Bear Mountain Capital Inc.

The Fed

| December 1, 2010


The Fed’s role in the recent financial crisis is unprecedented. While there is no doubt they staved off a true collapse of our financial system, there is also no doubt that they wield significant power over our capital markets that truly tests the principals of “free markets”. A few quotes from the article below are worth noting:

““The Federal Reserve followed sound risk-management practices in administering all of these programs, incurred no credit losses on programs that have been wound down and expects to incur no credit losses” on those that remain, the central bank said in a statement in Washington.”

“The data detail the breadth of central bank support that reached beyond banks to companies such as General Electric Co., which accessed a Fed program 12 times for a total of $16 billion in commercial paper. Lawmakers demanded disclosure, over the Fed’s initial objections, as U.S. central bankers pushed beyond their traditional role of backstopping banks. The Fed bought short-term IOUs from corporations, risky assets from Bear Stearns and more than $1 trillion in U.S. housing debt.”

“Bernanke pushed the boundaries of the Fed’s powers, using section 13(3) of the Federal Reserve Act, which allowed the central bank to aid non-banks under “unusual and exigent circumstances.” In some facilities, the Fed engaged in non- recourse lending, meaning it loaned against collateral alone and took a greater risk of loss.”

(Click here to read article)