It’s Not Just the Obama Administration That Is Flouting the Law, So Is the Fed
30th March 2014
Read it.
It was a clear violation of Section 14 (B) the Federal Reserve Act to buy $1.5 trillion of mortgages not guaranteed by the federal government. The agency hid behind Section 13.3 language allowing a broad scope of action under “unusual and exigent circumstances,” but the statute states clearly that Section 13.3 loans can only be short term and backed by high quality collateral, a requirement that was blatantly ignored.
It was also a violation of both the Fed statute and the Constitution to offload potential Fed losses from its hedge fund-like operations onto the Treasury, as was done stealthily via a note to the Fed’s Statistical Release H 4.1 dated January 6, 2011. The Treasury (ie. the taxpayers) having to bail out the Fed is not just a theoretical possibility. The just released Fed’s annual report shows a $53 billion unrealized loss.
It would also appear to be a violation of the Constitution to locate the new Consumer Financial Protection Bureau created by the Dodd- Frank Act inside the Fed. The Constitution requires that all government expenditures be authorized and funded by Congress. The Fed has always been treated as an exception. It uses income on securities it has bought with newly created money to pay its bills and has not even been subject to Congressional oversight.
Having a secretive, self-funded, extra-constitutional agency inside government was bad enough when the Fed consisted of seven governors and a few staff members. The new Consumer Bureau already employs an estimated 1,359 people and keeps growing. Many of these employees were transferred from other government agencies where they formerly had been counted as part of the federal budget, but are now suddenly off-budget. If this is allowed to stand, what other federal agencies will be slipped inside the Fed in the future in order to reduce the reported Federal deficit?