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The Next Bailout is Already Underway |
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Wednesday, 08 October 2008 |
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By Christian Hill
The hotly debated $700 billion bailout of Wall Street hasn’t even faded from the front pages, and we already have another bailout underway. This time, the Fed is targeting “commercial paper”, utilized by businesses to fund short-term operations.
Yesterday the Fed announced that it would begin buying these loans to ease liquidity concerns as the loans come up for renewal. The Fed plans on buying commercial paper until at least April of 2009, although the door has been left open to extending that date. The Fed also didn’t put a dollar amount on the amount it would purchase. Without the intervention, the Treasury was concerned that the credit markets would seize entirely and we could see a disastrous drop in the market.
It looks like the Federal Reserve and the Treasury are willing to take any step necessary to speed up the economic recovery. One has to wonder though, whether any of these plans will work as intended. If they do, we have essentially bought our way out of a recession. If they don’t work as planned, then we have simply added to the exponentially increasing national debt and used up all the bullets in the gun. Then what?
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