I am getting sick of your preening. I saw Asia open, and Paulson’s comments WERE a big factor in the market action.

Get over yourself.

You are not the expert you pretend to be, and I am tired of your need to pipe up whether you have anything useful to say or not.

Increased reserve holdings have absorbed perhaps half of the liquidity placed into the banking system from the Fed. Much of the rest has almost certainly been invested into the mountain of Treasury bills the U.S Treasury has been issuing. Only a very small proportion is left for re-lending to the real economy.”

That’s a quote from John Kemp’s good article today on “Tarp and Fed facilities unravel” at Reuters. It’s a great read:
http://blogs.reuters.com/great-debate/2008/11/13/tarp-and-fed-facilities-unravel/

I’m really surprised that someone on this blog hasn’t yet figured out why Hank baby had to switch from buying “troubled assets” (bad mortgages) to “investing in bank preferred stock”.

Answer:
Benny already has all of the really rotten “troubled assets” moldering away in the basement of the FED (Fetid?) as he keeps playing ever new versions of “Roll Over Beethoven”” Over night, 28 days, 180 days , and finally for now, “Ah hell guys whenever.” to the present estimated total of $2 trillion plus.

Earl L. Crockett
Santa Cruz, CA

The Fed is unable to buy tier-two companies’ commercial paper because the “law requires we be adequately secured,” Bernanke said during an Oct. 20 House Budget Committee hearing.

Don’t panic – all fed lending is on adequately secured assests. That’s a relief!

You can’t force consumers to spend. (as they hoard their walmart gift cards)

“Needless to say, the nasty selloff in Asia overnight says they are not very impressed with this move either”

It’s quite an extraordinary leap to claim that all of Asia ONLY reacted to this statement last night. What about the Intel news? That had zero effect?

Asian markets are reacting to a HOST of factors, including but BY NO MEANS limited to Paulson’s statement.

The Shanghai bourse was up. How is that accounted for in your statement? Shanghai is not trivial.

Matt Dubuque

Yves, I would have agreed with you wholeheartedly 6 months ago. Today, I'm not nearly so sure, for three reasons:

1) The absolute scale of rebates that can be given to those with a high marginal propensity to spend is not that great. Food stamp and unemployment benefits could never be very large relative to GDP as it stands today, and I hope it stays that way.
2) People who are terrified will try to save the money, as they did with the first rebate. It was very poorly targeted, but it's not clear to me that the results would have been dramatically different if it weren't.
3) This sort of assistance is purely consumptive, and doesn't really lay the groundwork for true further economic development.

I still think it's incredibly important to get help to the poor and laid off for humanitarian reasons, and I totally agree that giving it to the banks is either really dumb or really mendacious, and knowing your background, it makes me cheer that you say the same thing.

I would much, much rather see the government dumping its money on things that the private sector is bad at that do lay the framework for future growth: infrastructure, and basic R&D.

If highly leveraged bets is what is making the system so unstable then what the heck is going on? So, should the government not do the right thing because it will cause Hedge Fund margin calls? Who is continuing to lend money to those guys anyway, I thought we were in a credit crunch?

Forgive my ignorance but it strikes me as these guys will play poker till the table and the cards burn, and even then they will continue based on memory of the last hand. How do you isolate these groups from the system now, besides making it illegal (unenforceable I suspect)

Maybe I am missing the point though.