"The Fed can essentially lend to anybody" based on its emergency powers.Zero Hedge
"The Fed Can Lend To Anybody": Watch Live As Bernanke Holds Virtual Discussion On US Economy
Tyler Durden
See also
Zero Hedge
In "Unprecedented" Move To Ease Conditions, ECB Cuts Collateral Haircuts By 20%, Will Accept Greek Debt As Collateral
Tyler Durden
"the Fed can lend to anybody"
ReplyDeleteHere let me fix this for you:
"the Fed can lend to anybody the US Treasury guarantees the credit of"
Well, not really. There's nothing in the Federal Reserve Act stipulating that the Treasury has to guarantee those assets.
ReplyDeleteSection 13 (3).
"3. Discounts for individuals, partnerships, and corporations
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 participant in any program or facility with broad-based eligibility, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are endorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange, the Federal reserve bank shall obtain evidence that such participant in any program or facility with broad-based eligibility is unable to secure adequate credit accommodations from other banking institutions. All such discounts for any participant in any program or facility with broad-based eligibility shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe.
“All such discounts for any participant in any program or facility with broad-based eligibility shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe.”
ReplyDeleteSo the BOG just “prescribes” a restriction that the seller get a Treasury guarantee...
Or they lend at 5 cents on the dollar...
They can’t take a loss at the end of the operation they are required to maintain a Residual of 6.8B Max and return all surplus Residual to the Treasury Account...
The 6.8b is a positive number iow standard Accounting practice...
They can’t run “negative equity”....the law says POSITIVE 6.8B max...