July 18 2008 (LPAC)--On July 1, Lyndon LaRouche proposed emergency action by the U.S. Federal Reserve Bank, to prevent social chaos, in the face of looming collapses of some leading U.S. commercial banks and other financial institutions.

LaRouche presented two emergency measures, aimed as stop-gaps, to prevent chaos.

First, he called for the Federal Reserve to raise interest rates to four percent, in order to assure that institutional depositors maintain their deposits in the banking system.

Second, LaRouche called on the Federal Reserve to make it clear that whenever any commercial banks face insolvency, they will be put through bankruptcy reorganization under Fed protection.

LaRouche further emphasized that the Federal government must immediately enact legislation, to massively increase credit for vital infrastructure projects.

Today, LaRouche reiterated that the Fed must increase the interest rate to 4 percent. The only exception to this rate would be federally legislated credit extended for the development of needed infrastructure projects based on a capital budget approach. The interest on this credit should be in the range of 1 to 2 percent. We would thus have a two-tier credit system.

LaRouche emphasized that the 4 percent interest rate is necessary to staunch the flow of funds out of the system into speculation and to defend the U.S. against the British and the Europeans who are trying to incite panic in order to trigger an outflow of funds from the U.S. and a collapse of the dollar.

LaRouche stressed that if the dollar collapses, then everything is gone.

Raising the interest rate to 4 percent is a simple monetarist step, but it must be applied now to stop the chaos which will otherwise ensue.

Sources have told us that there is currently a faction fight at the Federal Reserve and that some are pushing now for higher interest rates. Today, the Gary Stern, the president of the Federal Reserve Bank in Minneapolis and a voting member of the Federal Open Market Committee (FOMC), responsible for setting rates, called for an increase in interest rates and said that this should not wait. Also the minutes of the FOMC meeting on June 24-25, released on July 15, revealed that some members of the Fed called for interest rates to be increased by the Fed "very soon."