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September 24, 2024


REVEALED: THE FEDERAL RESERVE’S SECRET 1973 PLAN TO BAILOUT THE SAVING & LOAN
INDUSTRY THAT VERY NEARLY HAPPENED



An update on my major project of the moment: launching my 30,000 page database
of FOIA minutes. All of the minutes have been uploaded to my website, but
generating an accessible and searchable database of these pdf files has taken
significantly longer than expected. Expect the database to go live over the next
two weeks. In the meantime, I’m covering some of the most explosive secrets
these documents have to offer. There is so much juicy material in this treasure
trove, so stay tuned!

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Longtime readers of Notes on the Crises are very aware of my fixation on the
Federal Reserve’s 13(3) lending authority (and so is Bloomberg & the Financial
Times). Typically seen as an “emergency lending authority”, at least up until
the failure of Silicon Valley Bank, this is the most open-ended legal authority
the Federal Reserve system has. The authority’s use in 2008 has brought it an
enormous amount of focus. ,and in 2020 even more so. Yet, before 2008, it was an
obscure and mostly forgotten provision. The modern Federal Reserve System— which
had a legislatively created “Federal Open Market Committee” where core decisions
were consolidated to Washington D.C.— had not seen section 13(3)’s use up until
2008.Because of this lack of use, section 13(3) was typically regarded as
unimportant, and a “relic”. What the 1967-1973 Federal Reserve minutes reveal is
that history of 13(3) needs to be quite significantly rewritten. The Federal
Reserve has come shockingly close to using this authority to rescue entire
industries, decades earlier than most would imagine. 

No episode illustrates this better than the subject of today’s piece. In the
summer and fall of 1973 the Federal Reserve developed a plan to activate 13(3),
to provide emergency liquidity support to the entire Saving & Loan industry. Not
in 1983 — but a decade before. 

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