After two months AIG finally gets its own line-item in the Federal Reserve Board's H.4 (like no one could figure out who "other" was!), and it takes two Maiden Lane LLCs to handle their size. Bear Stearns only took one.
A year ago the H.4 was a 4-page report no one read except the geekier Fed watchers. I hadn't looked at one since grad' school (assuming it had the same name back then). Now, I read it every week. The Fed has inflated its balance sheet by $1.2 trillion over the past few months.
Meanwhile Paulson is still trying to figure out 'What is TARP?' (and 'Why am I here?'). I think he's on TARP 6.0, but it's hard to keep up. We've gone from the "Greenspan put" to the "Paulson potlatch". As Francis Bacon once said, "Truth emerges more readily from error than from confusion." but Paulson is trying both, just to be sure.
JRB
12/3/08
The Fed & Treasury have been stupid, in addition to foolish. For example, they are guarantying both money market funds and commercial paper. Now while not all CP is held by MMkt funds and not all MMkt portfolios are comprised of CP, they are to a large degree guarantying both the assets & liabilities of MMkt funds, which is rather redundant. The Fed is now having to fund over $350 bln of CP. Paulson forced TARP funds on to banks and now he, other federal regulators, and legislators complain that the banks are not lending the money. (Not to mention he's run out of "firepower".) But much of it has been deposited back at the Fed (see H.4, URL above) who now pays interest on both required and excess reserves for the first time in history, which helps to fund their growing CP holdings. Talk about going in circles! (Or is it 'spinning their wheels'?)
12/8/08
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