FedUpUSA

More Bernanke (And Geithner) Perjury?

 

By Karl Denninger

Gee, where are the handcuffs?

July 1 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money lied like a bear-skin rug.

Indeed, they just plain didn’t tell the truth:

The so-called assets included collateralized debt obligations and mortgage-backed bonds with names like HG-Coll Ltd. 2007-1A that were so distressed, more than $40 million already had been reduced to less than investment-grade by the time the central bankers testified.

There’s a further problem: This was arguably illegal.

See, The Fed is not permitted to lend unsecured.  At all.  To anyone. 

The Fed also can’t buy anything without a full faith and credit guarantee (per Sections 13 and 14), even under “unusual or exigent circumstances”, with very few exceptions (all of which relate to short-duration paper such as revenue-anticipation notes from municipalities.)

Credit-default swaps do not qualify under even the most-creative reading of the statute, which is why The Fed set up “Maiden Lanes” (sans cherries) and then “lent money” to them – that was a pure artifice to get around the strictures in The Federal Reserve Act.

But to date, nobody in Congress has been willing to force either Bernanke or Geithner to resign, nor will they place sanctions in The Federal Reserve Act to make future violations a criminal act and thereby prevent future lies and evasions.

Can someone please explain to me what purpose a law has if there is no penalty for violating it, and why the citizens of this nation should obey any of the laws that allegedly bear on them when the “cognescenti” willfully and intentionally evade and violate the laws that allegedly govern their conduct – including, it appears, those that compel honest testimony before Congress.

The Market-Ticker

Share

Comments

comments