$5 Billion in Funny Money Movements Before 9-11

William Bergman worked at the Federal Reserve Bank of Chicago as an analyst. In late 2003, he was asked to consider an assignment in the money laundering area. Bergman accepted the assignment, underwent a background check, received credentials affording him access to confidential banking information, and began working in the area. He was told that he was “part of the fight against terrorism” and that he “had been asking good questions.”

Bergman noticed supicious increases in the August 2001 currency componet of M1 money supply numbers. He tried to determine what caused the currency escalation. In his own words:

The currency component of M1 (Federal Reserve Notes circulating outside of banks) rose especially rapidly in July and August 2001. In fact, up to and including August 2001, that month (August 2001) was one of the three fastest growing months for the currency component of M1 since 1947, on a seasonally adjusted basis, even on the heels of significantly above-average growth in July 2001. Much of the July-August surge (over $5 billion above-average) seems to have been in the $100 denomination. Among other explanations, persons aware of any imminent terrorist attacks and concerned about possible asset seizures such as those that arose after the 1979 Iranian hostage crisis and the 1998 embassy bombings could have been trying to liquidate their bank accounts in July and August 2001. The money trail could provide important clues about people aware of, if not responsible for, the attacks. I looked at some internal data bearing on this issue that was available to anyone within the Federal Reserve’s internal computer network; after going back to look at this important data again a week or two later, it was no longer freely available, but password protected.

Bergman had worked at the Chicago Fed since July 1990, Approximately one month after his money laundering work was terminated for what was described at the time as an egregious breach of protocol attributed to his contacting the staff of the Board of Governors, Bergman’s department was absorbed into another department, and his 14-year employment with the Federal Reserve ended. Bergman was told that the elimination of his position at the Federal Reserve had nothing to do with him personally – that it was an organizational matter. He was offered and accepted a severance package, and left the Chicago Federal Reserve Bank in March 2004.

The Mucraker Report has the full story.

The Truth About Alan Greenspan and the Real Estate

Alan Greenspan continues to warn about problems in the real estate markets and other parts of the economy. But with every warning, Greenspan paints a picture that suggests the problems have nothing to do with his irresponsible money management during his reign at the Fed. In truth, if one man can be blamed for today's problems in the real estate markets, it is Greenspan. He flooded the home mortgage market with trillions of dollars during his watch.

Here are the cold hard facts:

When Greenspan took over at the Fed in 1987, total outstanding US home
mortgages stood at only $1.82 trillion.

By 1999, total outstanding mortgages in the US stood at $4.45 trillion.

By 2004, US home mortgages stood at $7.56 trillion.

In 2005, Greenspan's final full year as Fed chairman, home mortgage debt
outstanding amounted to $9.1 trillion.

Here is some of the jawboning Greenspan conducted while he was Fed
Chairman.

In 2003, he called the refinancing of housing, "support" for the economy:

The outsized dollar volume of these refinancings--by our estimates, $1-3/4 trillion net of cash-outs--was an all-time record and represented almost
one-third of the value of all regular home mortgages outstanding at the
beginning of last year...An even greater support to the economy than cash-
outs last year was the extraction of home equity associated with a record
6.4 million existing home sales, including condos, at record prices.

And he basically advised not to worry about a housing bubble:

...any bubbles that might emerge would tend to be local, not national, in scope... In evaluating the possible prevalence of housing price bubbles, it is
important to keep in mind that home prices tend to consistently rise relative
to the general price level in this country...A sharp decline, the consequences of a bursting bubble, however, seems most unlikely...Here is Greenspan spinning things now, as though he had nothing to do with the problem.

On March 15 of this year, he said:

You can't take 10 percent out of mortgage originations without some
impact...

In October 2006, he blamed the entire thing on the Berlin Wall coming down:

I dont think that the boom came from a 1 per cent Fed funds rate or from
the Fed’s easing. It came from the collapse of the Berlin Wall.

The Berlin Wall??

In 2003, while discussing refinancings, he came closer to the truth:

Owing largely to the lowest mortgage interest rates in more than three
decades and rising home prices, close to 10 million regular home mortgages were refinanced.

There are massive distortions in the economy right now, caused by
Greenspan's low interest rate monetary policies when he ruled the Fed.
Many different sectors could implode: further problems in real estate, the
carry trade, the hedge fund industry, etc. Greenspan knows this. He sees
that the economic tsunami wave is about to hit. His warnings should not be
taken lightly. He created the mess ahead. He knows it and understands how
bad things can get.