Alice Wolf

      Hi. You are correct, are you a follower of Lynden laRouche by any chance. I go to several times a day to see the latest webcasts on LPACTV and read the articles.
      They need help, if you are interested you can contact them on the site. I emailed Maria Cantwell last night but I think that her email has been sabotaged somehow because I couldn’t submit my email successfully. I wrote to Daryll Issa but I”m not apparently in his district. I emailed Barbara Boxer and Dian Feinsten telling them to vote for the Glass Steagall Amendment to be passed, and globally too. Now I am just praying that Obama will leave the White House for good. Best regards, Alice Wolf.

  • Alice Wolf

    Glass Steagall is the answer. The Glass Steagall Standard should be applied globally and wipe out all the toxic debt.
    The legitimate banking functions should be used again constitutionally, i.e. the Congress should utter credit through the mandate of the US Constitution to be distributed through commercial banking institutions, and the lines of credit should be utilized for huge infrastructure projects, initially sponsored by the government and contracted out to private industry.
    Mag lev railroad system is one plan, world wide, water ways and sanitation, nuclear power plants, irrigation and agriculture are all essential as well a technological research and development, especially for the purpose of reviving NASA and travelling to Mars in the future, with an interim plan of colonizing the Moon and mining for Helium etc, and to forge forward with plans for Nuclear Fusion.
    La Rouche and his basement team are researching Cosmic Radiation which is crucial if we are ever to take our rightfulo place in the Galaxies for trade and all sorts of other exciting discoveries that will be the focus of generations to come.
    Without a vision the people perish.
    Obama has no vision, the present Congress has no vision and the people are indeed, literally, dying.
    We are ready for the Glass Steagall Amendment to be put to the vote and to be implemented.
    That is the first step.
    Everyone, get on the phone, emsil your Senators and start praying for tis to be passed. In light of the recent illegal bailout of Europe by the FED, we have every right to impose this standard immediately. The hocus pocus economy policy of the current Administration is wearing out and they are shwon to be trairos and simpletons and extremely evil and treacherous all at once, a nasty combination. They all deserve to be arrested for acts against the American People, that is treason.
    That’s where it’s at folks, there isn’t any other way of looking at it, it is impossible to confuse the toxic debt with the American People, the Constitution is for the General Welfare, not for the welfare of an artificial European Currency that has somehow latching itself onto the Dollar which is now the Petro Dollar, and is being propped up by the taxpayers, but since there is a drive to abort babies on demand, the population has gotten less and less and the source of taxes is diminishing so the debt that is being foistd on the next generation cannot be paid because less and less children will be born and live to pay taxes.
    The population of Europe is diminishing rapidly and the tax base is not sufficient to meet the terms of the recent bailout proposals. You don’t have to be a rocket scientist to understand this. We are in the hands of a President and an Administration and Congress that are working for the Banking Oligarchy, and that Banking Oligarchy is ruthless and wants more and more and more for what?
    This is only a suggestion, but we can have a better future if we plan ahead instead of causing more and more crises to occur by making the wrong decisions. The Glass Steagall Act would be a good start and then things would start to fall in place, it will probably take two generations to get things back on track, we have to educate this young generation so they can work, and the teenagers and other young people will need to be educated so they can be part of a productive work force, and regain a sense of self worth instead of being so suicidal and depressed.
    They see and hear only garbage and so they feel disgusting and behave accordingly. That’s not right, they deserve better than that, it is up to us to give them a chance.
    Signed: Alice Wolf.

  • Felix

    Usually Federal Rerseve Bank Chairmans are very knowledgeable people but Berneke does not even know if the US GNP was under 1 trl $ in 1914.
    Apparently, in the government like in the big corporate sector, they appoint people based on their ball-licking and lying skills rather than professionalism.
    And guess what, despite this Congressional hearing nothing is going to happen. The government will keep doing what it wants to do.
    Isn’t the Fed operating a money laundering scam? Berneke did not know where the money is!
    In the corporate world, Berneke would be fired upon the spot.
    I cannot wait until 2012, but most likely very little will change. Maybe Americans need to start electing Libertarian, Independents, Constitutionalists, etc. Hell, at this point, I’d even go for some Greens. But the Democrats and Republicans have to be voted out–we don’t stand a chance with them in power any longer.

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