For my part, it seems that Rep. Alan Grayson (D-FL) is one of a handful of members in Congress who actually understand what's going on, and are trying to get some answers on this bailout mess (Ron Paul is another). The following is from nakedcapitalism.com ...
In this YouTube clip, we see Rep. Grayson question Federal Reserve Chairman Ben Bernanke about the creation and distribution of half a trillion dollars ($500,000,000,000) in the form of swaps/loans to other nations.
After being questioned about the Fed's authority to create half a trillion dollars, Bernanke cites Section 14 of the Federal Reserve Act. You can read Section 14 for yourself, but nowhere does it say that the Federal Reserve can create money out of thin air for redistribution to foreign central banks (which, in this case, they turned around and lent to domestic client banks).
The closest Section 14 comes to granting the Fed the authority to create money is Section 14(e), which allows the Fed to trade ("swap") and purchase currency "arising out of actual commercial transactions" that "bear the signature of two or more responsible parties." As far as I can see, bad bets in a casino economy are not covered in Section 14 (Section 14(f) might provide a loophole, but I'll let you be the judge on that one).
One of the highlights in this clip is when Rep. Grayson pretty much laughs in Bernanke's face. The moment (start @ minute 3:19) occurs when Bernanke said that the 30% rise in the dollar, which took place at the same time that the Federal Reserve lent out $500 billion to foreign central banks, was just a "coincidence."
I'm not sure, but it seems to me that the swaps (U.S. dollars sent abroad for other currencies) are being used to cover hundreds of billions in counterparty claims that arose out of the murky underworld of collapsed derivatives, CDOs, CDSs, and the like. European and other banks got caught in a credit crunch and/or simply don't want to use (and inflate) their currency to pay out counterparty claims created by the incredibly bad and stupid bets made by U.S. financial institutions (I have no idea what we're doing with the currencies we're getting from other central banks).
Again, and I'm only speculating here, but it seems to me that the Fed is using it's authority to cover the calamity our financial institutions caused when they created and sold their incredibly shallow bets to the rest of the world. This also may explain, in part, why we've encumbered between $7-9 trillion in obligations through the Federal Reserve (to date).
And Republicans are fixated on President Obama's birth certificate and/or creating his "Waterloo" moment? Wonderful.
- Mark
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