How the Federal Reserve Bailed Out the Biggest Banks: Ratigan Interviews Whalen

Gary North

Dec. 9, 2010

On December 1, MSNBC's Dylan Ratigan interviewed Christopher Whalen on the Federal Reserve's bailouts in 2008. Whalen is the senior vice president of Institutional Risk Analytics. He is an accountant's accountant.

Whalen said that there will be no overall recovery until the big banks are forced to write down bad loans and re-structure. He knows this will not happen.

He made a major mistake early in the interview. He said that the Federal Reserve was set up originally to protect Main Street, not the big banks. That reveals an amazing lack of familiarity of the history of the origin of the FED. He said that the FED subsequently switched to protecting big banks. It did not switch. It was always the banking cartel's lender of last resort to the big banks. This is covered in Murray Rothbard's 1994 book, The Case Against the Fed, beginning on page 70. You can download it for free here: http://mises.org/books/fed.pdf.

This error aside, the interview blows the whistle on the FED. Here is his main point: until the big banks are re-structured to deal with their dead loans, there will be no recovery, for there will be no lending to businesses. He is correct.

What is the likelihood of such a re-structuring? Minimal. The big banks took billions of bailout money, and are now making their money with the same old leveraged financial deals, not lending to businesses. They know the FED will bail them out when these blow up, which they surely will.

It is business as usual on Wall Street.