I SEE FED PEOPLE....THEY'RE EVERYWHERE

And just as I post the most recent article about Bill Dudley, the NY Fed Chief putting on a PR blitz to save the reputation of the Fed and inform the public about the good works they do, we get another gem that reinforces just how rigged this whole system is. 

FORMER KANSAS CITY FED PRESIDENT, THOMAS HOENIG NOMINATED FOR FDIC CHAIR BY OBAMA.
http://www.bloomberg.com/news/2011-10-21/obama-nominates-former-fed-president-hoenig-for-fdic-vice-chair.html

Hoenig, who has served as President of the Kansas City Fed for 20 years and submitted his resignation on October 1st of this year.

Is it odd that Hoenig would retire only to move into the leadership role at the FDIC?  Perhaps not, however this interesting story about Bank of America, highlighted below, has me thinking a bit more now that I have noted the story.

WHEN THERE IS DISAGREEMENT IN THE WORKPLACE, FIRE THEM
When I worked at the hedge fund back in the day, you could tell when someone was about to be asked to leave the firm (fired).  Typically, the timing would coincide with any challenge or disagreement with the CIO on any investment decision or issue.  Once that event occurred the poor trader or manager was doomed to pack up his belongings within 30 days.

I think the Fed must have this type of leadership approach when it comes to the FDIC

B of A Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit -
http://mobile.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit?category=%2F

Hmmmmm.  Think just the first two paragraphs -

"Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position."

See, the FDIC looks at these transfers of derivatives into the bank holding company and sees these as potential claims against bank assets.  The counterparties that entered into these with Merrill Lynch love this because they are getting a "better" rated counterparty with much deeper pockets. 

Isn't it interesting that the FDIC and FED are split on this approval and a 20 year veteran Fed President would suddenly be nominated to a key leadership position at the FDIC?

ONE MORE JUST FOR GOOD MEASURE -
While it is not related to this story in any way, you just can't avoid a Federal Reserve connection or Goldman Sachs employee in any important office in our government.  While he never worked at Goldman, you've got to know that our friend Herman Cain was on the Board of Directors for the very same Kansas City Federal Reserve in the early and mid 1990's. 
MONTHLY UPDATE -
I took a much needed month off from writing the monthly reports and I feel refreshed and feel like I have a better perspective on the market due to the lay off.  I'm dealing with extended family health issues so I seem to have much fewer hours to devote to writing.  I will attempt to write less long, but more frequent posts in the next month.  The monthly update should be finished tomorrow for some weekend reading.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

THE SOFTER SIDE OF THE FED (SCARY)

I encourage you to read the piece in Bloomberg this week on Bill Dudley, the President of the NYFED titled
"Not Your Father's New York Federal Reserve NY FED President - Bloomberg Article by Caroline Salas Gage

PR BLITZ INDICATES FED HATERS ARE WINNING
Are you getting the idea that the FED is putting the full court press on the public to encourage them to see the side of them that is benevolent and for the little guy?  Yes, me too.  I mean how on earth could we possibly believe that the Fed had anything but the common folk's best interest at heart as they engineered too major stock market collapses and one real estate implosion in the last decade?

Dudley is one of the 3 Fed chiefs that actually matter, the others are Fed Chairman Ben Bernanke and Janet Yellen who is the Vice Chair of the Federal Reserve Board.

The article notes how hard Dudley is trying to get out with regular people and explain how the Fed is helping them.  Clearly he hasn't internalized the criticism of the Fed and questioned if anything they have to say might be true as the Fed continues to squeeze investors that use fixed income investments or even savings accounts as part of their portfolio.  Dudley obviously believes that old ladies should need to take more credit risk or simply cut out medical coverage or incidentals like food or shelter rather than raise interest rates.

Dudley's moves highlight the growing importance of the public's view of the Federal Reserve given that it has now become politically acceptable to believe that the Fed is a part of the financial crisis.  Ron Paul has a book about Ending the Fed, Rick Perry also is quite wacky crying that the US needs to get rid of the Fed.  I've even seen a sign or two in the OWS demonstrations that actually reference the Fed.  A growing move to understand and dismantle the Fed is absolutely not in the Fed's best interest..... nor in the interest of the banks and uber-wealthy 1%ers.  I expect more concerted efforts to humanize the Fed and make Joe 6 Pack feel happy to have a benevolent Fed on our side.

INFORMATION FLOW OR BIG BROTHER?
Now, add this to the recent "rumored" request by the Fed to begin a project to scan and analyze references to the Fed in social media and the blogosphere in order to capture market sentiment, I think you have a situation that could be ultimately bad for all of us in the general public.
http://www.forbes.com/sites/mobiledia/2011/09/30/federal-reserve-wants-to-monitor-facebook-twitter/

http://info.publicintelligence.net/FRBNY-SocialMedia.pdf

Clearly the conspiratorial side of me feels like the Fed has sinister intentions when they move forward with this project, however, the NY Fed assures us that it is all good, why worry?
 
"The project reflects its (NY Fed's) commitment to “improving its communications and engagement with the public in order to enhance and improve the public’s understanding of its activities and the role it plays in supporting the U.S. Economy,” according to a Fed spokesman’s statement."

I'm sure the Fed's efforts will be passive and harmless and simply used for data collection.  Having said that, I'm sure it won't be long till a blogger or Facebooker is threatened with jail or lawsuit for disparaging the Fed and invoking some type of crisis of confidence relate to their posts.  Think it can't happen?  Look no further than the Eurozone's sovereign debt issues where investors and "evil speculators" are targeted for stating that the sovereign countries are broke and the bonds are a poor investment.  Give the US debt crisis a few more years and we'll see how "passive" this monitoring becomes.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/