May 5th, 2010, Fairfax, VA—Americans for Limited Government (ALG) President Bill Wilson today blasted provisions of the Dodd financial takeover bill that “put the ‘preservation of financial stability’ ahead of an individual’s right to privacy.”

“This is basically the creation of a financial intelligence agency to monitor all economic activity in the country without regards to an individual’s reasonable expectation of privacy, and it must be stopped,” Wilson declared.

Wilson pointed to provisions establishing an Office of Financial Research (OFR) and those allowing a Consumer Financial Protection Bureau (CFPB) to monitor every bank account in the country as “going way too far into areas the government has no business, nor any constitutional authority to implement, giving the government the power to monitor every financial transaction in the country.”

ALG today released a backgrounder outlining these provisions in the bill.

According to the American Spectator, a Senate committee source stated, “As we read this legislation, the CFPB could mine for whatever data they want, bank card activities of a subset of American citizens, credit card debt and payment patterns, who is spending money on whatever… And if the business community isn’t already scared out of their minds, they should be.”

According to the bill, the OFR would be tasked with the power to “collect, validate, and maintain all data necessary” to maintain financial stability. The OFR would obtain information from “member agencies, commercial data providers, publicly available data sources, and financial entities.”

Wilson said “The OFR could monitor banks, large and small, and would possess an unlimited authority to monitor all financial activities, including deposits, withdrawals, account transfers, and trading by investors, large and small, through stock exchanges, securities exchanges, commodities exchanges, and the like.

“In short, under the Dodd bill, the OFR could monitor every economic activity in the country,” Wilson explained.

The OFR could “require the submission of periodic and other reports from any financial company for the purpose of assessing the extent to which a financial activity or financial market in which the financial company participates, or the financial company itself, poses a threat to the financial stability of the United States.”

The Director of the office would be given subpoena power to require “the production of the data requested” of an entity upon a written declaration by the Director of the OFR.

“All the Director of the OFR would need to do is cite that the information requested was necessary for the maintenance of financial stability,” Wilson explained.

According to the bill, the OFR would be tasked with “collecting data on behalf of the Council, and providing such data to the [Financial Stability] Council and member agencies… [and] making the results of the Office available to financial regulatory agencies.”

The technology and software developed for monitoring the financial system, and the data it produces, would be also shared with the Council and member agencies. The Office will be funded off-budget through assessments levied on the $50 billion and larger financial and non-financial companies supervised by the Federal Reserve.

Wilson said, “Therefore, the Office will have an unlimited budget to put together military-grade technology to monitor the financial system, and whatever activities it wants, including trades, transactions, deposits, and withdrawals.”

Wilson concluded, “None of the information the OFR will be gathering will ‘protect’ anyone; it will only be used to preserve the government’s maintenance of power over the financial system.  This is just way too much power to vest in government. Not even U.S. intelligence agencies have this much power upon U.S. citizens, and they’re tasked with preserving national security and protecting the homeland from actual physical assault.”

Attachments:

“Big Brother is Watching You: The Threat Posed by the Dodd Bill to Privacy,” May 5th, 2010.

“’Down a Rabbit Hole:’ The Threat Posed by the Dodd Bill to the Private Sector,” April 30th, 2010, Americans for Limited Government.

Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.

Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.

###

May 4th, 2010, Fairfax, VA—Americans for Limited Government (ALG) called on the Inspectors General of both the U.S. Department of Justice and the U.S. Treasury Department to investigate an apparent criminal violation of the Internal Revenue Code by either members of the Florida IRS or U.S. Attorney’s offices.

The case revolves around April 20, 2010 Miami Herald reports claiming, “the IRS is also looking at the tax records of at least three former party credit card holders — former Florida House Speaker Marco Rubio, ex-state party chairman Jim Greer and ex-party executive director Delmar Johnson — to determine whether they misused their party credit cards for personal expenses, according to a source familiar with the preliminary inquiry.”

ALG President Bill Wilson warned, “the danger of the IRS becoming a public relations weapon against private citizens is real, and I thought we learned from the days when Richard Nixon was president that even the appearance of using them for political intimidation purposes would not be tolerated.”

The timing of the newspaper leak is particularly troubling due to its relationship to politics in the state of Florida. Governor Crist decision to drop his Republican primary campaign in favor of an Independent run for the U.S. Senate may have been influenced by this politically motivated leak.

ALG Counsel Nathan Mehrens notes, “Anyone who is a regular follower of law enforcement activity knows that the typical response from law enforcement agencies is to ‘neither confirm nor deny’ when asked about current investigatory activities.”

Mehrens continues, “In the context of tax information and investigations into tax issues federal law prohibits the release of many types of information.”

The Internal Revenue Code states that it is a felony punishable by a $5,000 fine and up to five years in prison to “willfully disclose to any person except as authorized in this title, any return or return information.”

Attachments:

Letter to DOJ Inspector General, Americans for Limited Government, April 27th, 2010.

Letter to IRS Inspector General, Americans for Limited Government, April 27th, 2010.

Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.

###

May 4th, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today demanded that the U.S. Senate adopt an amendment by Senator Bernie Sanders (I-VT) that would audit the Federal Reserve Board of Governors and regional Reserve Banks, saying “the American people have a right to know, and Congress a duty to know how the nation’s central bank operates to ensure that the Federal Reserve has been a responsible steward of the nation’s monetary policy.”

“The shroud of secrecy at the Federal Reserve needs to come to an end,” Wilson declared.

“The lack of transparency at the Federal Reserve helped to contribute to the financial crisis. If markets had more reliable information regarding the nation’s monetary policy, including which firms are dependent on Federal Reserve subsidies, systemic risk within the system could be identified by markets, instead of kept under a shroud of secrecy as under the current system,” Wilson explained.

Wilsons said that the Federal Reserve was “one of the principal actors” that caused the financial crisis: “By keeping interest rates too low for too long, the Fed accommodated the inflation of the housing bubble throughout the 1990’s and 2000’s by pumping easy money into the system.”

Wilson cited research by Stanford economist John Taylor who in a recent Wall Street Journal column wrote, “the Fed’s target for the federal-funds interest rate was well below what the Taylor rule would call for in 2002-2005. By this measure the interest rate was too low for too long, reducing borrowing costs and accelerating the housing boom. The deviation from the Taylor rule, which had characterized good monetary policy during the previous two decades, was the largest since the turbulent 1970s.”

Wilson said the Sanders amendment, despite objections raised, was limited in terms of the impact it would have on the exercise of monetary policy. “The Dodd bill does nothing to rein in the Fed’s ability to manipulate markets, and neither would the Sanders amendment,” Wilson said.

Wilson clarified, “What it would do is give Congress and the American people a means to ascertain the full scope of the Fed’s role in market interventions prior to and throughout the crisis.”

Wilson said that as the capital the Fed provided through the banking system helped to create the housing bubble and “disproportionately contributed the rise of the nation’s money supply.” In 1990, outstanding mortgage debt held was $3.805 trillion. By the end of 2007, total mortgage holdings had risen to $14.568 trillion, a monumental 282 percent jump of $10.763 trillion in new mortgages. During that same period, according to the True Money Supply index from the Ludwig Von Mises Institute, the money supply rose from about $1.787 trillion at the end of 1990 to about $5.268 trillion by the end of 2007, an 195 percent increase of $3.481 trillion.

In addition, Wilson said the Federal Reserve’s role since the crisis began in 2007 is “very unclear.”

According to Bloomberg News, the Federal Reserve had committed over $7.76 trillion for the bailout. However, it is unclear who received loans from the Federal Reserve, or who will receive the remainder of the committed funds.

Wilson explained, “Nobody can account for about $2 trillion of loans made by the Fed. The reason is because the Fed has consistently stonewalled the press, Congress, and even courts of law. And because law exempts most of the institution from being audited by the GAO.”

Wilson cited that the Government Accounting Office, according to 31 USCA §714(b), cannot audit and exempts from public oversight the following activities of the Federal Reserve:

(1) transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization;
(2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, open market operations;
(3) transactions made under the direction of the Federal Open Market Committee; or
(4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to items.

According to Bloomberg, “The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return.” The Fed has argued it is actually allowed to withhold “internal” memos as well as commercial and trade secrets information. Bloomberg, on the other hand, has actively filed a Freedom of Information Act (FOIA) request, demanding the information.

Thus far, the Fed’s Board of Governors has refused to comply with Bloomberg’s FOIA requests, despite a court ruling in Bloomberg’s favor. The Fed’s regional Reserve Banks have argued that they are private institutions beyond the reach of the Freedom of Information Act.

The Southern District Court of New York has ordered that the Federal Reserve Board of Governors comply with Bloomberg News’ Freedom of Information Act (FOIA) request to produce the details of some $2 trillion in emergency loans that were made. This includes who received the $2 trillion of loans, the terms under which they were received, and what collateral was taken by the Reserve branches in exchange for the loans.

The Federal Reserve is appealing this ruling, and has thus far refused to comply.

In answering questions from Congressman Alan Grayson (D-FL) last year, Fed Inspector General Elizabeth Coleman testified she could not account for “$1 trillion-plus that the Fed extended and put on its balance sheet since last September…”

An email to Bloomberg by Coleman’s office also revealed that “By law, we are the Office of Inspector General for the Board of Governors only… Consistent with our authority, we cannot conduct a direct audit of Reserve Bank operations.”

Wilson concluded, “The American people have a right to know just what has gone wrong with the nation’s monetary policy, how it contributed to the financial crisis, and what the true extent of the Fed’s relationship with financial institutions, foreign banks, and foreign central banks really is.”

Attachments:

Sanders Amendment to the Dodd Bill, SA 3738, sponsored by Senator Bernie Sanders, and cosponsored by Senators Russ Feingold, Jim DeMint, Patrick Leahy, John McCain, Ron Wyden, Chuck Grassley, Byron Dorgan, David Vitter, Barbara Boxer, Sam Brownback, James Risch, Roger Wicker, Lindsay Graham, Orrin Hatch, Mike Crapo, Robert Bennett, and Jim Bunning.

Interview Availability: Please contact Rebekah Rast at (703)383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.

###

May 3rd, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today dismissed an amendment offered by Senator Barbara Boxer (D-CA) to the financial takeover bill as “doing nothing to prevent future bailouts, and instead will guarantee that they occur.”

“Senate Democrats need to stop lying to the American people about what is in this legislation. The Boxer amendment will do nothing to prevent unlimited bailouts to creditors that will ultimately be paid for by the American people,” said Wilson.

“Senator’s Boxer’s amendment is being presented as if it removes the unlimited bailout authority from the Dodd bill, but it leaves in place the ability of the government to put a company into receivership, fully compensate its creditors and recapitalize it, all with the bailout fund, which the amendment will not remove from the bill,” Wilson explained.

“Then, the bailed-out company, under a new name, could be sold back to the creditors who were already bailed out from the fund in the first place,” Wilson added. “That’s a bailout.”

The Boxer amendment states that any company put into receivership by the Federal Deposit Insurance Corporation (FDIC) must be “liquidated,” but in an oped published this morning, Wilson wrote, “the ‘orderly liquidation fund’ is so broadly established that it even allows the FDIC to operate any company while in receivership, including all staffing decisions and the composition of the board of directors.”

The oped continues, “The FDIC could [also] reorganize the company as a ‘bridge financial company,’ whose board of directors is appointed by the FDIC, and the ownership of the company transferred to the new company by the FDIC. The new company, at the discretion of the FDIC, can then issue capital stock and securities.”

Wrote Wilson, “That is a lot more like a Chapter 11 reorganization of company than a Chapter 7 liquidation, except that it can be completely financed by the unlimited fund. That’s because it’s a bailout.”

The controversy over the Boxer amendment came amid reports that there would still be more amendments to remove the bailout provisions. According to the New York Times, “Mr. Dodd and Senator Richard Shelby of Alabama, the senior Republican on the banking panel, said they may introduce a joint amendment early this week that would ease Republican complaints that the measure would still allow government bailouts of economically endangered firms.”

Wilson asked, “If the Dodd bill does not contain bailouts, and if the Boxer amendment would ‘prevent’ bailouts, why are now Senators Shelby and Dodd working on another amendment to remove the bailout provisions?”

Wilson answered, “Because the Boxer amendment does not prevent bailouts inherently contained in the Dodd bill.”

The Boxer amendment contains a provision stating that “No taxpayer funds shall be used to prevent the liquidation of a financial company,” which Wilson called “meaningless.”

“Everybody knows that the unlimited bailout fund is financed by assessments on about sixty bank holding and insurance companies already. The fact is, as noted by a recent Congressional Budget Office Study, the American people are going to be the ones who pay for it, with higher costs on financial transactions, bank fees, and the like,” Wilson said.

According to the CBO study, “the ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government. The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors…”

The Senate is expected to vote on the Boxer amendment today.

Attachments:

“’Down a Rabbit Hole:’ The Threat Posed by the Dodd Bill to the Private Sector,” April 30th, 2010, Americans for Limited Government.

Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.

Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.

###

ALG Calls On Senate to Start Over With New Legislation “Addressing Root, Government Causes of Financial Crisis”

April 30th, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today condemned Senator Majority Leader Harry Reid and Senators Chris Dodd and Barbara Boxer “for leaving in place the potential for unlimited government takeovers and bailouts paid for by the American people through assessments levied upon financial institutions via the Dodd bill.”

ALG today updated its comprehensive backgrounder, “Down a Rabbit Hole,” on the imminent danger this legislation represents, and to include what Wilson said was “the precise mechanism for the bailout authority. Under the Dodd-Lincoln and Boxer amendments, the government can still seize any institution it wants, and then keep it, reorganize it, or redistribute it without any Congressional approval,” Wilson declared, urging Senate Republicans to filibuster the measure.

According the ALG backgrounder, “Conceivably, when the FDIC seizes a company, it could use the Fund to fully pay back all outstanding liabilities to the company’s creditors, turn the company into a bridge financial company, fully recapitalize it with financing from the Fund, and then sell the capital stock to those very same creditors that were bailed with the Fund.”

The backgrounder continues, “That’s a bailout, and neither the Dodd-Lincoln substitute amendment nor the Boxer amendment would remove any of these provisions.”

“Senate Democrats have lied to both the American people and Senate Republicans about the removal of the bailout provisions in the bill. They’re still contained in the Dodd-Lincoln substitute, and the Boxer amendment does not remove those provisions, either,” said Wilson.

“Senators Dodd and Boxer are misleading the American people,” Wilson continued. “The Boxer amendment is meaningless, because the allegation is not that the American people will pay for these bailouts and takeovers via income and other taxes. It is that the American people will pay for these government takeovers and bailouts through higher costs on financial transactions and other fees levied by the financial institutions.”

Wilson continued, “The FDIC under the bill can still levy unlimited assessments on the financial institutions, leaving anyone who uses the financial system to pay for it with higher costs.”

Wilson said Boxer’s amendment to require that the assets of companies put into receivership are “liquidated” was also “meaningless, because under the orderly liquidation fund, the FDIC has unlimited capacity to either sell seized companies to the Treasury, to reorganize them, or to be redistribute their assets to politically-favored entities.”

On April 29th, Senator Dodd assured his colleagues that the bill did not contain bailouts, but that he would accept an amendment from Boxer affirming his position. Dodd said that he shared others’ “determination that we never again have institutions that become too big to fail, with that implicit guarantee that the government will bail them out. I’m satisfied that our bill does that already… I know my colleague from California, Barbara Boxer, has some ideas on this as well, she has raised… that I think can help get us there.”

Senator Boxer on April 30th, as she submitted her amendment, agreed with Dodd that her amendment was unnecessary. “When I heard my colleagues on the other side say Senator Dodd’s bill would ensure taxpayer bailouts, I knew it was false, and I went to Senator Dodd and colleagues on the committee and said I did not understand why these comments were coming from the other side, as if saying this glass of water on my desk is a cup of coffee. No. This glass of water is a glass of water. It is not coffee. And if you say seven, eight, and nine times that it is coffee, somebody might believe it.

Boxer continued, “That is how I view the comments from the other side that this is guaranteeing bailouts, when in fact it is not.”

Wilson asked, “If the Dodd bill does not contain bailouts, then why is Boxer trying to submit an additional amendment to affirm that position?”

Wilson said, “Provisions in this bill that create a $50 billion revolving ‘orderly liquidation fund’ and the creation of ‘bridge financial companies’ give the government unlimited authority and resources to seize companies and either nationalize, bail out, or redistribute their assets to favored political classes, in spite of the Boxer’s hollow amendment.”

“The Dodd-Lincoln and Boxer amendments do not eliminate bailouts and government takeovers, they institutionalize them for all time,” Wilson concluded.

Attachments:

“’Down a Rabbit Hole:’ The Threat Posed by the Dodd Bill to the Private Sector,” April 30th, 2010, Americans for Limited Government.

Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.

Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.

###