Whadyamean It Won't Work?
I was struck by a newswire story that the current effort to buy an equity stake in banks and injecting cold, hard cash, in the words of a bank CEO, will not un-lock the credit markets. My initial reaction was: GUH??
In a way, I feel sorry for Paulson. He was the CEO of the biggest investment bank. If there is anyone on the face of this planet in this continuum who genuinely understands how hi-finance markets work, surely it is Paulson. He has thrown everything but the kitchen sink at the problem, but yet, the credit markets are still frozen solid. Buying MBS' that are worthless, guaranteeing interbank lending, buying equity stakes and injecting cold, hard cash, opening the Fed credit window to both banks and large corporations.
Question: has anyone bothered to ask the bank executives who have the authority to allow or prohibit interbank lending? Has anyone asked these key people what must happen to unlock interbank lending? There is something really screwy going on here, and I want to know what.