Is The Federal Reserve Doing Its Job?

I was researching to find a citation for my statement that the Federal Reserve System was put into place to regulate the banking industry and to prevent bank panics and failures. (Seems to have failed huh?)

Anyway, I ran across "Lender of Last Resort" as one of their responsibilities. Here's the definition from the glossary pages of the Minneapolis Federal Reserve Bank.

lender of last resort

As the nation's central bank, the Federal Reserve has the authority and financial resources to act as “lender of last resort” by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy.

So there it is... in black and white on one of the Fed's websites.

Does the situation meet the conditions specified?

1. Unusual circumstances - It isn't usual for this many banks to go belly up.

2. National or Regional Emergency - The Federal Reserve Chairman says that if we don't bail out the banks, the economy will collapse. I'd call that an emergency.

3. Severe adverse impact on the economy - The Pres, SecTreas and Fed Chairman say that if the banks can't get credit, the economy is doomed.

As I see it, the situation fits the three requirements for the Federal Reserve to act as lender of last resort and extend credit to the banks. That is their job!

So why are they trying to foist it off as a loan to us citizens?

What do you think?

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