March 26, 2008 (LPAC)--The General Welfare clause of the Preamble to the United States Constitution governs any actions to be taken by the Federal government in the financial crash and economic collapse underway, said economist and statesman Lyndon LaRouche today. What the Federal Reserve Bank has done, he said, is not only explicitly illegal under the 1933 emergency banking statutes of Franklin Roosevelt's Presidency; it also implies powers which the bankrupt Federal Reserve does not have. Congress should move to expose and overturn these illegal actions, and punish those responsible. They bear the immediate threat of loosing hyperinflation, destroying the economy and General Welfare.

LaRouche said that the General Welfare principle requires of the Federal government, measures to solve problems which may destroy the general welfare, and economic measures to create it. The Federal Reserve is not the Federal government, and lacks authority except that given it by statute, subsidiary to the Treasury, which actually has the Constitutional authority to take action demanded by the General Welfare clause. In addition, the Federal Reserve itself is bankrupt, and needs bankruptcy reorganization under Treasury authority, after 20 years of Alan Greenspan's debt-bubble policies. And the Federal Reserve's March 16-18 actions issuing loans against the nearly worthless private securities of a non-bank, Bear Stearns, violate the clear limitations on the Fed in the 1933 Emergency Banking Relief Act, which restored the U.S. banking system to functioning in the Great Depression.

Fed officials have circulated two "justifications" for those actions--supposed effects of 1926 and 1932 amendments to Section 10(b) and 13(3) of the Federal Reserve Act. But both are explicitly ruled out by the March 9, 1933 Emergency Banking Relief Act, which deals with both those sections of the Federal Reserve Act.

The 1933 precedent is important, LaRouche added, because that emergency act to save some 7,000 chartered banks in a bank collapse, was guided by the General Welfare clause of the Preamble, and expressed the Constitutional authority of the Treasury and the Controller of the Currency, to save those Federal and state chartered banks. It strictly limited what the Fed could do, and those limitations remain valid in the current crisis, and are being violated.

The Federal Reserve is bankrupt, LaRouche stressed. The Federal government has to put it through bankruptcy reorganization. The Fed's action on Bear Stearns, and its promise to lend to more than 20 other Wall St. non-banks, is illegal.