Alexander Saeedy is a senior at Yale University studying history.
With six years of historical distance between the beginning of the Great Recession and the present, it is clear that the United States and Europe have had fundamentally different, though not opposite, experiences with the global crisis. One possible reason for this difference was the Federal Reserve’s invocation of emergency powers in 2008. The invocation was an obviously legal action—emergency powers are included within the Federal Reserve’s charter—but it is fair to ask: how constitutional and democratic was it?
We may find some answers by turning back to 2008. When Bear Stearns, the former investment bank that became defunct in that same year, was found to have mortgage securities that were toxic, the Federal Reserve created a limited liability corporation called Maiden Lane LLC and floated $30 billion to the corporation, a loan designed to absorb Bear Sterns’ toxic assets. The remainder of Bear Stearns was sold to JPMorgan Chase.  The process was repeated in September of 2008 as Maiden Lane II LLC and Maiden Lane III LLC took on $43.8 billion of AIG’s toxic assets.