The following comes from a July 30, 2008 press release by the Federal Home Loan Bank

Today, the Housing and Economic Recovery Act of 2008 was signed into law by the President.

The FHLBanks are referenced in this legislation, and the most notable changes are as follows:

• The Secretary of the Treasury is authorized to purchase Federal Home Loan Bank obligations in any amount deemed appropriate by the Secretary. This temporary authorization expires December 31, 2009 and supplements the existing limit of $4 billion.

“Any Amount Deemed Appropriate By The Secretary” of the Treasury, Henry Paulson and whoever succeeds him between now and December 31, 2009. Does that make you feel confident or does it scare the hell out of you? Do you feel comfortable placing unlimited power in the hands of one person?

I especially liked the concept that this new power “supplements” the existing limit of $4 billion. To me a supplement is a small addition. To the government, a supplement apparently means “unlimited”.

Please read this wonderful commentary by Lee Hamilton, former Congressman in which he states:

The framers of the Constitution, mindful of “taxation without representation” suffered by colonists under the British crown, took care to specify in the Constitution that the ultimate power to tax and spend resides in the hands of the legislative branch - which is closer to the people - not the executive branch.

The power of the purse is the most important power of Congress. James Madison in the Federalist papers called it “the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people”. It checks the power of the President and gives Congress vast influence over American society, because federal spending reaches into the life of every citizen……

Congress used to have the “Power of the Purse”. It does not anymore. They gave it away. In my opinion, The Housing and Economic Recovery Act of 2008 approved by Congress and signed into law by the President a few weeks ago, is not only scary, it has ruined the Constitution and the importance of the Founding Fathers’ system of checks and balances. How this is not Unconstitutional is beyond me.

In the past few days, there has been much talk about the strength of Fannie and Freddie and how they were able to raise debt and how they don’t need to be nationalized. Do you really believe that? Do you think that would have been possible without the unlimited powers of the Treasury? The whole thing looks like a sham to me.

Consider that the Treasury Secretary can lend to Fannie and Freddie and almost any bank that wants to use its FHLB branch as a conduit in Any Amount Deemed Appropriate By The Secretary. This opens up the opportunity for a giant abuse of power whenever it is required to make everyone feel comfortable about the mortgage and debt markets. For as long as this power exists, I do not understand how any American can look at the balance sheet of any bank, any FHLB, any GSE or more importantly, the balance sheet of The United States of America and have any confidence.

Please click here and watch this video of Rep. Ron Paul (R-TX) about the “Mother of All Bailouts”. Warning….you will might should be troubled by the open ended nature of the Housing and Economic Recovery Act of 2008 and that little bit about raising the national debt by $800 billion and that little bit about big brother tracking every one of your credit card transactions via the IRS.