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This is somewhat similar to Northern Rock.

The BoE wasn't financing NR, it was paying paper straight to NR's creditors using NR as a conduit. Which is why the final debt was something like ten times NR's nominal value.

Similarly the Fed isn't financing BS, it's 'supporting' JPM - and by implication the rest of Wall St, since JPM has creditors too.

This isn't finance, it's politics. The Fed is making a - slightly ambiguous - statement that whatever else happens in the US, Wall St is safe, and that with its help BS is worth closer to a sensible market value, so there's really no need to panic.

There's no point looking for an economic rationale, because there isn't one. This is really just a $30bn bedtime story and reassuring tuck-in before lights out.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Mar 24th, 2008 at 08:09:05 PM EST
[ Parent ]
before lights out.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Carrie (migeru at eurotrib dot com) on Mon Mar 24th, 2008 at 08:20:04 PM EST
[ Parent ]


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