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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2859

Response to Tate Ulsaker’s "Profitable Crash Benefits Owners of the Federal Reserve System"

By Dr. Richard L. Benkin

I have to begin by revealing a bias I have; that is, I find conspiracy theories such as that expounded in the article, "Profitable Crash Benefits Owners of the Federal Reserve System." Now, to be sure, I will not attempt to challenge the author's credentials or knowledge base with regard to this subject; however, none of the seemingly endless string of conspiracy theories about almost every major historical event has proven correct. Perhaps, too, my dislike for conspiracy theories stems in large part from the still pernicious tendency to build wild ones around my people, the Jews. (Just to be clear, I am NOT in any way accusing Mr. Ulsaker of that.)

One of the biggest problems with conspiracy theories in general is that they presume a level of coordination of gargantuan proportions. They also assume--and I think this is where they can get very dangerous--a concentration of power that does not exist but can lead to scapegoating and false solutions. Additionally, the article's description of the economic crisis completely buys into one of several opinions and misses a number of cogent facts. Finally, they presume a level of malevolence and self-seeking that falls so far outside the realm of humanity that they challenge our basic understandings of humanity itself. Did a group of self-seeking men determine to pad their own bank accounts at the expense of worldwide economic and human disaster, as Mr. Ulsaker suggests?

First of all, I have spoken to several US lawmakers and others in Washington. While Mr. Paulson and other individuals did indeed paint the dire pictures Mr. Ulsaker’s article suggests (something which I as an American found highly disingenuous and, as Mr. Ulsaker believes, suspect), lawmakers did not take them at face value. In fact, if we look at the delays in passing the bailouts, we can see a deliberative process that took those statements with a grain of salt. More than one told me that they checked with local business owners and bankers in their districts to assess the likely impact of the growing economic crisis on, as we say here, "Main Street" not Wall Street. That information had a greater impact on their decisions than Mr. Paulson's scare tactics. I could not find anyone who believed the US would see martial law, as according to the article, Mr. Paulson threatened.

Moreover, the root cause of the economic crisis was the mortgage crisis, something else that Mr. Ulsaker seems to identify. But the root of that crisis is not financial but political. It all began in 1977 during the administration of President Jimmie Carter with the Community Reinvestment Act (CRA); Public Law 95-128, title VIII, 91 Statute 1147, 12 U.S.C. § 2901 et seq. The law included a provision by which federal regulatory agencies would examine banks for "CRA compliance," a potentially disastrous event for any bank. Prior to that, as American homeowners would testify, obtaining a mortgage could be quite a rigorous process; more to the point, would be homeowners would have to plunk down 20 percent of the home's assessed value in order to get a bank loan (mortgage) for the other 80 percent. But the CRA changed that by compelling banks to make loans to residents of primarily minority communities who might otherwise not qualify for the loan based on economic criteria. Banks could face severe regulatory sanctions, as well as lawsuits and charges of racism, if they did not follow the new mandates. To be sure, the Fed's monetary policy did, as Mr. Ulsaker notes, contribute to the crisis and the horrendous escalation of housing values--the equivalent of false money. But the CRA really took off during the administration of President Bill Clinton. More and more bad loans were made under a false assurance that home values would provide the needed capital to save the day.

The CRA was a sacred cow of the American left. Organizations like ACORN, which has also been named in several voting fraud schemes during the last election, made millions of dollars from the act; and they kept the heat on the liberal Democrats in Washington. Senator Christopher Dodd and Congressman Barney Franks, two very liberal Democrats were charged with monitoring the system, which allowed CRA abuses to grow geometrically. As the economic crisis became real to most Americans during the 2008 election campaign, a Member of the US Congress from Minnesota, Michelle Bachmann, sought to counter the tide of blame by raising the issue of the CRA in her campaign. The Democratic Party and various interest groups screamed "Racism" and the media dutifully took up their cause. The issue died, and blame was laid at the feet of "de-regulation," even though Wall Street regulation increased under President George W. Bush.

Whether Mr. Ulsaker is correct or I am will become apparent in the coming months. Most expert economists predict that the economy will right itself by mid-2010 the latest and that we have seen the worst of it. According to Mr. Ulsaker, "At this late hour, a huge crash is inevitable." He also predicts that "Very soon, due to pressures too numerous to name here, the dollar is about to reach runaway inflation (devaluation) on levels not seen in the history of the US." Although he does not specify what "very soon" is, the fact that US inflation is no higher than it was when Clinton took office should make a march to "levels not seen in the history of the US" quite dramatic and apparent to all. During the twentieth century alone, US inflation rates dwarfed the current rates during World War I (under Democrat Woodrow Wilson), World War II (under Democrat Franklin Roosevelt), and the late 1970s (under Democrat Jimmie Carter).

Conspiracy-caused calamity or temporary and limited downturn? Only time will tell whose predictions are correct.

- Asian Tribune -

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Profitable Crash Benefits Owners of the Federal Reserve System

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