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I hate to criticize my friend @PeterContiBrown; I'm also not one to dare to disagree with any lawyer! But I must say I'm surprised by two claims he makes in the article @Aarondklein links to here. (Short thread.)
Peter claims that "Nowhere in any part of the Federal Reserve Act does Fed lending require Treasury participation."
The closest it comes, he says, is the vague 13(3) requirement that "that any emergency lending be “indorsed or otherwise secured to the satisfaction” of the regional Federal Reserve Bank that undertakes" it.
But as I've pointed out to Peter inn this very forum, FRA 13(3)(B)(i) adds "that the security for emergency
loans is sufficient to protect taxpayers from losses."
loans is sufficient to protect taxpayers from losses."
I'm no lawyer, but it seems to me that this can be taken to meany that the Fed isn't supposed to lose money. The Treasury, on the other hand, presumably can dispose of taxpayers money, in accordance with Congress's instructions.
Peter also claims that the Fed has never before required Treasury participation for its emergency lending--that "this had never been done before, even after the vast experimentation in emergency lending that we saw in the 2008 financial crisis."
But that's also not true, as I pointed out in a recent essay I shared with him and others here ( https://www.alt-m.org/2020/03/30/when-the-fed-tried-to-save-main-street/) concerning the Fed's emergency lending to businesses during the Great Depression.
That lending, authorized by the Federal Reserve Act's now defunct Section 13(b), was not just partially but *fully* backed by the U.S. Treasury, which contributed $280 billion in extra Fed capital, while confining its total 13(b) loans to that amount.
In short, it is I believe, possible to claim that a refusal to take losses, except when these are covered by Treasury-provided funds as approved by Congress, has, rightly or wrongly, long been part of Fed's DNA.
P.S.: To paraphrase Mark Twain, anyone who reads a normative stand into this thread will be shot on sight.
