On Tue, 10 Feb 2009, Doug Henwood wrote:
>> "...a $1 trillion program to supply new credit to consumers and
>> businesses."
>>
>> Could someone elaborate on this?
>
> The Fed and Treasury have jointly been running a program to buy up such
> loans, to provide liquidity and a security blanket. They're jacking it
> up so that the Treasury is supplying $100 billion (from TARP cash),
> which the Fed will leverage up to $1 billion. You could think of the
> Treasury as contributing equity and the Fed, debt. It seems a little
> loopy to me, in an era of deleveraging.
This is probably a naive question, but why can't this simply be thought of as setting up a wholly state-owned bank under another name? For a bank, a gearing 10 or less would normally be considered prudent.
Michael