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We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
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Friday, July 11, 2008
Former Defense Department Official Sentenced to 57 Months in Prison for Espionage Violation
Comtex
WASHINGTON, July 11, 2008 /PRNewswire-USNewswire via COMTEX/ ----Gregg William Bergersen, age 51, of Alexandria, Virginia, was sentenced today in the Eastern District of Virginia to 57 months in prison and three years of supervised release for conspiracy to disclose national defense information to persons not entitled to receive it, in violation of 18 U.S.C., Sections 793(d) and (g). Bergersen pleaded guilty to this offense on March 31, 2008, after being arrested by federal authorities on February 11, 2008.
Patrick Rowan, Acting Assistant Attorney General for National Security; U.S. Attorney Chuck Rosenberg of the Eastern District of Virginia; and Arthur M. Cummings, II, Executive Assistant Director of the FBI's National Security Branch, made the announcement after U.S. District Judge Leonie M. Brinkema imposed the sentence.
"Mr. Bergersen betrayed his oath to serve and protect our nation when he used his government position to access and pass national defense information to a person he knew was not entitled to receive it. Today, he is paying the price for his actions," said Patrick Rowan, Acting Assistant Attorney General for National Security.
"Mr. Bergersen predicted he would go to jail if anyone discovered he was unlawfully providing classified information to a foreign government. We did. He is," said U.S. Attorney Chuck Rosenberg.
"Espionage is one of the most serious crimes any American, much less a government official entrusted to serve and protect our Nation's defense, can commit," said FBI Executive Assistant Director Arthur M. Cummings, National Security Branch. "The FBI is working diligently with our partners in the law enforcement and intelligence community to safeguard America's national defense information and to ensure individuals who commit such treasonous acts against the United States will be held fully accountable."
According to a Statement of Facts filed in Court with Bergersen's Plea Agreement, the criminal conduct spanned the time period of March 2007 to February 2008. During this time, Bergersen was a Weapons Systems Policy Analyst at the Arlington, Va.-based Defense Security Cooperation Agency, an agency within the Department of Defense.
While in this position, Bergersen provided national defense information on numerous occasions to Tai Shen Kuo, a naturalized U.S. citizen and a New Orleans businessman. Much of the information pertained to U.S. military sales to Taiwan and was classified at the Secret level.
During the course of the conspiracy, Kuo cultivated a friendship with Bergersen, bestowing on him gifts, cash payments, dinners, and money for gambling during trips to Las Vegas. Unbeknownst to Bergersen, Kuo passed along to an official of the government of the People's Republic of China (PRC) the information Bergersen had provided him. As described in court documents, Kuo operated within the United States under the PRC official's direction, committing numerous acts of espionage during the time period of the conspiracy.
In some of his meetings with Kuo, Bergersen cautioned that the information he was providing was classified. On one such occasion, in July 2007, Bergersen handed Kuo a classified document with jagged cut marks at the top and bottom of each page. Bergersen pointed out to Kuo that he had cut off the document's title and had also removed the classification markings from the top and bottom of every page, ensuring Kuo that he was being given classified information.
On May 13, 2008, Tai Shen Kuo pleaded guilty to conspiracy to deliver national defense information to a foreign government, namely, the PRC, in violation of 18 U.S.C., Section 794(a), (c). Kuo is scheduled to be sentenced on August 8, 2008 and faces a maximum possible sentence of life in prison.
On May 28, 2008, another conspirator in the case, Yu Xin Kang of New Orleans, La., pleaded guilty to aiding and abetting an unregistered agent of a foreign government, namely the PRC, in violation of 18 U.S.C., Sections 2 and 951. According to court documents, Kang assisted Kuo by periodically serving as a conduit for information between Kuo and the PRC official. Kang faces up to ten years in prison when she is sentenced on August 1, 2008.
The investigation was conducted by the FBI. The Air Force Office of Special Investigations (OSI) provided substantial assistance and cooperation throughout the course of the investigation.
The prosecution is being handled by Assistant U.S. Attorneys Neil Hammerstrom and Aaron Zebley from the U.S. Attorney's Office for the Eastern District of Virginia, and Trial Attorney Ryan Fayhee from the Counterespionage Section of the Justice Department's National Security Division.
SOURCE U.S. Department of Justice
http://www.USDOJ.gov
Copyright (C) 2008 PR Newswire. All rights reserved
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