[Toddsterpatriot]

The Fed has already violated its charter to the tune of trillions of dollars by buying unsecured debt, an act as contrary to the black letter law of its charter as it's possible to be.

Huh? Where is this charter, specifically the part that says they can't buy "unsecured debt"? Thanks.

Is Treasury debt "secured"?

[Attention Surplus Disorder]

http://www.bloomberg.com/news/2010-07-01/fed-s-maiden-lane-made-taxpayers-junk-bond-buyers-without-congress-knowing.html

(above refers to the trash purchased and stuffed into Maiden Lane 1 and 2)

http://www.federalreserve.gov/aboutthefed/section1.htm

(above is text of the Federal Reserve Act, starting from page 1)

I am trying to find the specific text in the FRA which prohibits the Fed from buying anything but direct obligations of the US gov’t. These regulations were summarily ignored during the collapse of Lehman and Bear, and the crap they bought was for the most part stuffed into ML 1 and 2.

http://www.newyorkfed.org/markets/maidenlane.html

As you might imagine, it is buried pretty deep. If you read language of the FRA, you’ll see that *anything* (meaning any kind of debt) the Fed buys that is not a direct obligation of the gov’t MUST be discounted, and heavily. (You’ll recall the payout on AIG’s debt to GS was not discounted despite its troubled [to put it mildly] status. The cash from that operation came from the Fed accepting AIG paper at par) And, that characteristic of said debt is reiterated at practically every mention. IOW, every time “it” (the buying of debt, whether a loan or by virtue of accepting it as collateral to infuse cash into a member bank or a regional bank or a private company is mentioned, there is always...”...as long as the collateral accepted is a direct obligation of the US gov’t.” That characteristic of any collateral is endlessly repeated throughout the charter.

In “exigent circumstances” the Fed is allowed to accept “investment grade” securities as collateal, but they are clearly bending the rules twice to 1: accept dogdoo and then 2: not discount it.

[Attention Surplus Disorder]

The characteristics of exactly what the Fed can “buy” or “accept as collateral for a loan” are detailed in sec 13 and 14 of the FRA.

http://www.federalreserve.gov/aboutthefed/section13.htm

http://www.federalreserve.gov/aboutthefed/section14.htm

I am a little tired to sort this out at the moment. In *rare* cases, the Fed can accept “investment grade” securities as collateral for lending operations. I do *not* believe the Fed can *buy* such debt.