Reforming the Federal Reserve's Rescue Authority

The most publicized bailout of the financial crisis was the TARP bill that provided capital injections to a wide range of banks. But most of the assistance to financial firms was provided through a less publicized set of emergency lending programs authorized by Section 13-3 of the Federal Reserve Act. This emergency lending authority supported the Fed’s rescue of AIG, a massive set of guarantees for Citibank, which would have failed without them, and an alphabet soup of lending ‘facilities’ that supported a small set of Wall Street dealers with almost unlimited cheap credit for a period of years. When Congress examined this issue during the Dodd-Frank Act, they placed new limits on emergency lending that are contained in Section 1101 of the legislation. These limits are clearly intended to limit 13-3 lending to programs that are truly broad based (as opposed to bailing out a small set of insider Wall Street institutions) and to exclude the use of the program for bailouts of institutions that are actually insolvent. Join us as we discuss whether Dodd-Frank’s limitations to the Fed’s 13-3 powers went too far, or not far enough. 11:30 a.m.–12:10 p.m. Panel 1: A Policy PerspectiveModerated by: Ylan Mui, Washington PostMark Calabria, Cato InstituteMarcus Stanley, Americans for Financial ReformPhillip Swagel, University of Maryland 12: 15 – 12:45 p.m. Panel 2: A Congressional PerspectiveModerated by: Mark Calabria, Cato InstituteSenator David Vitter (R-LA)Senator Elizabeth Warren (D-MA)