(above refers to the trash purchased and stuffed into Maiden Lane 1 and 2)
The above confuses taxpayers with the Fed. Kinda silly mistake.
Oh, oh, OK. The Fed buys, then hands off to the Treasury. I feel much better.
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
So we’re off the secured claim?
I never used the word “secured”. Where did you read that in anything I posted? You introduced the term. I spoke of “investment grade” debt and direct US gov’t obligations.
*anything* (meaning any kind of debt) the Fed buys that is not a direct obligation of the gov’t MUST be discounted, and heavily.
I don’t think that’s what they mean when they’re talking about discounts.
It is exactly precisely what they mean by “discount”.
(You’ll recall the payout on AIG’s debt to GS was not discounted despite its troubled
Yeah, AIG paid what they owed. That’s not the Fed.
You are being deliberately obstreperous. The Fed accepted AIG debt, debt which AIG owed to GS under terms of the CDO AIG sold to GS, at par. AIG owed it to GS because the conditions embodied in said CDO occurred, meaning AIG owed GS the money or some part of it. They lost their bet. The house burned down. AIG, the insurer, was compelled to pay. That debt, given that AIG was insolvent, was not payable in cash that AIG did not have. The Fed accepted that debt as “collateral” and made AIG’s payment to GS good at par. If the payment made to GS on behalf of AIG is not a loan, and there is no indication that it is, then the Fed “bought” it, a prohibited transaction. The use of the term “collateral” is essentially a deception on the part of the Fed. All these “borrowings” or “advances” have gone well past 90 days.
The cash from that operation came from the Fed accepting AIG paper at par)
What AIG paper did the Fed accept at par?
Nope. And a Fed purchase doesn't make taxpayers the owners and doesn't put taxpayers on the hook.
I don’t think that’s what they mean when they’re talking about discounts.
It is exactly precisely what they mean by “discount”.
No. When the Fed buys something, they're buying it at the market price. If that price is less than par, that's the only discount involved. They don't get a discount below the market price. Sorry.
The Fed accepted AIG debt, debt which AIG owed to GS
The Fed did not take the liability from AIG to pay GS.
debt which AIG owed to GS under terms of the CDO AIG sold to GS
AIG did not sell a CDO to GS.
The Fed accepted that debt as “collateral”
How is money AIG owes to GS "collateral"?