IMHO...the Feds can't use it!!!

October 21st
1950 EST

Soon, the combined machinations of the Federal Reserve and
Treasury will see the depletion of useable Acronyms. This
morning the Fed created the MMIFF (Money Market Investor
Funding Facility) to take care of the hurtin' people in
money market land. I've moved back to 100% cash and
am determined to sit on the sidelines all day watching
the market see-saw. I'm not afraid of the swings but I'm
really afraid of how the government keeps changing the
game. Amidst all this, its rather interesting to see
how the folks on CNBC keep saying that things are improving
by citing the reduction in Libor.

Though the Fed and Treasury have injected money directly
into banks, given guarantees and loans, tax breaks, created
corporate weddings, and danced and pranced about with the
bankers the reality is that we're still stuck.

What we should have done is to follow the Swedish model
closely - we should have helped the banks that were hurting
a little, liquidated the worst, re-capitalized the ones that
were sort of strong enough to pull through. We should have
collected all the bad assets and thrown them all into a
Resolution trust type of vehicle whose sole aim would be
liquidation.

The problem we still have is one of FAITH and not of LIQUIDITY.
If you were a banker, and see that the section of society that
needs the most amount of lending is hurting why on earth
would you want to lend if you are convinced that there is a
greater chance of default? Would you not want to just hoard
the money the Treasury just gave you and thereby improve your
capital ratios??

What people will now start to focus on is the real economy. There
are a lot of people and organization that are shell shocked
realizing that leverage is indeed, a two sided sharp relentless
sword. There will be massive de-leveraging across the economic
landscape that will hurt company earnings. The consumer will
re-trench and hopefully start to save that'll likely make the
recession a real biter. House prices will probably fall another
10-15%, the employment situation may make it worse....and, the
banks won't lend until there is some evidence that the economy
has turned.

The future will be worse before it gets better. Please DO NOT
be fooled by just watching what the stock market does -- its
just a sideshow. The pure equity people don't get it and they
never will.

All this IMHO...er...In My Humble Opinion - the Feds cannot use
this one!

- aLV