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1 comments posted · 1 followers · following 0

15 years ago @ Paul Kedrosky: Infecti... - Lucy, Congress, and th... · 3 replies · +1 points

OK, some banks have a liquidity problem, and some banks simply are not solvent. The banks that are not solvent should be shut down by the FDIC, and the banks that have a liquidity problem should have loans extended to them by the FED. Per my understanding both of those things are going on right now, especially the business of the FED providing liquidity. As I understand it the FED is directly providing loans to any bank that asks for it at terms that are better than they could have gotten from anyone a year ago.

So, Insolvent banks are closed down by the FDIC and their assets sold at market clearing prices to prudently managed banks. Banks that have a liquidity problem get loans from the FED, in any amount, for any reasonable security.

SO WHAT IS THE EMERGENCY?