There were many of us here on dKos wondering why congress et al couldn't come up with a plan to help from the bottom up, by directly loaning money to businesses, since the lack of short term credit seemed to be the biggest bombshell that would truly be felt by mainstreet. Well, guess what - the Fed is now considering doing just that.
The Fed said in a statement that it would begin to buy large amounts of short-term debt in an effort to stimulate the credit markets, which have all but dried up.
Under the program, the Fed said that it would buy the unsecured short-term debt that companies rely on to finance their day-to-day activities.
more below...
On top of the $700B that we just gave them. The problem is, the Federal Reserve is a reserve. There are major legal questions as to whether or not the Fed has the power to buy these assets.
But the effort is fraught with legal complexities. Though the Federal Reserve has sweeping power to create money and lend it out, experts said it was normally prohibited from buying assets that could lose money.
And, well, the Fed doesn't even actually have the money:
To pay for its burgeoning responsibilities, the Fed has no choice but to keep printing more money. To prevent that flood of new money from reducing the central bank’s overnight interest rate to zero, the Fed also announced on Monday that it would start paying interest on the excess reserves that banks keep on deposit at the Fed.
Why didn't they present this idea to Congress? Why couldn't Congress have created an entity to loan this money?
I'm really trying hard to follow this crisis, and I think I've done a pretty good job up til now, but hell if it doesn't sound to me like Paulson's first priority was Goldman Sachs. The execs don't want to lose their golden parachutes, so now they go to option two, which sounds like it could work if we could have done it right, and created a trust for the loans. But now there's no time, Congress is on its way out the door....
So now what?? This whole fiasco looks like it's going to cost over $2T, our money will be worth less than the flimsy paper it's printed on, and all the guys responsible STILL get to walk.
AAAARRRRRGGGHHHH!!!!!!!