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Between March and December 2008, the Fed used its section 13(3) emergency powers to act like a market maker in the primary and secondary markets for credit products. To tailor these efforts to the new credit market, the Fed created limited-liability companies and ran secured lending programs, especially for nonbank firms that had become active in the credit market. These companies and programs added liquidity to "structured finance," so called because these are assets created by rearranging the cash flow from other financial instruments. Just as last resort lending made banks more liquid, these emergency programs made structured finance assets and their investors more liquid.' By doing this, the Fed calmed down credit markets, was repaid on its emergency lending, and put taxpayers in a position where we stand to make even more money on these deals.

This Article focuses on the historical, legal, and policy justifications for the Fed's actions and concludes that the Fed's actions were readily defensible on several grounds. First, the Fed's recent efforts were just the latest expression of the Fed's open-ended authority to trade financial products for its own account, especially during credit emergencies. Second, the policy rationale for these efforts is that credit market dynamics had become influenced by a "shadow banking" sector that a traditional lender of last resort could not reach. To influence the contemporary version of the traditional credit function-borrowing short to lend long term-the Fed would have to expand its emergency liquidity facilities. Finally, the Fed's market making is congruent with the Fed's century-old symbiotic relationship with banks, so we should reconsider our naiveté about what has long been a corporatist relationship.