September 17, 2008
Does the Fed Have the Power to Buy AIG?
One or more of the twelve federal reserve banks, which are privately-owned companies chartered by the federal government with limited powers, and that are part of the Federal Reserve System, have loaned another privately held company, AIG, 85 million dollars under the banks "emergency" loan power. The hitch is that, in return, the reserve bank will hold an in the money option for 79.9 percent of the stock of the company. The bank then, for all practical purposes, owns and controls a privately held insurance company. A federal reserve bank has no explicit power to do this and has not done this before. In short, a federal reserve bank, at the request of the head of the Fed, Bernanke and the Secretary of the Treasury, has stretched its statutory power to, or even past its limit. A suit challenging the Fed authority, brought by someone with standing, would have to be taken very, very seriously by the federal courts.
September 17, 2008 | Permalink
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