"First of all, in private contracts: wherever the unjust is the partner of the just you will find that, when the partnership is dissolved, the unjust man has always more and the just less. Secondly, in their dealings with the State: when there is an income tax, the just man will pay more and the unjust less on the same amount of income; and when there is anything to be received the one gains nothing and the other much. Observe also what happens when they take an office; there is the just man neglecting his affairs and perhaps suffering other losses, and getting nothing out of the public, because he is just; moreover he is hated by his friends and acquaintance for refusing to serve them in unlawful ways. But all this is reversed in the case of the unjust man."
Plato's reply to Socrates, The Republic
I watched with ironic despondency as Representative Ron Paul (R-Texas) engaged, for what most commentators suggest is his farewell bout, with Federal Reserve Chairman Ben Bernanke (R - Banks & High Net Worth Investor Pals) on the cost of opacity in the Federal Reserve. Characteristically, Chairman Bernanke knew that his philosophical battle with Rep. Paul has been a war of attrition and the last man standing will be proclaimed the victor. To be clear, all Ben needed to do is be silent and he knew that the halls of Congress would serve as a cavernous acoustic curtain that would suck Ron's words into the void. And, for the most part, he did what he needed to do. The only place he lost his script of the silent treatment was in his unbelievable statement that, "To eliminate the exemption on monetary policy deliberations would effectively - at least to some extent - create a political influence, or a political dampening effect, on the Federal Reserve’s policy decisions." Really, transparency would lead to political influence? No wonder Socrates wound up drinking the hemlock!
This past week we have seen an expansion of unfathomable crimes being 'uncovered' long after their effects have wrought great damage on the General Public. While I have, for years been commenting on the massive abuses in the municipal bond market - abuses which undermine every pension investor in the United States and many around the world - the U.S. Department of Justice has succeeded in getting 13 guilty pleas from muni riggers at Bank of America, JPMorgan, UBS, Wells Fargo, and General Electric resulting in a reported $700 million in restitution and penalties. And now, this week the Justice Department announced an indictment for wire fraud and conspiring to defraud the United States against Bank of America's municipal derivatives desk former executive Phillip D. Murphy who allegedly played a key role in rigging the price of funds for things like building schools and roads.
Rep. Ron Paul's frustration with a system out of control and operating with impunity is justified. Chairman Bernanke's reply to Rep. Paul suggests that he either never read or forgot what Congress actually authorized on that wonderful Christmas Eve eve session in 1913 at the passage of the Federal Reserve Act. He overlooked the fact that Congress actually stated that "shareholders of every Federal Reserve bank shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such bank…." He also seemed to assume that We The People wouldn't go back and read the actual Act that put his position into effect and see that, "Nothing in this Act contained shall be construed as taking away any powers heretofore vested by law in the Secretary of the Treasury which relate to the supervision, management, and control of the Treasury Department and bureaus under such department, and wherever any power vested by this Act in the Federal Reserve Board or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be exercised subject to the supervision and control of the Secretary." Oh, and did I mention that the Fed's salary cap was $12,000 annually?
This week's news highlighted one of the great cognitive ischemias of our time. We're either supposed to listen to sound bites emanating from Congressional hearings and assume that one or more of the parties is actually telling the truth or we're supposed to be sufficiently anesthetized not to care (or both). Without basic financial literacy, We the People are incapable of knowing when justice is being served and when it's being usurped. While we've got a basic impulse that senses that injustice is at hand, we wait to see who is left in relative paucity and then conclude that the one that got away with all the wealth was the unjust. While this logic is consistent with Plato's argument in The Republic, I am compelled to suggest that outing the bad guy is not overly constructive. In fact, as Chairman Bernanke quite correctly said to Rep. Paul, "there's no constitutional reason why Congress couldn't just take over monetary policy," concluding that if Rep. Paul doesn't like the job the Fed is doing Congress can "take it back."
This exchange was Chairman Bernanke's crowning achievement in the two days of testimony. While guilty of grievous over-simplifications of the law authorizing his job, he quite correctly stated that the same Congress that passed the Federal Reserve Act in 1913 could repeal any or all of it. And, this rather frontal retort should be a clarion call for citizens to join in the effort to reform or reconstitute a more transparent system. In his defense, Chairman Bernanke is only as good as the ideas that he receives from his advisors and the public. The lack of constructive solutions to monetary policies and the economy is, in large part, due to the lack of constructive input coming from citizens. But, as Occupites across the globe have quite convincingly proven, disgruntled ignorance, regardless of its justification, is, in the end, as unhelpful as incumbent complacency.
So, here's an idea. This year, the U.S. Department of Justice is likely going to rake in record fines from banking institutions. If the first two quarters are any indication (see their graph above), they could blow through last years $1 billion mark quite easily. So why don't We the People petition for the Treasury (the recipient of these windfalls) to provision a Town-Hall-for-Financial-Literacy Campaign - funded by the temple robbers' levies - so that We the People actually know enough to form constructive critiques and, in so doing, actually create a More Perfect Union?