Money market trouble was the trigger, and it’s back. The direct
response was a $50 bln insurance fund, not in place yet. How about $200
bln in insurance, with a 15-minute turn-over for enrollment? Give the
FDIC a green light – already backed by Treasury, so no legislation
needed. Put everything in place that can be done without legislation
and that directly addresses the issues that confront us, instead of
issue that are behind other issues. Financial firms will need to worry
about staying in business, but they won’t have to worry about
liquidity. Moral hazard is a lesser concern.
The big unfixable thing is that the government teased a hungry market
and then jerked the bacon away. Can’t fix that now, but there are other
approaches to the problems we have.
He is a commentator over at calculatedrisk.blogspot.com. My personal, oversimplified rule of thumb is that as long as trading continues The End of the World has yet to come.
It’s also worth considering the new equilibrium. If things do not totally tank right now, Paulson and Co. truly have zero credibility — for better or worse — the next time they claim that some particular policy action has to be done.