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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (373801)	3/12/2008 7:38:38 AM
From: Road Walker	Read Replies (1) \| Respond to of 1584949

You prob agree with this... Bernanke Steps Up Ibd Tue Mar 11, 6:55 PM ET Economy: Central bankers aren't known for their creativity, but the Fed's move to refloat the troubled U.S. banking system is a great example of thinking outside the box. And it just might calm the world's markets. Tuesday's powerful market rally underscored the relief felt after the Fed unveiled its new $200 billion Term Securities Lending Facility. The name may sound ungainly, but it will let the central bank make short-term loans to those who need it most -- lenders with lots of impaired mortgage-backed securities on their balance sheets, a result of the housing market's yearlong collapse. Those impaired securities have made it, at times, impossible for banks to get funds on the open market. Who would make a loan to a bank with an unknown amount of damaged collateral on its books? That's why this new lending program can work. It lets troubled mortgage lenders swap some of their shakier debts for AAA-rated U.S. government securities. This fills a lot of holes in bank balance sheets, and puts them back in the business of lending again. And it can't come too soon. The economy clearly is struggling. The job market is shrinking. Sales of new single-family homes are off almost 40% in the past year, dragging prices down by 12% -- and the betting is that the bottom hasn't been hit. Nearly 2 million mortgages are in default -- a number that could surge if unemployment begins to rise. Of course, the weakness isn't just in housing. The new IBD/TIPP Poll shows continued slumping consumer confidence as oil nears a record $109 a barrel. Economists have gone back to their spreadsheets to revise their 2008 outlooks to include a recession. That's why, unlike some, we're not worried that the Fed's recent moves will ratchet up inflation. True enough, overall consumer prices are up more than 4% in the past year. But core inflation remains below 2.5%. The monetary base -- the Fed's main money-supply lever (chart, above) -- shows no danger of runaway inflation at all. Quite the contrary, we're alarmed at its ongoing slide. Next Tuesday, the central bank is scheduled to hold its regular meeting. The deck already has been cleared for the Fed to cut its benchmark fed funds rate by at least 50 basis points. It should do so to show that it's using both hands to fight off recession. We've heard a lot of criticisms about the Fed's recent interventions, many of them couched in free-market jargon. But the housing bust has become a systemic, worldwide problem. That's why the European Central Bank, among others, is helping out, making dollar loans available to their own banks. Europe, Asia and the Mideast all have enormous exposure to our housing crash. For the Fed and other central banks to do nothing and let the global economy unravel would be unacceptable. We agree that free markets imply the need to have failure. Banks that made bad loans should have to take big write-offs. Those who took out loans they couldn't afford should feel some pain, too. That said, it's never acceptable for central banks to sit idly by as systemic failure sweeps the markets. When this happens, it punishes the virtuous and the less-than-virtuous alike. That's not a free market, but a kind of roulette. We're glad Fed chief Ben Bernanke seems to understand the difference.