Economic Collapse, Bailout & All The Presidents’ Bankers with Nomi Prins

Much of the world is still reeling from the effects of ‘The Great Recession’ that first hit amid the banking and financial crisis beginning in 2008. In this discussion with best-selling author and speaker Nomi Prins, she exposes how private banks influence the Federal Reserve and assesses the reasons why the most expensive bailout in history was not necessary to save the world economy.

Speaking about the Obama administration’s huge bailout of the banking sector after the crisis, Prins, who penned the book ‘All the Presidents’ Bankers: The Hidden Alliances that Drive American Power,’ says she doesn’t thing the “subsidization” of the banking sector in 2008-2009 should have been carried out as it was.

“What occurred was a tremendous amount of different perks and aid that were given to the private banks, in particular the big six banks,” she said.

She said this list of institutions - comprising JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley – all came out of the crisis and bailout bigger and more powerful. This contrasts to most of the U.S. population, which has either stayed the same or become weaker.

Prins points out that much of the talk at the time about the banking bailout being necessary to save the world’s whole economic system amounted to scare tactics by high government officials trying to frighten U.S. citizens into accepting the idea.

“In total, there was something like 23 trillion dollars,” she said about the astronomical money transferred to the troubled banks. “Loans given to banks at zero interest, in return for some of the bad assets, some of the assets that were the heart of the crisis.”

As a result of this, the banks were able to replenish themselves and regain solvency for the bets they made with the rest of the financial industry and with each other, without having to do anything for the individual borrowers that actually had mortgages with these institutions.

In addition to the advantages afforded the banks, there were no government requirements for them to give anything back to the borrowers who were most affected by the crisis.

Prins is asked about the national debt and to whom the U.S. government is actually in debt to. “It’s this triangle of the treasury creating debt, which then looks like it’s all on our backs, because it is public debt, but it goes through a private banking system, for which private banks make money,” she responded.

“And then private banks take some of it and put it on the books of the Federal Reserve, with that money doing nothing but sitting on the books of the Federal Reserve - and earning a quarter percent interest from the Federal Reserve.”

The author also comments on some calls in congress to bring back the Glass-Steagall Act, which was originally passed in 1933 to separate commercial banking activities from investment banking. The act was repealed in 1999.

Addressing the assertion that the United States is effectively held hostage by the Federal Reserve system, Prins said it indeed serves as the bank to all other banks. “It really controls and calls a lot of the shots for Wall Street and therefore for the full banking system.”

Since private banks hold shares in the Federal Reserve, they also have influence over its decisions, with banks with the most shares getting the most control.

Moving to the present state of the U.S. economy, Prins said she definitely feels the nation has gradually become weaker due to the country’s debt to GNP ratio being over 100 percent, the $17 trillion debt, a stagnation or lowering of wages, rising living costs, etc.

“The infrastructure investment has largely stopped – you know it’s all about where are the bucks going right now? Where’s the speculative money going to go now? And that doesn’t lend itself to long-term planning for the country.”

Prins also explained why she thinks the U.S. dollar is not necessarily on the decline. “The reason the current level of the dollar has maintained its position is because even though other countries are beginning to form their own trading partnerships outside of the dollar, such as Russia with China, or China with Venezuela, this is happening.”

“It’s sort of like because of our economic recession, because of the epic amount of government subsidies and Fed subsidies given to a flawed financial system in the form of debt, it has sort of the opposite effect of giving the dollar a little bit of a boost.”

Watch the interview for more, including Prins’ forecast for the economic state of Europe and the Euro.