There was no longer a one to one ratio of paper to gold. Now there could be three or four pieces of paper in circulation for every unit of gold in the vault. ibid.
This system became known as Fractional Reserve Banking. ibid.
Wall Street swiftly adopted the fear of bank failures to sell the idea of a central bank or lender of last resort. ibid.
In November of 1910 under the guise of a duck-hunting trip six men took a secret train ride to an exclusive private club on Jekyll Island, Georgia, to write a Central Banking Act. The classified gathering read like a Who’s Who of American banking. ibid.
When the Fed was established in 1913 it cut reserve requirements in half over the next four years doubling the money supply by the end of World War I. But the Fed’s real power lies in its monopoly to create money. ibid.
The Federal Reserve system adds another inflationary layer to an already unstable banking system. ibid.
Roosevelt confiscated the people’s gold. ibid.
There is not now nor has there ever been any direct control over the Fed by the president or Congress. The meetings of the Federal Reserve Board are held in secret. And nobody knows exactly what goes on. ibid.
A recent attempt to open the Fed to public scrutiny came in 1993 ... An independent audit of the Fed’s operations ... The proceedings of the open market committee video-taped with detailed minutes released within a week ... The President chooses the twelve heads of the Fed’s regional banks instead of powerful bankers. Predictably, Fed’s Chairman Alan Greenspan resisted the changes. What was surprising was the President Bill Clinton’s position. He declared the reforms would ‘run the risk of undermining market confidence in the Fed’. ibid.
Despite the established view, Greenspan and the Fed and big commercial bankers are not the inflation fighters they pretend to be; the Fed and its allied banks are not part of the solution to inflation and the business cycle, they are the problem itself. ibid.
Bribery: it’s a trillion dollars a year. Now there is an international crackdown and a pivotal case. Frontline: Black Money PBS 2009
BAE aka British Aerospace is the world’s third largest arms manufacturer. ibid.
An $80 billion international arms deal: a fighter jet deal involving BAE, the United Kingdom and Saudi Arabia. ibid.
In late 1977 Congress passed the Foreign Corrupt Practices Act. ibid.
The first investigation in the United Kingdom of oversees bribery. ibid.
Prince Bandar brought a letter from his father Crown Prince Sultan threatening to cut off cooperation on terrorism. ibid.
Since this programme was first broadcast in the US in 2009 BAE has admitted in the US to false accounting and ... guilty to a breach of duty to keep accounting records, and agreed to pay £30m in respect of separate wrongdoings concerning Tanzania. ibid.
The recession had destroyed $11 trillion of Americans’ net worth. A recovery seemed far off. Occupy Wall Street wanted bankers held responsible. Frontline: Money, Power and Wall Street I, PBS 2012
Credit Default Swaps – a kind of derivative that ensures a loan against default. ibid.
And so they began selling derivatives that were simply bets on any and all portfolios whether the bank owned them or not. These products came to be known as Synthetic Collateralised Debt Obligations – Synthetic CDOs. ibid.
A wave of lending abuses. ibid.
By the end of 2005 the total outstanding value of credit default swaps around the world was measured in trillions of dollars and was doubling every year. ibid.
AIG was on the hook for $440 billion of credit default swaps. ibid.
It was on a cold March day in 2008 that the fear of a meltdown would become a reality. After the real estate bubble burst it would only be a matter of time before investors would start to lose confidence in Wall Street’s biggest banks. Bear Stearns was the first to crack. Frontline: Money, Power and Wall Street II
Bear was party to complicated financial deals. Geithner learned that Bear had made credit default swap deals worth trillions of dollars all over Wall Street and around the world. Geithner saw what central bankers feared most: systemic risk. ibid.
A bail-out of Bear Stearns was not [Henry] Paulson’s style. But [Ben] Bernanke and Geithner believed it was too big to fail. And by that weekend options were dwindling. ibid.
One of the most basic moral tenets of the free market – Moral Hazard. ibid.
Paulson told President Bush what was needed now was to rebuild confidence in the economy ... It became known as the Summer of Assurances. ibid.
Then it hit: in the cross-hairs the world’s fourth largest investment bank – Lehman Brothers. ibid.
Paulson delivered the message: Lehman was in a death spiral and there would be no government bail-out. ibid.
Geithner realised that if AIG went down the consequences would be even worse than Lehman. He argued for another bail-out. ibid.
Conservative Republicans in the House were in full revolt. ibid.
The Congress finally passed Paulson’s Bill ... Paulson was about to hand out billions of dollars. ibid.
The Stock Market was down more than 6,000 points. Frontline: Money, Power and Wall Street III
The mega-bank Citibank was failing. ibid.
Barack Obama had made the economy a key issue. ibid.
For months there had been public anger of Wall Street. ibid.
The anger was not just confined to the streets. On Capitol Hill Congress responded to the public anger – they summoned the heads of the nation’s biggest banks. ibid.
The banks were so large and inter-connected the government felt it had to bail them out. Because their failure could bring down the entire economy. They are Too Big To Fail. ibid.
The loans were part of an unprecedented intervention in the financial system. ibid.
Now the president decided to revive a central theme of his campaign – reforming Wall Street. ibid.
None of the bank CEOs had been fired or prosecuted. ibid.
This season New York banks set aside $20 billion in bonuses. Since the crash of ’08 banks have paid out more than $80 billion in bonuses. Frontline: Money, Power and Wall Street IV
Cathy O’Neil, a mathematician, came to Wall Street in 2007 after beginning her career in academia. ibid.
For most of the last century bankers made the same salaries as lawyers, doctors and engineers. ibid.
Many American banks found London preferable to New York. ibid.
The country suddenly owed hundreds of millions of dollars of fees and penalties to its debt holders including J P Morgan. ibid.
So bankers descended on European capitals offering derivatives solutions. ibid.
Italy and J P Morgan entered into a currency swap. ibid.
Greece would also go on a massive spending spree. ibid.
Between 2001 and 2008 Greece’s debt had doubled. No-one it seemed wanted to ask any hard questions. ibid.
With the markets no longer willing to provide Greece cheap credit the country had to cut spending. People took to the streets in protest. ibid.
The five biggest banks in America have become larger ... 56% of the American economy. ibid.
‘A very cruel and destructive god.’ ibid.
On September 18th 2008 the Secretary of the Treasury Henry Paulson and the Chairman of the Federal Reserve Ben Bernanke arrived for an emergency meeting of the Cabinet. In the past seven months they have bailed out one bank and let another one fail, nationalised three of the nation’s largest companies and watched in horror as the credit markets froze. Frontline: Inside the Meltdown, PBS 2009
The road to riches for Bear [Stearns] was simple: buy hundreds of mortgages, then bundle them into securities and sell them to investors. ibid.
Bear had borrowed heavily to invest in toxic assets and other high risk securities. ibid.
They found billions in sub-prime default loans. ibid.
Bear had made credit-default-swap deals worth hundreds of billions of dollars all over Wall Street and around the world. ibid.
A shotgun marriage between Bear and J P Morgan. ibid.