Promod Radhakrishnan

PPIP Killed the 2008 Bear

The PPIP does involve some risk for tax payer money, but its probably one of the only few options to revive the MBS/ABS/CMO markets and have liquidity flowing again. The question is not whether big banks will gain from this...but whether there are enough controls to safe guard public moeny. Considering the situation, Tim Geithner and team have done a decent job. If there's nothing on the table from the government, tha market's going to stay off such assets for a long period. Fresh Fed lending alone doesn't help - banks just park it back as deposits with the Fed itself! So, i would say the PPIP is one of teh few good options to get the credit markets functionaing near normalcy again!

Economic Fault Lines Emerge

Nice article..i agree we need to make a long-term move towards a balanced fiscal strategy and work our way up the savings ladder. However, the current crisis is unforeseen and of enormous proportion - and hence the need for seemingly counter-logical interim steps to pull us out of the rut before we can work on a longer term strategy. As long as the current administration does have a medium-to-long term strategy of balancing the budget, we can very well live with an interim fiscal deficit brunt.

Can the Fed Really Afford to Cut Another 50-75 Points?

I agree with your assessment of the current situation - we definitely need a lot of focus on saving the insurers and money center banks. However, once another rate cut takes us to 2.50 or 2.25, the fed will no longer have any leeway in rate reduction as a monetary tool. And given the current situation, i feel just one more rate cut instalment would not do much good. If the Fed instead focuses all attention on what lilguy has mentioned ("find a more direct way to...") and provides rate cuts in spaced out instalments, that might give it more time from a monetary policy stand point. And leave enough room for the market down the year to expect positive monetary policy updates.