Richard Bowen

  • Home
  • About
  • Speaking
  • Videos
  • Media/Press
  • Testimonials
  • Blog
  • Contact
  • +1-214-604-5492

June 22, 2017 By Richard Bowen

FED UP… An Insider’s Take On Why The Federal Reserve Is Bad For America

Danielle DiMartino Booth’s book FED Up is an insider’s take on why our Federal Reserve System is deeply flawed and requires major change. It is an interesting and disturbing read into the working of the Fed by one who’s been there and understands the system. I was deeply disturbed by some of her observations, most especially on her insightful comments on what cheap debt and debt overall have done to this country.

Ms. Booth held a high-ranking Wall Street position at one time and credits herself with correctly predicting the 2008 housing crisis. After leaving Wall Street for the Dallas Morning News, Ms. Booth reports that then Dallas Fed President Richard Fisher, seemingly wowed by her reporting, called to tell her “You should be writing for the Wall Street Journal. You could be a Jon Hilsenrath or Greg Ip.” She was subsequently recruited as an analyst at the Federal Reserve Bank of Dallas working closely with Mr. Fisher.

From her perspective, she found that the Federal Reserve System decision makers and analysts were “unelected academics who make decisions without the slightest understanding of the real world” convinced that their theoretical models were the answer.

She says she repeatedly pointed out the dangers inherent in Fed policy such as the deeply depressed interest rates. Ms. Booth notes that “In five thousand years of record keeping debt has never been cheaper.”… and “Since 2007 world debt has grown by about $60 trillion, enriching legions of investment bankers one bond at a time.”

The Fed has made it so cheap to borrow that companies, with their management driven by incentive compensation on increased stock prices, have driven a significant amount of debt-fueled common stock purchases to, for the short term, increase EPS and, therefore, stock price. This is simplistically called financial engineering based solely upon cheap debt.

She notes that companies in the S&P 500 expended more than $1.1 trillion to buy back their stock in 2014 and 2015. And this has driven down the investment in research and development and capital expenditures in recent years. It is R&D and capital expenditures which ultimately drives the growth of companies and thus employment, and that’s being curtailed by the temptation of cheap debt.

Stock repurchases do not accomplish anything productive and are for the short term, as contrasted with capital expenditures, which are typically made for increasing long-term productive assets and are thus expenditures, “investments” in the companies’ future. She further notes cheap debt is also driving much of the acquisition binge, which in turn leads to more employee layoffs.

Ms. Booth  quotes Rana Foroohar in May 15, 2016 Financial Times op-ed stating ”It is easier for chief executive officers with a shelf life of three years to try to please investors by jacking up short-term share prices than to invest in things that will grow a company over the long haul.” She notes that easy money kept those who already have the money and Wall Street alive and flourishing, while Main Street struggles. 

And the very cheap debt has enabled our government to grow its deficits with little accountability, encouraging tax and spend policies. She noted, “the United States is paying less in interest than the average of the past half century. In 1995 the government shelled out $232 billion in net interest payments. In 2015 it had dropped to $223 billion,” despite the dramatic increase in government borrowings.

In another observation which we all knew, Danielle notes that the zero interest rates have destroyed peoples’  incentive to save and has destroyed pensions, with the huge unfunded amounts of public employee pension plans ultimately having to be dealt with, largely through increased taxes. She also notes that in Japan, where they have gone to negative rates, with  the population no longer having any incentive to save their money in banks, the sales of home safes have doubled in 2015. “Under ZIRP (zero interest rate program) only fools save for a rainy day.”

Ms. Booth also had some concerns which I share on Goldman Sachs’ infiltration of the Fed, noting that 4 out of the 5 District Bank Presidents eligible to vote in 2017 on the Federal Open Market Committee, which determines monetary policy, are alums of Goldman Sachs.

And she also makes note of the overall revolving door nature of the FED and correctly relates that to the weakened regulatory posture they have taken over the large banks they regulate.

There is no question Ms. Booth believes that the Fed is out of touch and relies on legions of PhD academics that rely on esoteric financial models unrelated to the real world economy. The Fed’s balance sheet has grown to $4.5 trillion and has so much control over this country’s economy that she refers to it as the “fourth branch of the US government.”

An interesting book, which has you turning the pages and yet a disturbing one. It prompts some critical thinking about the Federal Reserve, its present role, and whether or not it is hurting or helping the average American, while certainly enriching Wall Street and corporate management.

So, is the Fed out of touch and should we be FED UP? Read her book – as well as John Tamny of Forbes critique and make up your own mind. Let’s hear from you with your take on her work and ideas. She has certainly reinforced many of my feelings about the Fed.

Related Posts

  • The Goldman Sachs Takeover of the Fed!
  • The Wall Street Merry-Go-Round Revolves Again!
  • Is the Fed Really Interested In Protecting Consumers or Is It just Lip Service?

Are Clawbacks and Shareholder Proposals Essential to Corporate Governance?
Why Is the Fed Ignoring What Goldman Sachs Is Up To Now?

Tagged With: Fed

Ethics on your mind? Subscribe to my ezine to get my latest article delivered right to your inbox. Click Here to Subscribe

Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

Related Posts

  • The Fed: Why They Must Engage Before It’s Too LateThe Fed: Why They Must Engage Before It’s Too Late
  • Is the Fed Really Interested In Protecting Consumers or Is It just Lip Service?Is the Fed Really Interested In Protecting Consumers or Is It just Lip Service?
  • If You Can’t Trust the Intelligence Community, Who Can You Trust?If You Can’t Trust the Intelligence Community, Who Can You Trust?
  • What Do We Need To Do To Increase Accountability?What Do We Need To Do To Increase Accountability?

What People Are Saying About Richard M. Bowen

William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59-05:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
https://richardmbowen.com/testimonials/2556/

Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19-06:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
https://richardmbowen.com/testimonials/711/

Ben Stein"Richard Bowen, you are a star and a hero."

~ Ben Stein, Economist and Political Commentator
2015-02-13T19:50:26-06:00
"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
https://richardmbowen.com/testimonials/712/

Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17-06:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
https://richardmbowen.com/testimonials/532/

Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06-06:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50-06:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22-06:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

Want to Hire Richard?

Watch Richard

See What Clients are Saying

About Richard

Recent Posts

  • Ethics in the Last and Next Financial Crisis
  • Speaking on Resisting Corporate Corruption
  • The Importance of Corporate Culture
  • Brigham Young University Students Understand the Importance of Ethics in Business
  • Increasing corruption: U.S. falls out of the top 25 countries on the CPI

Categories

  • Business Ethics
  • Congress
  • Corporate Debt
  • Corruption
  • Ethical Leadership
  • Financial Crime
  • Financial Crisis
  • Financial Crisis of 2008
  • Holiday
  • International
  • Mortgage Lending
  • Mortgage Meltdown
  • Relationships
  • Speaking
  • Texas Politics
  • The Fed
  • Too Big To Fail
  • Uncategorized
  • Updates
  • Wall Street
  • Whistle Blowers

About Richard

Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

Read more

Connect with Richard

  Facebook   Twitter   Linked   YouTube

Contact Us

Phone: +1-214-604-5492

Email: Richard@RichardMBowen.com

Contact Richard

Copyright 2021© 2022 · Richard M. Bowen | ALL RIGHTS RESERVED.

X
Sign up to receive my blog posts via email!
Subscribe >>