LEGAL LINES WITH LOCKE MEREDITH SHOW 136, GUEST: CONGRESSMAN DR. BILL CASSIDY

Legal Lines with Locke Meredith

Show 136, Guest: Congressman Dr. Bill Cassidy

#136

Attorney, Locke Meredith, interviews United States Congressman for District 6, Dr. Bill Cassidy, on important issues facing our country like debt, unemployment, & international issues such as the conflicts in the Middle East.

Meredith asks Congressman Cassidy What is the Federal Reserve & how does it work. Congressman Cassidy explains that the Federal Reserve (the Fed) is the bankers’ bank. The Fed is the “referee” who manages inflation & money supply. One controversy is that recently they didn’t publish their deliberations & they seem to have moved into a position where they are trying to manage the global economy. The Fed controls the borrowing rate between banks. This rate is in direct correlation with the price the U.S. pays on its debt, as well as the rate homeowners pay on their loans. This is why mortgage rates are at historic lows right now.

Another issue is that the Fed is providing funds to European countries to help their economies though a complex set of currency swaps. Cassidy explains that the Fed is very concerned that if the global economy tanks, then so will our financial system in America. Thus they are pumping money into places like Europe’s financial system. This is being done through a series of complex currency swaps. Cassidy is concerned with the fact that these swaps & the information regarding them is being kept far away from the eye of the public. Cassidy also explains the concept of quantitative easing (QE). This is money that the Fed has put out in the economy, mostly in the form of large reserves in banks, which they can borrow cheaply from each other or the Fed. It allows for lower borrowing costs for developers & homeowners, but it also dilutes the power of money. Furthermore, it encourages banks to hold onto these reserves by depositing them into the Federal Reserve & getting a safe but small return. This results in the return on a typical savings account being lowered, which hurts people trying to live off the interest of their savings. There is a general concern that this policy could cause interest rates to rise significantly in the future. Next Cassidy explains how Freddie Mac & Fannie Mae worked. For a long time, these two organizations bought mortgages from banks on the secondary market, keeping mortgage rates reasonably low. The problem is that these quasi-government quasi-privately owned firms & the commercial banks were given instructions to approve & sell loans they shouldn’t have by the federal government. When these loans defaulted, it is not Freddie & Fannie that have to bear the cost, but instead the American taxpayers as we repay the huge bailout cost.

In July 2010, the Obama Administration passed the Dodd-Frank Act. This act was designed to address financial system failures that led to our recession. However, instead of addressing Fannie & Freddie, the true culprits of the problem, they only imposed sanctions on commercial banks, causing them to have to pass up loans that they know are safe & good for the economy. Cassidy then discusses Democratic versus Republican methods of growing the economy. The Keystone Xl project is an example of the Republicans favor. This project involves a private company producing a private product & producing 20,000 direct jobs. A Democratic example is Solyndra Energy. This is a solar company that was given a $300 million loan by the Federal government to keep from failing, despite a huge public outcry that they were bound for bankruptcy inevitably. Even with this loan, within two years, Solyndra did go bankrupt & its 1,000 employees lost their jobs. Because of situations like this, Cassidy says he has more faith in the small businesses of America.

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