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I don't think its worth holding up a second relief bill for the sake of clamping down on possible abuse of the Fed's 13(3) lending. However, I do believe that the present language of 13(3) is dangerously imprecise. When does a "circumstance" cease to be "unusual and exigent"? 1/n
Do the requirements that security for 13(3) loans must be "sufficient to protect taxpayers from losses" and that Fed banks assign "a lendable value to all collateral" for such loans mean that the loans must be fully collateralized? If not, what the heck DO they mean? 2/n
Is providing Treasury backstops to absorb losses on unsecured or less-than fully-secured 13(3) legally equivalent to securing 13(3) loans sufficiently "to protect taxpayers from losses" even though it actually makes taxpayers bear the full burden of the losses in question? 3/n
If backstops are deemed legal does the Fed get to keep such funds as the Treasury assigns to it for that purpose, apart from those it uses to cover actual losses? If not, when must if give the remainder back? 4/n
That the present wording of 13(3) leaves so many questions unanswered suggests to me that revising it is both far more important and far more desirable than putting a stop to the present round of 13(3) lending, which could actually do some harm. 5/n
Still, I won't be among those deploring shutting the present 13(3) facilities if that happens. I don't believe doing so will make much, if any, difference. Holding up any relief measure will, on the other hand, do a lot of harm. So I hope someone blinks. I don't care who.
