Bo Peng

It's the Capital, Not Liquidity, Stupid

The government is in paralysis. They continue doing what's been proven ineffective and wrong repeatedly, injecting liquidity. This is getting pathetic.

Added Liquidity Part of the Problem, Not the Solution

No, Fanny and Freddie were not clean from subprime crime. I don't want to divert this thread into a postmortem of GSE's (many) ills. My point is, subprime and Alt-A were only a small portion of their asset pool. If things hadn't gotten ugly in prime, the conservatorship would not have been necessary.

Added Liquidity Part of the Problem, Not the Solution

Update: Fed is apparently getting ready to lend directly to lower rings of the money supply chain. It's a de facto admission of failure of the blind liquidity injection to the banks, exactly as I said above. I'm very tempted to suggest Fed start lending mortgages directly -- it would've been funny if it weren't so sad.

Banks are flooded with cash. But such short-term liquidity cash is of no use to most of them. What they need is capital injection. How many will fail before Paulson gets around implementing the bailout plan? It would've been so much faster if the government would follow Buffet's GS model.