Twitter, Bloomberg, The ESF, The UST and more Sunday 8-9-2020
Thank you Sierra and Vee
From Twitter:
IET: Trump said they have “SIGNIFICANT unused money”. The article written by Bloomberg on 3/27/2020 stated that Trump admin was using ESF money to fund relief (See Article Below)
What is the ESF? How much money does the ESF have? Trump using corporate constitutional laws to mandate through EO the financial relief of Americans using the ESF? Do you see what’s happening here ? It…….. It is happening.
In the 1930’s a backdoor was installed in the Fed so the elites can easily and secretly steal money from it. What is the back door? It is the Exchange Stabilization Fund. (ESF) which is attached to the New Yok Branch of the Fed.
LuisG: Wait wait wait hold on a second. He's using the Exchange Stabilization Fund? The same fund (((they))) use to drain cash from?
BruteWoman: NESARA Baby!!
TrashTalk: If he plugged the Hole in the OUTGOING ESF $$$, then yeah dark opps slush funds going to the PEOPLE instead.
Patriots Progress: This is why POTUS is so confident he'll win in the courts. He has control of the Treasury and has directed the Treasury to release these funds; no need for congress.
The Fed's Cure Risks Being Worse Than the Disease
By Jim Bianco March 27, 2020 -Bloomberg
The economic debate of the day centers on whether the cure of an economic shutdown is worse than the disease of the virus. Similarly, we need to ask if the cure of the Federal Reserve getting so deeply into corporate bonds, asset-backed securities, commercial paper, and exchange-traded funds is worse than the disease seizing financial markets. It may be.
In just these past few weeks, the Fed has cut rates by 150 basis points to near zero and run through its entire 2008 crisis handbook. That wasn’t enough to calm markets, though — so the central bank also announced $1 trillion a day in repurchase agreements and unlimited quantitative easing, which includes a hard-to-understand $625 billion of bond buying a week going forward.
At this rate, the Fed will own two-thirds of the Treasury market in a year.
But it’s the alphabet soup of new programs that deserve special consideration, as they could have profound long-term consequences for the functioning of the Fed and the allocation of capital in financial markets. Specifically, these are:
CPFF (Commercial Paper Funding Facility) – buying commercial paper from the issuer.
PMCCF (Primary Market Corporate Credit Facility) – buying corporate bonds from the issuer.
TALF (Term Asset-Backed Securities Loan Facility) – funding backstop for asset-backed securities.
SMCCF (Secondary Market Corporate Credit Facility) – buying corporate bonds and bond ETFs in the secondary market.
MSBLP (Main Street Business Lending Program) – Details are to come, but it will lend to eligible small and medium-size businesses, complementing efforts by the Small Business Association.
To put it bluntly, the Fed isn’t allowed to do any of this. The central bank is only allowed to purchase or lend against securities that have government guarantee. This includes Treasury securities, agency mortgage-backed securities and the debt issued by Fannie Mae and Freddie Mac. An argument can be made that can also include municipal securities, but nothing in the laundry list above.
So how can they do this?
The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations.
The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a “first loss” position.
What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury.
In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades.
This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump. In 2008 when something similar was done, it was on a smaller scale.
Since few understood it, the Bush and Obama administrations ceded total control of those acronym programs to then-Fed Chairman Ben Bernanke. He unwound them at the first available opportunity.
But now, 12 years later, we have a much better understanding of how they work. And we have a president who has made it very clear how displeased he is that central bankers haven’t used their considerable power to force the Dow Jones Industrial Average at least 10,000 points higher, something he has complained about many times before the pandemic hit.
When the Fed was rightly alarmed by the current dysfunction in the fixed-income markets, they felt they needed to act. This was the correct thought. But, to get the authority to stabilize these “private” markets, central bankers needed the Treasury to agree to nationalize (own) them so they could provide the funds to do it.
In effect, the Fed is giving the Treasury access to its printing press.
This means that, in the extreme, the administration would be free to use its control, not the Fed’s control, of these SPVs to instruct the Fed to print more money so it could buy securities and hand out loans in an effort to ramp financial markets higher going into the election.
Why stop there? Should Trump win re-election, he could try to use these SPVs to get those 10,000 Dow Jones points he feels the Fed has denied everyone.
If these acronym programs were abused as I describe, they might indeed force markets higher than valuation warrants. But it would come with a heavy price. Investors would be deprived of the necessary market signals that freely traded capital markets offer to aid in the efficient allocation of capital. Malinvestment would be rampant.
It also could force private sector players to leave as the government’s heavy hand makes operating in “controlled” markets uneconomic. This has already occurred in the U.S. federal funds market and the government bond market in Japan.
Fed Chair Jerome Powell needs to tread carefully indeed to ensure his cure isn’t worse than the disease.
(Originally posted by Vee and Sierra ) The Exchange Stabilization Fund
The Exchange Stabilization Fund (ESF) is an emergency reserve fund of the United States Treasury Dept. Normally used for foreign exchange intervention ..
This arrangement as opposed to the Central Bank intervene directly, allows the US Government to influence currency exchange rates without affecting domestic money supply.
As of Mar.2009 the fund held assets worth $105 Billion Dollars. Including $58.1 Billion dollars in Special Drawing Rights (SDR’s).
About minute 3:50: A change in the law in 1070 allows the Secretary of the Treasury , with the approval of the President to use money from this to deal in Gold, foreign exchange and other instruments of credit and securities.
Use of these funds circumvent the need for approval from the Legislative branch.
From the US Treasury
The Exchange Stabilization Fund (ESF) consists of three types of assets: U.S. dollars, foreign currencies, and Special Drawing Rights (SDRs), which is an international reserve asset created by the International Monetary Fund.
The ESF can be used to purchase or sell foreign currencies, to hold U.S. foreign exchange and Special Drawing Rights (SDR) assets, and to provide financing to foreign governments.
All operations of the ESF require the explicit authorization of the Secretary of the Treasury ("the Secretary").
The Secretary is responsible for the formulation and implementation of U.S. international monetary and financial policy, including exchange market intervention policy.
The ESF helps the Secretary to carry out these responsibilities. By law, the Secretary has considerable discretion in the use of ESF resources.
The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s, the Act provides in part that "the Department of the Treasury has a stabilization fund …Consistent with the obligations of the Government in the International Monetary Fund (IMF) on orderly exchange arrangements and an orderly system of exchange rates, the Secretary …, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities.
https://home.treasury.gov/policy-issues/international/exchange-stabilization-fund
Wikipedia:
The Exchange Stabilization Fund (ESF) is an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention.[1] This arrangement (as opposed to having the central bank intervene directly) allows the US government to influence currency exchange rates without directly affecting domestic money supply.
As of October 2009, the fund held assets worth $105 billion, including $58.1 billion in special drawing rights (SDR) from the International Monetary Fund.[2]
Background
The U.S. Exchange Stabilization Fund was established at the Treasury Department by a provision in the Gold Reserve Act of January 31, 1934. 31 U.S.C. § 5117. It was intended as a response to Britain's Exchange Equalisation Account.[3]
The fund began operations in April 1934, financed by $2 billion of the $2.8 billion paper profit the government realized from raising the price of gold to $35 an ounce from $20.67. The act authorized the ESF to use its capital to deal in gold and foreign exchange to stabilize the exchange value of the dollar. The ESF as originally designed was part of the executive branch not subject to legislative oversight.
The Gold Reserve Act authorized the ESF to use such assets as were not needed for exchange market stabilization to deal in government securities. The Fund had no statutory authority, however, to engage in other activities that it began to undertake.[citation needed] The principal such extraneous activity it devoted itself to was lending dollars to politically favored governments.
In 1938–40, the director of the Division of Monetary Research, Harry Dexter White, worked on a proposal for loans to Latin America and participated in plans for an Inter-American Bank, which did not materialize. The plan for an Inter-American Bank, however, inspired White's first draft of the subsequent plans for the International Monetary Fund and the World Bank that White prepared in 1941 at Secretary of the U.S. Treasury Henry Morgenthau's direction.
It was funded by Franklin D. Roosevelt under the Emergency Banking Act of 1933, with Archie Lochhead serving as its first Director.
The Special Drawing Rights Act of 1968, 22 U.S.C. § 286o, likewise provided that any special drawing rights (SDRs) allocated by the International Monetary Fund or otherwise acquired by the United States are resources of the ESF. In accordance with the Act, SDRs can be "monetized" (i.e., converted into dollars) by having the Secretary of the Treasury issue Special Drawing Rights Certificates (SDRCs) to the Federal Reserve System.
The amount of SDRCs are limited to the dollar value of the ESF's SDR holdings. The dollar proceeds of such monetizations are assets of the ESF, and the SDRCs are a counterpart liability of the ESF.[4] Treasury has a written understanding with the Fed that the SDRCs will be redeemed when ESF dollar holdings appear to be in excess of foreseeable requirements. Treasury does not pay interest on SDRCs.[5]
Uses
A change in the law, in 1970, allows the Secretary of the Treasury, with the approval of the President, to use money in the ESF to "deal in gold, foreign exchange, and other instruments of credit and securities."[6]
The U.S. government used the fund to provide $20 billion in currency swaps and loan guarantees to Mexico following the 1994 economic crisis in Mexico. This was somewhat controversial at the time, because President Clinton had tried and failed to pass the Mexican Stabilization Act through Congress. Use of the ESF circumvented the need for approval of the legislative branch. In response, Congress passed and President Clinton signed the Mexican Debt Disclosure Act of 1995, which implicitly accepted the use of the ESF, but required reports to Congress every six months on the status of the loans.[7] At the end of the crisis, the U.S. made a $500 million profit on the loans.[8]
On September 19, 2008, U.S. Treasury Department announced that up to $50 billion in the ESF would temporarily be made available to guarantee deposits in certain money market funds.[9]
On March 25, 2020, Congress temporarily authorized the treasury to use the ESF to stabilize money market mutual funds in response to the COVID-19 pandemic.[10] LINK