I want you to understand something.
Corporate bond yields are near historic lows.
See that little spike in March? That's what the Fed considers "dysfunctional."
Instead of using CARES funds for Main Street, they're buying bonds from investors to limit their exposure to loss.
Corporate bond yields are near historic lows.
See that little spike in March? That's what the Fed considers "dysfunctional."
Instead of using CARES funds for Main Street, they're buying bonds from investors to limit their exposure to loss.
Read the top line of a dollar bill.
Each dollar *must be backed by a) an IOU of the US (Sec 14) or b) enough collateral to avoid any public loss (Sec 13).
Printing dollars backed by less is counterfeiting ($675B Fed SMCCF “leverage”).
George Floyd was killed over a sketchy $20
Each dollar *must be backed by a) an IOU of the US (Sec 14) or b) enough collateral to avoid any public loss (Sec 13).
Printing dollars backed by less is counterfeiting ($675B Fed SMCCF “leverage”).
George Floyd was killed over a sketchy $20
Here's Section 13(3) of the Federal Reserve Act. Worth noting 13(2) requires that collateral be non-financial unless it's guaranteed by the U.S. govt. 13(3) requires collateral "sufficient to protect taxpayers from losses."
Leveraged corporate bonds aren't their own collateral.
Leveraged corporate bonds aren't their own collateral.
Here's Section 4003 of CARES, which requires "for the avoidance of doubt" that any use of CARES funds must adhere to 13(3), "including requirements relating to loan collateralization, taxpayer protection, and borrower solvency".
Fed use of "leverage" in SMCCF is wholly illegal.
Fed use of "leverage" in SMCCF is wholly illegal.
Meanwhile, the SPV isn't a loophole, it's an end-run. The Fed is asserting the SPV is the "corporation" getting loans. The SPV then buys bonds with public money.
As Bernanke did w/Maiden Lane, in clear violation of Sec(13), they're treating uncollateralized bonds as collateral.
As Bernanke did w/Maiden Lane, in clear violation of Sec(13), they're treating uncollateralized bonds as collateral.
Creating money to buy unbacked securities crosses an illegal rubicon, even for the Fed.
Unchecked, they could arbitrarily issue and allocate purchasing power to anyone scribbling an IOU.
Worked with Jonathan Ferry @jdronaldson on this.
Read, Sign, RT: change.org/NoMoreJunk
Unchecked, they could arbitrarily issue and allocate purchasing power to anyone scribbling an IOU.
Worked with Jonathan Ferry @jdronaldson on this.
Read, Sign, RT: change.org/NoMoreJunk
While the illegality of the Fed's corporate bond program involves the collateral and loss-protection requirements of Section 13(3), here's a clip from 13(8) of the Federal Reserve Act, which conveys how aggressively the Act was written to AVOID loans backed only by securities.
