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Genesis Posts: 71366 Incept: 2007-06-26 
KD^2 
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http://market-ticker.org/archives/985-Ma....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-04-24 10:01:02
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Bozonian Posts: 14033 Incept: 2007-09-01 
PFT - Pure F'n Tin
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Oh, so now The Fed needs to be bailed out? As I predicted. ---------- I'm so depressed about outsourcing I called the suicide hotline and got a call center in Pakistan. They got all excited and asked me if I could drive a truck. Everything I write is my opinion and not to be considered proven fact. Nothing I write should be considered financial advice.
2009-04-24 10:04:19
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Koaj Posts: 950 Incept: 2009-02-03
NJ
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Bozonian - they print the money out of thin air, why would they need to be bailed out? unless of course, the looter's appetite is growing for more money and power
2009-04-24 10:19:16
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Swingtrader Posts: 5891 Incept: 2007-08-12
United Oligarchic Goldman Sachs States of America
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Koaj wrote..Bozonian - they print the money out of thin air, why would they need to be bailed out? I'm wondering the same thing. Can't they just "write it off" and create more? if they can create money to buy T's, why not create money to cover the loss? ---------- Janet Tavakoli wrote.....greater risk for deflationary collapse than before... Whether we get deflationary collapse followed by inflation or just move straight to inflation, the economy is guaranteed more pain. Last modified:
2009-04-24 10:22:38 by swingtrader
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Phirang Posts: 8823 Incept: 2008-10-25
bar khoba's revenge
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Fed will dump it on treausry. bank on it. ---------- The Treasury can issue debt on your behalf because the State can and will stomp the wealth out of you and your family.
2009-04-24 10:23:00
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Pinal Posts: 699 Incept: 2007-08-16 
Chicago
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No sensible thing has been done by folks in DC during this crisis. Why expect it now, legal or not? Treasury will take this loss and eventually all the garbage currently on Fed's balance sheet when it blows up later. "Throw general public/taxpayer under the bus" has been the pattern for government's intervention during financial crisis for centuries.
2009-04-24 10:23:12
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Madashel Posts: 577 Incept: 2007-09-14
West Texas
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Great ticker as usual, Gen. I hate to be negative, but laws are for little people like us. The Government is above the law. It's up to us to bring them to justice. We write, call, and complain, but it makes no difference. We try to do it using our wallets, but they have the printing presses. The only justice that will ever be served to these people will be street justice. (In my opinion that will only happen somewhere between the collapse of the government and the cancellation of American Idol). We used to depend on the media to right wrongs and expose corruption. Those days have been gone for some time. The media is NOT on our side. The gov butters their bread, not us. The media has become a useful tool to promote hidden agendas, nothing more. If you are not gay or a contestant on a tv "reality" show, then you mean absolutely nothing to them. Some politicians have agreed with us and spoken out about the corruption, but it always goes nowhere. Many of them are completely ignored by the media or silenced by money, threats, or blackmail. If a pol calls a press conference to expose corruption and the media does not show, then there is no story. I have to fight off immense depression every day seeing what is happening to our once great country. I am fortunate that so far my mind is able to overcome it. I am fortunate because I saw it coming and was able to prepare. I feel indebted to Karl for helping us sort it all out and make us realize how bad it really is and how much worse it can/will be. We are truly on our own. ---------- "Those who cannot remember the past are condemned to repeat it." - George Santayana "It is better to live for something rather than die for nothing." - George S. Patton
2009-04-24 10:37:28
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Tesla Posts: 8174 Incept: 2008-04-03
Delaware
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Can we "stress test" the Fed ?
---------- "Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." Samuel Adams I'd rather die on my feet than live on my knees. - Emiliano Zapata
2009-04-24 10:38:40
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Kuhio Posts: 206 Incept: 2008-12-31
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Awesome KD. There's a reason I always cite Carroll ("The question is, " said Alice, "whether you can make words mean so many different things." The question is,' said Humpty Dumpty, `which is to be master - - that's all.') when referencing the 1913 Fed Reserve Act. The point being made is similar to Orwell's "History is written by the winners". The PTB only get to do what they are doing as long as they are the masters ie winners. The day they are no longer the masters, words once again mean exactly what they are supposed to mean! And history is re-written by the new 'winners' (ahem, that would be US) to reflect events, outcomes and results as they actually occurred. Last modified:
2009-04-24 10:44:42 by kuhio
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Phirang Posts: 8823 Incept: 2008-10-25
bar khoba's revenge
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Laws ARE for little people: that's why we ARE little people! If we weren't little people, we'd be busy prying open the anus of the taxslave. Unless the tea parties take off, we're heading to a Syrian trajectory. At that point, your children have NO ****ING FUTURE. Bank on it. ---------- The Treasury can issue debt on your behalf because the State can and will stomp the wealth out of you and your family.
2009-04-24 10:43:40
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Mouse Posts: 20 Incept: 2009-03-16 CA
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Gen, Looking quickly at the statute, the limitations you describe in section 4 do not apply to actions undertaken in section 3 (the "unusual and exigent circumstances" section). Section 3 [12 USC 343] requires an affirmative vote of five members of the Board and authorizes the purchase of adequately secured "notes, drafts, and bills of exchange", while Section 4 [12 USC 344] authorizes any (single) member bank to "discount or purchase bills of exchange payable at sight or on demand". The bills must relate to shipping of staples and be secured by shipping documents. They're two separate code sections so the limitations described in one would not be relevant to actions undertaken pursuant to the other. Am I missing something?
2009-04-24 10:46:48
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Genesis Posts: 71366 Incept: 2007-06-26
KD^2
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Section 13.3 does not permit purchasing anything. "Unusual and exigent circumstances" is the "catch-all" that permits The Fed to lend to anyone. But the key there is LEND. "Discount" = LEND, not BUY. Note this: Quote:
The Fed is NOT authorized to purchase ANYTHING that is not backed by the full faith and credit of the United States EVER, under ANY circumstances, EXCEPT for self-liquidating trade credit (e.g. "bills of exhcange") which are in fact secured BY THE PHYSICAL GOODS IN TRANSIT. Period. The reason they are prohibited from doing so is to prevent EXACTLY THE CLUSTER**** THAT WE NOW FACE where they buy for political or "expediency reasons" something that turns out to be trash. By demanding that The Fed always LEND against security The Fed (and thus Treasury and The Taxpayer) is protected against the prospect of loss, and it is through this requirement that the Constitutional Infirmity that ALL REVENUE BILLS MUST ORIGINATE IN THE HOUSE is avoided. These acts are clearly, under the black-letter of US Code, illegal. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me Last modified:
2009-04-24 10:53:06 by genesis
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Mouse Posts: 20 Incept: 2009-03-16 CA
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Isn't "discount" the same as buy? I'm not an expert so I'm not trying to argue with you but that is my understanding of the term.
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2009-04-24 10:58:26 by mouse
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Newbtrader Posts: 3254 Incept: 2007-08-24
Bubbleville, VA
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Great ticker.. this one's going off to my rep and senators now. Edit: I ****ing hate fax machines, they're so ******n slow. ---------- "So try and figure this **** out. Catholic men and jewish women, no hats. Catholic women and jewish men, hats. Somebody's got the whole thing totally ****ing backwards." -George Carlin Last modified:
2009-04-24 11:07:48 by newbtrader
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Joe Posts: 716 Incept: 2008-06-18 Boston, MA Online
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Gen, I don't believe I've ever seen your position on the End the Fed rallies. Care to comment?
2009-04-24 11:00:08
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Jubber Posts: 4241 Incept: 2007-07-05
UK Online
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So if its illegal why isn't Ron Paul or anyone else challenging it in court over the last year?
---------- "War is God's way of teaching Americans geography." Ambrose Bierce "The Emperor realized that the people were right but could not admit to that. He though it better to continue the procession under the illusion that anyone who couldn't see his clothes was either stupid or incompetent." Hans Christia Last modified:
2009-04-24 11:03:43 by jubber
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Genesis Posts: 71366 Incept: 2007-06-26
KD^2
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No Mouse. "Discount a note" means make a loan; it is to "lend money after deduction of interest." That's why they call it "The Discount Window" - they take in paper and issue money against the note held as collateral at a discount. It's a loan - not a purchase. Equity (ownership) may be held only for: 1. Self-liquidatiing trade credit ("bills of exchange" and certain revenue anticipation notes issued by municipal and state governments) and only for paper that has a maturity of 90 days or less (with the exception of certain agricultural bills under certain circumstances, in which case the limit is 180 days.) 2. ANY paper, irrespective of maturity, that has the explicit full faith and credit of The United States Federal Government. This means The Fed can buy Treasuries, Ginnie's Paper and debt (has FFAC) but NOT Fannie and Freddie (does not have FFAC) paper and debt. The Fed's actions since Bear Stearns' bailout have been blatantly unlawful as they took equity in Maiden Lane I. That's not permitted under The Federal Reserve Act, nor are they permitted to buy GSE paper (with the exception of Ginnie, which is lawful for them to purchase.) The Fed is constrained in this fashion for the explicit reason that it is unconstitutional to appropriate funds by any other method than a bill originating in The House. This is why when EESA/TARP was passed first in the Senate they couldn't just pass it - they instead ATTACHED IT to an existing bill that had passed The House, because The House voted down EESA and as such for The Senate to pass it first was blatantly unconstitutional. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me Last modified:
2009-04-24 11:06:05 by genesis
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Genesis Posts: 71366 Incept: 2007-06-26
KD^2
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Ron Paul is a pussy. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-04-24 11:08:02
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Jubber Posts: 4241 Incept: 2007-07-05
UK Online
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sure, so why hasn't anyone else?, that's what I don't understand
---------- "War is God's way of teaching Americans geography." Ambrose Bierce "The Emperor realized that the people were right but could not admit to that. He though it better to continue the procession under the illusion that anyone who couldn't see his clothes was either stupid or incompetent." Hans Christia
2009-04-24 11:11:17
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Jinxx0r Posts: 2064 Incept: 2007-08-10
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Shouldn't this type of ticker go to the justice department and the AG? Most of the reps in this nation are complicit. Does holder have the ability to actually DO anything about this or is he just a political shill too?
---------- "Americans grew tired of being thought of as dumb by the rest of the world, so in 2008, they went to the polls and removed all doubt" ~~ unknown http://www.youtube.com/watch?v=2x2W12A8Qow http://www.youtube.com/watch?v=4pXfHLUlZf4
2009-04-24 11:12:04
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Mouse Posts: 20 Incept: 2009-03-16 CA
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Gen, Here's what I found. Is the term used differently in the Federal Reserve Act? Discounting Paper. To discount a note or draft is to sell it at a discount. The rates of discount vary according to the security offered, or the character of the loan, or the state of the money market. For ordinary commercial paper the rates run from 4 to 8 per cent. Notes received and given by commercial houses are not usually for a longer period than four months. http://chestofbooks.com/finance/banking/.... To 'discount' signifies the act of buying a bill of exchange or promissory note for a less sum than that which on its face is payable. http://books.google.com/books?id=2Y0NAAA.... Though it is interesting that section 344 says discount or purchase while the other sections only use the term discount. Last modified:
2009-04-24 11:16:03 by mouse
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Phantomace Posts: 2184 Incept: 2009-03-16
Las Vegas, NV, and your screen
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Mouse: See the "character of the loan" statement there? Also, see "the rates run 4 to 8 per cent". Those are statements regarding a loan, not a purchase. I know the specific verbage can be confusing, but that is a loan, not a buy. ---------- "That was a little trick I call math. Oops, now I'm not emotionally invested..." - Dilbert The only good thing I have to say about Barney Frank is at least he's not breeding...
2009-04-24 11:17:10
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Mouse Posts: 20 Incept: 2009-03-16 CA
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Phantom, Yes I see that. 4 to 8 percent is the discount given to determine the price that will be paid for the commercial paper. I.e., the discount on the face value. Last modified:
2009-04-24 11:22:20 by mouse
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Arkroyal Posts: 87 Incept: 2009-02-04 St. Augustine, FL
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Gen, how about looking into your crystal ball and making some predictions where all this is in 6 months and/or a year without the market/fed./treas./legal situation changing for the better? Inquiring minds want to know (IMWTK). Thanks for all your hard work - this is the blog that I really pay attention to.
2009-04-24 11:20:06
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Genesis Posts: 71366 Incept: 2007-06-26
KD^2
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Mouse, Section 14 deals with the purchase and sale of various securities. The word "purchase", "sale", "buy" or "sell" denotes equity interest. The difference between that and "discounting" is that the former transfers equity interest while the latter is a secured lending transaction. The exception for the requirement of security in The Federal Reserve Act exists only for "bills of exchange" which is a term of art for self-liquidating trade credit (e.g. I ship you a product to be paid for on delivery, FOB my factory. Since the product is FOB my factory you have issued me a "bill of exchange" that is your indebtedness for that product from the time I ship it until you receive and pay for it.) The Federal Reserve Act limits such "bills of exchange" to terms of 90 days or less (again, with the exception of certain agricultural products where the limit is 180 days to permit a full growing season to pass) because such bills are in fact secured by the underlying commodity or product, and The Act also requires that The Fed intend to and actually dispose of them (rather than take delivery - that is, the equity interest - in point of fact.) Maiden Lane I was set up as a separate LLC owned by The Fed. This was an attempt to end-run around the requirements of 13.3; it is an artifice, however, as the ownership of Maiden Lane is in fact The Fed's, and ownership is ownership. The black letter of The Federal Reserve Act does not permit equity interest in a security (e.g. debt) to be held by The Fed except for that backed by Full Faith and Credit. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-04-24 11:33:40
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