WASHINGTON, D.C.–Illinois Governor Rod Blagojevich was disappointed to learn in a phone call from Ben Bernanke that he lacks the power to appoint Roland Burris to the U.S. Senate. This is because the Federal Reserve added the rights to sell Senate seats to its balance sheet back in September.
“We [Federal Reserve officials] purchased all of the power-backed securities that exist back in September, through Open Market operations. This accounts for about 1/4 the expansion of our balance sheet at the Fed,” said Federal Reserve Chairman Ben Bernanke.
What this means is that the Illinois Governor doesn’t have the right to sell a Senate seat. In fact, no politician holds onto the right to sell a Senate seat unless the Fed begins to sell off its power-backed assets. This also means that the appointment of Roland Burris is null and void.
With the fall in asset prices, and tax revenues (or government power) expected to fall, the price of Senate seats became severely depressed, thus diminishing the value of power-backed securities. As the economy took a nosedive, this diminished the pool of capital that politicians could loot, thus depressing the value of power-backed securities. Many power-brokerage firms have already gone bankrupt, and more would have gone bankrupt if the Federal Reserve hadn’t stepped in to buy up these power-backed securities.
“I guess not too many politicians realized that the Federal Reserve has became so powerful. The Federal Reserve has virtually cornered the market on Congressional and Senate seats,” said Robin Banks, an economist with Risky Ventures, Inc. “This means that the political capital markets are pretty shaky, despite the huge powers that politicians still have to tax and control the economy.”
Up until a few months ago, Congressional seats were sold for about $2,000,000, while Senate seats sold for around $10,000,000. Many banks were financing these Congressional and Senate races through risky lending practices, making sub-prime loans available to politicians with cognitive deficiencies, scandal-ridden pasts, or with little political capital. Citigroup, for example, financed Senator Larry Craig’s races over the last several years. Since Senator Craig was caught soliciting gay sex at an airport bathroom, his political capital has been severely diminished and Citigroup has had to write down its loans.
These loans were then packaged into power-backed securities, as they are backed by the power of politicians. They were then sold to investment banks. The Fed has purchased a lot of these depressed power-backed securities, and now owns the right to sell President-elect Barack Obama’s former Senate seat. President-elect Barack Obama’s former Senate seat is expected to go up for auction at the Federal Reserve’s next Term Auction Facility on January 12, 2009.