The Fed Cheated for NAFTA

22The Fed Cheated for NAFTA

It turns out the Federal Reserve took an active role in pushing for NAFTA which included denying Congress information about the instability of Mexican currency, information that could have sunk the deal.

James Pilant

Anatomy of an economic debacle: How the Fed proposed bailing out Mexico to pass NAFTA –

The Federal Reserve is supposedly an independent central bank, that we’re told is above politics. By this telling, it is supposed to be staffed with ramrod straight central bankers, tight-fisted but apolitical. While the Fed can state its opinions on policy matters when asked by Congress, it isn’t supposed to use its power to manipulate the political system. And it isn’t supposed to propose bailing out a foreign country just to get the United States Congress to change policy.

But in 1993, that is exactly what the Federal Reserve did.

On Sept. 28, 1993, Jon LaWare, a member of the Federal Reserve Board of Governors, testified before the House Banking Committee in support of the North American Free Trade Agreement, or NAFTA. “I want to make clear that the Federal Reserve supports NAFTA without qualification,” he said, discussing throughout the hearing how NAFTA would help American banks penetrate the Mexican financial system. LaWare, like other regulators testifying at that hearing (including Mary Schapiro, then-head of the SEC before returning to the job under Obama), was pressing the agreement aggressively. The Federal Reserve has, broadly, two reasons to press trade agreements. One, the Fed wants lower labor costs, which reduces inflation. Shipping jobs abroad makes the Fed’s job easier. And two, U.S. banks, which are the regulatory customers of the Fed, wanted to get their hands on the Mexican banking system (which they eventually did).

via Anatomy of an economic debacle: How the Fed proposed bailing out Mexico to pass NAFTA –

From around the web.

From the web site, Systemic Disorder

A frequent criticism of “free trade” agreements is that corporations are elevated to the level of a country. It might be more accurate to say that corporations are elevated above countries.

The muscle in trade agreements like the North American Free Trade Agreement or the proposed Trans-Pacific Partnership is the mandatory use of “investor-state dispute mechanisms.” That bland-sounding bureaucratic phrase is anything but bland in its application — these “mechanisms” are the tools used to turn corporate wish lists into undemocratic reality.


The concrete form of these “mechanisms” are corporate-dominated secret tribunals that hand down one-sided decisions with no oversight, no public notice and no appeals. This is so is because governments that sign trade agreements legally bind themselves to mandatory arbitration in these secret tribunals despite (or because of) their one-sided nature. It is a virtually certainty that, should be they passed into law, the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) will contain some of the most draconian language yet in this area.

Goldman Sachs Hit With More Sanctions (via Axsmith Law Blog)

No firm deserves sanctions more!

James Pilant

Goldman Sachs is being sanctioned by the Federal Reserve related to illegal mortgage practices, specifically robo-signing. Robo-signing is when a person signs affidavits used in a foreclosure case using someone else's name. Often these employees of banks or law firms will sign hundreds of documents in a single day – with someone else's name. … Read More

via Axsmith Law Blog

Progressives Need to Politicize Money (via Gerry Canavan)

Exactly. jp

From a series of legal codes favoring creditors, a two-tier justice system that ignore abuses in foreclosures and property law, a system of surveillance dedicated to maximum observation on spending, behavior and ultimate collection of those with debt and beyond, there’s been a wide refocusing of the mechanisms of our society towards the crucial obsession of oligarchs: wealth and income defense. Control over money itself is the last component of o … Read More

via Gerry Canavan

Why Elizabeth Warren Is Still the Best Choice for CFPB Director (via Rortybomb)

Just like the writers at Rortybomb I have long believed that Elizabeth Warren was the best choice.

I have written about this before. You can read my July 26, 2010 post – Elizabeth Warren Should Be The Head Of The Consumer Financial Protection Bureau or the July 24th, 2010 post –  Treasury Makes A Mistake – Claiming They Are Not Blocking Elizabeth Warren (via The Baseline Scenario).

Please read the post and add Rortybomb to your favorites.

James Pilant

Why Elizabeth Warren Is Still the Best Choice for CFPB Director The Consumer Financial Protection Bureau just launched its website. Meanwhile, Shahien Nasiripour has a story that found “… if the White House can’t get a nominee through the Senate by July, the bureau will lack the authority to supervise nonbank lenders, according to a Jan. 10 report by the inspectors general of the Treasury Department and Federal Reserve obtained by The Huffington Post.” One of the main reasons for creating a Consumer Financi … Read More

via Rortybomb

Dylan Ratigan Challenges The Current Beltway Definition Of “Free Market”

Dylan Ratigan has a interesting essay in the Huffington Post. As is usual with his writing, the indignation boils over. I find this very pleasing. My indignation boils over from time to time. I have long been struck by the beltway commentator constant refrain, “free market.” It is used over and over as a cure for every economic malady. I can’t help but believe they don’t know the subject. Little industrial or financial business in the United States can be considered free market in any traditional sense: Our agricultural products are heavily subsidized; our financial industry is favored by a host of friendly laws as well as being able to borrow money from the Federal Reserve at zero percent interest.

What’s free market about any of that?

Here’s a quote from Ratigan’s essay –
Here we find ourselves today in a similar situation, where six industries have a stranglehold over Washington. And the draining of our current and future wealth will only continue as both the media and the political class not only tolerates but spreads the phrase “free market” when the reality doesn’t match the rhetoric.

Our politicians continue to take money from massive corporations to subsidize them in a rigged marketplace that only cares about protecting the incumbent structure. At the same time, the American people are drowning in a red sea of debt caused by perpetuating banking, health care, energy and defense systems that are expensive, ineffective and protected from competition.

So I have a challenge for those so-called free market Republicans who rode a wave of voter discontent into Washington. I challenge you to end massive corporate subsidies. To end tax loopholes. And to end rigged trade with China and release the true power of free markets.

This can no longer be simply a talking point to win votes. Because this broken system is not only costing American jobs… it’s costing us the very prosperity and freedoms that this country was founded on.

If we actually had an intelligent discussion about the economic future of this nation, the great mass of citizens would benefit. The kind of “single phrase” thinking currently in vogue only benefits the status quo. We can’t begin to address these issues until the appearance of intelligent thought is replaced by the real thing.

Fewer slogans, more thinking.

James Pilant

Federal Reserve Proposing Mortgage Rule to Eliminate Key Foreclosure Protections (via Rortybomb)

Rortybomb has it right here. The Federal Reserve is rushing into to save the banks from their forclosure fiasco. I have blogged on this. I was expecting Congress to rush to the banks’ aid but apparently the Federal Reserve is going to beat them to it.

The banks, the forclosure industry, they never seem to lack for friends in all the right places. Have you noticed that? Where are the homeonwners’ friends? Where are our friends? Is the only value in this society cold hard cash?

Read this. It’s good writing.

James Pilant

In the early 2000s the subprime lender Household Finance settled the largest consumer fraud settlement in U.S. history. Household Finance paid a whopping $484 million in fines to a joint settlement with a group of attorneys general. One month later Household was acquired by HSBC, the London financial giant, for $16.4 billion, setting off a bidding war on subprime dealers by the highest parts of Wall Street. It's like they were being rewarded, ins … Read More

via Rortybomb

Matt Taibbi Is Mad

Matt Taibbi is angry. The reform bill on the financial industry is a sham and he’s going to let everybody know.

Mr. Taibbi has the same contempt for the way things are done in the government and private business that I do. Whatever makes the most money is the only consideration. It takes a lot of dead people or an incredible catastrophe to get the government to react or private industry to change course.

Here’s Matt venting about Goldman Sachs.