Anyone Swear An Oath To The Constitution?

Let's ask some "tough questions" here.

First, let's start with The Fed's press release "filling in the details" of their intended purchase of Fannie and Freddie (along with Ginnie) securities:

"Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program."

Ok, so we claim these are the securities.  Well enough, so far.

"How will purchases under the agency MBS program be financed? Purchases will be financed through the creation of additional bank reserves."

That's FedSpeak for "we're going to print the money out of thin air."  In other words these purchases will be financed through taking on additional debt for which the US Taxpayer is obligated, since dollars are in fact debt and are backed by the "full faith and credit of The United States" (so it says - "This note is legal tender for all debts, public and private.")

Now what does The Constitution say about that?

"All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."

What is a "revenue bill"?

Legally, it is a bill that obligates the taxpayer.  This is why the TARP/EESA had to be attached to existing legislation in The Senate - it was not Constitutional for The Senate to originate that bill (the Senate CAN originate other sorts of bills) because under The Constitution all revenue bills must originate in The House.  Because the EESA proposed to raise revenue (indirectly; it was a bill to spend and thus obligate the taxpayer for which revenue would have to be raised) it had to originate in The House of Representatives.

Thus the game-playing by the Senate, attaching it to an existing revenue bill (the "mental health" bill) that was languishing on The Senate floor.

Why is this important? 

Because The Fed's actions - all of them that in fact are "financed through the creation of new bank reserves" - are in fact unconstitutional unless explicitly authorized by a revenue bill originating in The House.

Second, we have this little problem:

"What is the legal basis for the agency MBS purchase program?Purchases of agency MBS in the open market, under the direction of the FOMC, are permitted under section 14(b) of the Federal Reserve Act."

Only for Ginnie Mae.

The specific section referenced, 14(b) of The Federal Reserve Act, says:

"Purchase and Sale of Obligations of United States, States, Counties, etc., and of Foreign Governments

(B)

1. To buy and sell, at home or abroad, bonds and notes of the United States, bonds issued under the provisions of subsection (c) of section 4 of the Home Owners' Loan Act of 1933, as amended, and having maturities from date of purchase of not exceeding six months, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political subdivision, or municipality in the continental United States, including irrigation, drainage and reclamation districts, and obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof, such purchases to be made in accordance with rules and regulations prescribed by the Board of Governors of the Federal Reserve System. Notwithstanding any other provision of this chapter, any bonds, notes, or other obligations which are direct obligations of the United States or which are fully guaranteed by the United States as to the principal and interest may be bought and sold without regard to maturities but only in the open market.
2. To buy and sell in the open market, under the direction and regulations of the Federal Open Market Committee, any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.

Now here's the problem.

(B).1 clearly does not apply.  These notes have a maturity of more than six months.

(B).2 only applies to Ginnie Mae securities.  How do I know?  Because this is what is on the face of every Fannie and Freddie offering prospectus:

Every single prospectus for the various MBS and other offerings of Fannie and Freddie through the years - all of them - contain this language on the face of the prospectus.

This is what is on the face of a Ginnie Mae prospectus:

Any questions?

Fannie and Freddie, even in conservatorship, are still publicly traded companies.  Henry Paulson, Secretary of the Treasury, has been asked multiple times if these securities have been "converted" to "Full Faith and Credit" and he has refused to answer in the affirmative. 

Without some sort of enabling legislation (remember, Revenue Bills must originate in the house, and this would be the GrandPappy of all such bills, since the debt taken on would total five trillion dollars all at once), Fannie and Freddie debt cannot be converted to "Full Faith and Credit." 

Period.

This fact is why these securities trade at a significant spread to Treasuries; ergo, they are not full faith and credit obligations.

Paulson knows this, which is why despite repeated attempts he has refused to answer in the affirmative.  He'd love to say yes - but he can't and he knows it.

In fact, this is what Freddie's web page says directly to this point:

6) Is Freddie Mac a government agency?

No. Freddie Mac was chartered by Congress as a private company serving a public purpose. On September 6, 2008, the Director of the Federal Housing Finance Agency (FHFA), appointed FHFA as conservator of Freddie Mac. As conservator, FHFA has all rights, titles, powers, and privileges of Freddie Mac, and of any stockholder, officer, or director of Freddie Mac with respect to Freddie Mac and its assets; and title to the books, records and assets of Freddie Mac. In connection with the appointment of FHFA as conservator, Freddie Mac and the U.S. Department of the Treasury have entered into a Senior Preferred Stock Purchase Agreement. As part of the agreement, Freddie Mac has issued $1 billion aggregate liquidation preference of senior preferred stock to Treasury, together with a warrant for the purchase of common stock representing 79.9% of Freddie Mac's common stock."

Ginnie Mae securities trade with much less of a spread; this is because they are issued with the full faith and credit of The United States behind them.

Again, the difference is clearly disclosed on the face page of the prospectus of all of the securities issued by each of these firms in accordance with securities laws of The United States.

Therefore, it appears to me that under the plain facts of the Statute and the US Constitution the actions that The Federal Reserve announced today are unlawful, constituting a direct violation of both statutory law and The United States Constitution, and that Congress and The Justice Department, both of whom are aware of these facts, are intentionally refusing to enforce both the Statute of The Federal Reserve Act and The Constitution.

This action is not of minor importance and the amount of money involved is not "de-minimus."  $500 billion dollars is approximately one sixth of the entire FY2008 Federal Budget and has been effectively expropriated without an act of Congressional authorization originating in The House.

I ask again:

Is there a Federal Prosecutor who still believes in The Constitution and Rule of Law who will go after this issue, and if not, is there any other person or group of persons who has sworn an oath to uphold The United States Constitution left in this nation who will actually  discharge that obligation?

If so when will Chairman Bernanke be removed from office and these decisions reversed?

(PS: I doubt that such a person or group of persons still exist in America, despite what they may say - but I had to ask)