On the 100-year anniversary of the Federal Reserve, Consuelo Mack sits down for an interview with James Grant and Richard Sylla for a PBS Wealthtrack special. James Grant is the editor and founder of Grant’s Interest Rate Observer, and Richard Sylla is a Henry Kaufman Professor of the History of Financial Institutions and Markets at NYU’s Stern School of Business. During the discussion both men made the candid accusation that the Federal Reserve has assigned itself the job of propping up the stock market. I think this revelation is overwhelmingly obvious, but it’s nice to hear some veteran market analysts admit what is actually taking place within America’s central bank.
The Fed’s real agenda, often skirted in the press releases and public media is to prop up the banks and the Wall Street money machine. Whether it’s facilitating hedge funds’ push into residential real estate or helping giant banks to enter and manipulate commodity markets, there are broad implications for the economy with Wall Street’s trickle-down philosophy. Far from being and independent regulator of the banking system, the Fed has chosen to become the enabler of the banks and Wall Street, and their various wealth-transfer mechanisms. As Pam Martens and Martin Smith accurately describe it, “Wall Street has become an institutionalized wealth transfer mechanism, moving the savings of the little guy into the pockets of the very rich.”
Grant: “New thing – it is in the business of talking up the stock market…The Fed is manipulating prices, especially on Wall Street.” To another question from Mack, Grant says: “The Fed has presided over the decay of finance.”
Professor Sylla adds more fuel to the fire: “The Fed seems to have, I think almost deliberately, is trying to push the stock market up. I’ve watched this stuff for 40, 50 years now and this is the first time in my memory when it seemed to be official U.S. government policy that the stock market goes up. And the Fed likes this because it thinks that when the stock market goes up, people who own stocks feel richer, they’ll go out and spend more money, and the unemployment rate will come down.”
To get a better glimpse of that incestuous relationship between the Federal Reserve and the banks, Gretchen Morgenson provides a stunning reminder of just how far the Fed will go to enable our too-big-to fail banks and their too-big-to-jail executives in their quest to extract profits from the public and manipulate markets. The Fed’s treatment of JP Morgan Chase and their purchase of commodity firm Henry Bath & Son is a stunning example of how corrupt the banking system has become.
“With the big banks, everything is negotiated,” said Edward J. Kane, a professor of finance at Boston College and an authority on regulatory failure. “The rule provides a constraint on the negotiation, but ultimately the Fed and these banks are married. They are, day after day, dealing with each other and as in a marriage you almost never issue an ultimatum.”