Upcoming Classes

Search CFLA's Article Archive:

Study Exonerates Federal Reserve's Crisis-Era Bailouts

reuters.comMay 4, 2012

By Jonathan Spicer

(Reuters) - A study by economists at one of the regional Federal Reserve banks has found that the U.S. central bank didn't break any laws in its handling of the 2007-09 U.S. financial crisis, and that, in fact, it handled that crisis better than the savings and loan collapse of the 1980s.

The Federal Reserve had attracted scorn when it loaned hundreds of billions of dollars to troubled banks during the 2007-09 crisis, with some critics suggesting the bailout broke the law.

"The authors find no evidence that the Federal Reserve ever exceeded statutory limits during the recent financial crisis, recession, and recovery," said the study by the St. Louis Fed bank, which sought to find out whether the Fed had violated "the letter or spirit of the law" by lending to undercapitalized banks.

The financial crisis was, in part, brought on by aggressive securitization by financial institutions, lax regulations, and a bursting of the subprime mortgage-market bubble in 2007.

At the height of the crisis - which spread to international markets and sparked a brutal global recession - the Fed took unprecedented emergency actions well beyond its traditional use of interest rates to backstop both banks and the market.

It bought an array of financial securities to keep rates low and markets liquid, aggressively lent money to banks and brokers, facilitated Bear Stearns' fire sale to fellow bank JPMorgan, and rescued giant insurer AIG, among other steps that some criticized as excessive or illegal.

The central bank also established a new so-called Term Auction Facility (TAF) to make funds available to banks. Those outstanding loans peaked at $493 billion.

Chairman Ben Bernanke has said the Fed had such powers based on Great Depression-era laws, and needed to act to avoid another Depression. Today, U.S. unemployment remains high and the economy is still recovering from the recession, the worst since the 1930s, even as major banks have again become profitable.

Critics also argued the Fed in 2008 violated the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), which limits Fed lending to undercapitalized banks.

But the study found "no instances in which the Fed provided credit to an undercapitalized or critically undercapitalized bank for more than the maximum number of days specified in FDICIA." It also concluded that few banks that failed between 2008-2010 borrowed from the Fed in their last year running.

"As a group, the banks that failed during the 2008-10 period relied less on the Federal Reserve as a source of credit during their last 52 weeks than did the banks that failed during 1985-90," said the study, which was published on the St. Louis Fed's website.

(Editing by Bernadette Baum)


Back to May 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
spacer
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
 
BBB Logo

 

spacer
Contact us or view our Sample Documents & Audits by completing the form below.

  • Reload
  • Should be Empty:



 

DVD Sets Only $99

 

FREE Mortgage Fraud Analysis

 

Order Cutting-Edge Services Now

 

Quiet Title Packages from Licensed Attorneys

 

Affiliate Services

 

CFLA Sponsored Attorney Links

 

Take-Home Education Package

 

ALB Law Firm

 

Advocate Legal

 

The True News Network

 

Sutton Law Firm, P.L.L.C.

 

Rubenstein Business Law

 

Atighechi Law Group

 

Scunziano & Associates

 

Get Certified to Perform Mortgage Securitization Audits

 

CFLA Training Academy

 

Expert Witness Services

 

Cutting Edge Expert Securitization Reports

 

CFLA Credit Cards

 

Breaking News

 

Letters to the Editor

 

CFLA Weekly Newsletters

 

Code of Ethics

 

Testimonials

 

Instructional Videos

 

Job Opportunities

 

License Opportunities

 

MARS Rule

 

Product Samples

 

Resource Links

 

Servicer Information

 

Foreclosure Laws

 

REST Report

 

Quiet Title Packages from Licensed Attorneys

 

Advertise on CFLA

 

Advertising Space: Mortgage Securitization, Quiet Title

 

Certified Forensic Loan Auditors, LLC
13101 West Washington Blvd.
Suite 444
Los Angeles, CA 90066

Phone: 832-932-3951
Toll Free: 888-758-CFLA (2352)
Mobile Users: CLICK TO CALL
info@certifiedforensicloanauditors.com

   
 
CFLA IS NOT A LAW FIRM AND DOES NOT PROVIDE ANY LEGAL ADVICE. CFLA DOES NOT OFFER FORECLOSURE CONSULTING OR FORECLOSURE RELIEF
SERVICES. CFLA DOES NOT OFFER OR ASSIST WITH ANY LOAN MODIFICATION SERVICE. CFLA ALWAYS RECOMMENDS THAT CLIENTS RETAIN COMPETENT COUNSEL IN THEIR RESPECTIVE JURISDICTION. CFLA HAS A FREE PROGRAM TO REFER CFLA CLIENTS TO LAW FIRMS IN NEARLY EVERY STATE AND CFLA
DOES NOT CHARGE OR OBTAIN REFERRALS FEES FOR THESE SERVICES. SERVICES NOT OFFERED TO RESIDENTS OF THE STATE OF NEVADA.

 
Home About Us Privacy Policy Terms of Service Disclaimer SERVICES Careers Contact Us
 
COPYRIGHT © 2013 . - All rights reserved.