A Rare Glimpse Into The Fed's Discount Window Courtesy Of The Brewing Lehman-Barclays Scandal

10-18-2009 • Zero Hedge

Coming full circle, the major question we have is what, if any, considerations did the Fed use when determining how much of Lehman's collateral pool it would be willing to onboard in the discount window. And if back then it was willing to accept securities of bankrupt companies as value pledges to US taxpayers, why would one assume that anything has changed? The next time there is a "risk-flaring" event (and with bankrupt companies presumably still on the Fed's balance sheet, it is merely a matter of time), how much more leeway will be given to toxic assets? Will the Fed now allow for a 10% haircut instead of 20%? Or how about 5%? Or maybe it will actually say the securities deserve a premium, since all that money Bernanke is printing has to go somewhere. We hope that the over 300 members of Congress who already support Ron Paul's "Audit the Fed" Initiative consider the implications of what the Lehman fiasco has taught us, and how this unique look into the Fed's balance sheet should be a very critical reminder of just how much risk the Fed is willing to take on with taxpayer capital when bailing out a financial system that, absent ongoing accounting gimmickry and endless Reserve Banking System subsidies, is still rotten to its core.