The Law Is Strange
From Sudeep Reddy:
Real Time Economics : An Old Law for a New Step at the Fed: The Federal Reserve Act’s Section 13(13), created in 1933 and amended in the late 1960s, allows the Fed to lend to any individual, partnership or corporation with collateral backed by U.S. government securities or securities issued by federal agencies. Fannie Mae and Freddie Mac debt is generally included in that latter category of safe holdings, even though it’s not directly guaranteed by the U.S. government...
Of course, the reason the Fed is contemplating this is that right now Fannie Mae and Freddie Mac debt is not regarded as "safe"--even though it is in normal times.
