Reforming the Federal Reserve’s Rescue Authority

Featuring Mark A. Calabria

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 Perspective

Moderated by: Ylan Mui, Washington Post

Mark Calabria, Cato Institute
Marcus Stanley, Americans for Financial Reform
Phillip Swagel, University of Maryland

12: 15 – 12:45 p.m.

Panel 2: A Congressional Perspective

Moderated by: Mark Calabria, Cato Institute

Senator David Vitter (R‑LA)
Senator Elizabeth Warren (D‑MA)