Britannia Radio

The Fed Admits To Breaking The Law
By Devvy
4-3-10

Now how long will it be before something is done about it?

April 1 (Bloomberg) -- After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout.

In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns's takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information.

The problem is this: The Fed is not authorized to BUY anything other than those securities that have the full faith and credit of The United States.

In addition Ben Bernanke has repeatedly claimed that these deals would not cost anyone money. But the current value looks differently:

Assets in Maiden Lane II totaled $34.8 billion, according to the Fed, which set their current market value in its weekly balance sheet at $15.3 billion. That means Maiden Lane II assets are worth 44 cents on the dollar, or 44 percent of their face value, according to the Fed.

Maiden Lane III, which has $56 billion of assets at face value, is worth $22.1 billion, or 39 cents on the dollar, according to the Fed's weekly balance sheet. A similar calculation for the Bear Stearns portfolio couldn't be made because of outstanding derivatives trades.

In other words, they have lost more than half of their value.

This was and remains a blatantly unlawful activity.

The Fed has effectively usurped Article 1 Section 7 of The Constituion which reads in part:

All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

The Fed effectively appropriated taxpayer funds without authorization of Congress. At the time these facilities were put in place neither TARP or any other Congressional authorization existed for them to do so, and to date no bill has been put through Congress authorizing the expenditure of taxpayer funds, either through putting them at risk or via outright expense, for this purpose.

Nor does it stop with a "mere" Constitutional violation - The Federal Reserve Act's Sections 13 and 14 do not permit Fed asset purchases except, once again, for items carrying "full faith and credit" guarantees. Credit-default swaps and trash mortgages most certainly do not meet these qualifications.

I know I've harped on this for more than two years, but here we have a raw admission of exactly what was done - and there is simply no way to construe any of it in a light that conforms with either The Constitution or black-letter statutory law.

Rest at link

http://market-ticker.denninger.net/archives/2147-The-Fed-Admits-To-Breaking-The-Law.html