So if this doesn't appear in the money supply itself; it's all done technically in a swap agreement where the bank will make, let's say, a takeover loan. And how does it get the money without reserve? Well, it'll take its packaged mortgages, or its credit card loans or whatever, or its junk mortgage loans, and deposit them with the Federal Reserve, and it'll use the Federal Reserve deposit and it will be as if a regular depositor walked into the bank and lent them enough money to make the loan. So it's all done with a technicality that the Federal Reserve is very careful not to explain to people how the system works and it's not really taught in the monetary textbooks. You really have to work in the field to follow it day by day.
There are some sites that follow it, like Wall Street On Parade (A Citizen Guide to Wall Street wallstreetonparade.com) goes into the nitty-gritty. And Randy Wray at the Levy Institute did a whole study of quantitative easing where he actually subpoenaed and got access to the $29 trillion worth of loans that the Fed kept making. And what the Fed did in 2008, as a result of the junk mortgages and of the wave of financial fraud, Citibank was broke. It was insolvent. And yet the Federal Reserve, through Tim Geithner, who was a protégé of the Citibank's head, Robert Rubin, who had been Secretary of the Treasury under Clinton, made sure that the most crooked banks were kept in business by the Fed—Citibank, Bank of America, Countrywide—these were the worst offenders and the government could have taken them over, bailed out all of the insured depositors, and turned them into public banks that would have enabled Citibank and others to make loans for the kind of thing that you just mentioned, for public infrastructure.
Ralph Nader: At lower prices too.
Michael Hudson: Yeah, that’s the whole point.
www.ralphnaderradiohour.com
