Time to Abolish the Federal Reserve System as it Exists

Bloomberg reports that, pursuant to a FOIA request, the Fed has released documents showing that money was lent to foreign sources to prop up banks lending money to local governments in Belgium, a financer of cooperative fisheries in Japan and a company part owned by Libya. I guess we really did have vital interests over there. During a record week in October 2008 when the Fed lent out $110.7 billion, 70% went to foreign sources. The Federal Reserve chairman, Benjamin Bernanke, had sought to block access to this information (gee, I wonder why). In fact, during the peak of the financial crisis, Wachovia was the only U.S. bank to be amongst the top five borrowers under the discount rate program. The second largest borrower, Bank of China.

What if those loans had been to the Greek banks and Grece had fully collapsed? It would cause a liquidity crisis which would have had severe effects in the United States. Meanwhile, Bernanke is trying to keep this from the American people. Since the Fed prints money and thereby directly controls the value of the dollar, I would say the American people should probably be able to know what's going on at the Fed. However, the Fed is not accountable to anyone, it's books closed to public inspection. Only in theory is it accountable through Congressional oversight. Further, the banks which make up the Fed are privately held companies.

Abolishing the Fed entirely is probably not a practical option politically, however, making the public funds open to review and bringing in stiff penalties and possible criminal sanctions would go a long way to bringing accountability to the system.