How to spend $1.5 trillion without congressional approval

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investorzzo's picture
investorzzo
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Joined: Nov 7 2008
Posts: 1182
How to spend $1.5 trillion without congressional approval

How to spend $1.5 trillion without Congressional approval

Step 1: Federal Reserve purchases $1.5 trillion in Fannie Mae and Freddie Mac securities, creating $1.5 trillion of monetary base to pay for these purchases.

Step 2: U.S. Treasury quietly announces unlimited support for Fannie Mae and Freddie Mac on December 24, 2009, exploiting a loophole in a 2008 law that was originally written to insure a maximum of $300 billion in total mortgage principal (not losses, but principal).

Step 3: Over the next several quarters, the U.S. Treasury issues $1.5 trillion in new Treasury debt to the public, taking in the $1.5 trillion in base money created by the Fed in Step 1.

Step 4: U.S. Treasury hands that $1.5 trillion in proceeds from the new debt issuance to Fannie Mae and Freddie Mac.

Step 5: Fannie Mae and Freddie Mac use the proceeds to redeem the $1.5 trillion in mortgage securities held by the Fed, thus reversing the Fed's transactions in Step 1, without the need for any other "unwinding" transactions (watch). The base money created by the Fed comes back to the Fed, and the mortgage securities purchased by the Fed disappear, by burdening the American public with a new, equivalent obligation in the form of U.S. government debt.

 Outcome: The Federal Reserve closes its positions in Fannie Mae and Freddie Mac securities, the quantity of outstanding Fannie Mae and Freddie Mac liabilities declines by $1.5 trillion, thus allowing their remaining assets repay the remaining liabilities without a $1.5 trillion hole of insolvency, and the outstanding quantity of U.S. Treasury debt expands by $1.5 trillion in order to protect the lenders, while ordinary Americans continue to lose their homes and jobs.

Throughout this crisis, the ultimate objective of Bernanke and Geithner has consistently been to protect the bondholders. This objective will not change unless the leadership changes.”

http://www.financialsense.com/fsu/editorials/deepcaster/2010/0205.html

  • To replace The Fed, and in order to protect ordinary citizens interests, the U.S. Congress should create a genuinely National Bank under the auspices of the U.S. Treasury Department as authorized by the U.S. Constitution.  That truly National Bank should be the money issuer for the United States, not the private for-profit Cartel of International Bankers known as The Fed.

This is not such a radical idea.  President Kennedy caused U.S. Notes to be issued late in his presidency as a replacement for Federal Reserve Notes.  [He was killed a few months after the issuance was started and the U.S. Notes disappeared from the market.] This would relieve U.S. Taxpayers from the obligation to pay interest on the dollars The Fed prints for free.

docmims's picture
docmims
Status: Platinum Member (Offline)
Joined: Jun 17 2009
Posts: 644
Re: How to spend $1.5 trillion without congressional ...

Yes, Kennedy abolished the Federal Reserve by executive order.  Unfortunately, he died a few months later, and Pres Johnson repealled the order as one of his first actions in office.  Quite "unfortunate", but clearly unrelated.Undecided

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