 Quote:
Originally Posted by d
Hussman suggest, but does not so clearly state, that the Fed acted outside of its authority in this situation; however, the authority seems clear under the Federal Reserve Act, section 13(3): "In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank"
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d, here may be your answer, found it on Seeking Alpha today:
Fed: Law breaker? When the Fed took control of Bear Stearns' $30B portfolio of "less liquid assets," it told the public it was "taking control" of the portfolio, not purchasing it. The Fed assumed the portfolio's risk and stands to gain if it appreciates in value, causing some to call its denial of ownership purely semantic. "They get the residual -- that almost always defines ownership," one expert said. If so, the Fed may be in violation of its charter, which allows it to buy U.S. Treasury and agency securities, foreign government securities, bankers acceptances, bills of exchange, certain municipal debt, foreign currency and gold -- but not CDOs, private mortgage-backed securities and other derivatives.
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