Congress's Afterthought, Wall Street's Trillion Dollars

Fed's Bailout Authority Sat Unused Since 1991

By Binyamin Appelbaum and Neil Irwin
Washington Post Staff Writers
Saturday, May 30, 2009

On the day before Thanksgiving in 1991, the U.S. Senate voted to vastly expand the emergency powers of the Federal Reserve.

Almost no one noticed.

The critical language was contained in a single, somewhat inscrutable sentence, and the only public explanation was offered during a final debate that began with a reminder that senators had airplanes to catch. Yet, in removing a long-standing prohibition on loans that supported financial speculation, the provision effectively allowed the Fed for the first time to lend money to Wall Street during a crisis.

That authority, which sat unused for more than 16 years, now provides the legal basis for the Fed's unprecedented efforts to rescue the financial system.

(More here.)