by Pam Martens and Russ Martens
Wall Street on Parade
We have become convinced that the allocation of $454 billion under the CARES Act stimulus legislation to cover any losses incurred in the Fed’s emergency bailout programs was a dog and pony show created by U.S. Treasury Secretary Steve Mnuchin (who has testified to Congress that he helped write the legislation) in order to provide Mnuchin with a slush fund to trade in markets. (See Trump Issued an Executive Memorandum Giving Mnuchin a $50 Billion Slush Fund; Mnuchin Gave Himself $386 Billion More.)
Our suspicions are heightened by the fact that the Fed ran very similar emergency bailout programs from 2007 to 2010 and did not require any funds from the Treasury to backstop losses. The Fed simply relied on collateral from the Wall Street firms borrowing from the Fed. If those firms don’t have the collateral today, then they’re likely insolvent and not legally allowed to borrow from the Fed.