n-Systemic Risk of the US Fed: Can the Orderly Liquidation Authority be used to Limit the Power of the US Fed

1. Sometimes the medicine is worse than the disease. Under the Orderly Liquidation Authority (OLA) of the Dodd Frank Act, any company posing a systemic risk to the US economy may be taken over by the FDIC and properly dismembered into a "good company" and a "bad company" such that the latter retains the bad (underwater or non-performing) assets and the former retains the good (profitable or performing) assets. Nothing in the OLA prohibits or prevents the FDIC from going after the US Fed itself, although one might argue that sort of action was not explicitly contemplated by the statute. Supposing the OLA could be applied to any private company having 85% of its tradable assets or balance sheet in financial instruments, which the Fed unquestionably has, then the question is "What actions or activities has the Fed engaged in which have posed systemic risk on the US economy?"

2. Evidence abounds. This blog is not the place to itemise the evidence. But a good summary is as follows:

"The Last Remission:

According to the official figures put out by the US government, the economic "recovery" in the US celebrated its second anniversary on June 30, 2011. The "fuel" burned in this "recovery" is immense. Mr Obama's presidency has ushered in the era of $US 1 TRILLION plus annual deficits riding on top of 0.00 percent controlling interest rates from the Fed. It has also ushered in the era in which almost nothing is traded on the paper markets which is not - explicitly or implicitly - guaranteed by the government.

The fuel to keep the global financial system functioning does not stop at the borders of the US. The "Dodd-Frank Wall Street Reform and Consumer Protection Act" has just produced the first ever "audit" of the US central bank. It reveals that in the period between December 2007 and July 2010, the Fed parcelled out $US 16.1 TRILLION in emergency loans to financial entities all over the world. Almost half of this - a total of $US 7.75 TRILLION - was loaned to four US banks. They were Citigroup, Morgan Stanley, Merrill Lynch and the Bank of America. In July 2010 (the cut off date for this "audit"), total US stock market capitalisation was $US 15 TRILLION. The Fed provided about half of that."

Source: http://www.the-privateer.com/front.html

3. If these figures are to be believed then the US Fed is the main culprit for insidiously halting the private markets and propping up at least four major banking entities for an amount which is around one-half of the total national debt! Crazy, what a public entity can do to its people while vainly saying that its policies are meant to avoid depression.

4. And who is to blame for this systemic fiasco? Shall we blame Obama, the puppet, or his major contributors ("his masters") on Wall Street? Why blame anyone at all when the rules of the game are fixed to ensure the continuation of the power, privilege, immunities and rights of the few against disabilities, duties, liabilities and no rights of the many?