FED intervention explained

Paul Krugman has written up a nice summary of what the Ben Bernanke is doing.

http://krugman.blogs.nytimes.com/2008/03/08/whats-ben-doing-very-wonkish/

I agree with most of the post except for the last part where Paul says the intervention is a drop in the bucket compared to the broad financial markets.

Steve Walden wrote in

http://interfluidity.powerblogs.com/posts/1204920896.shtml

that "a reasonable estimate for the current market value of bank equity is 2 trillion dollars. The $200B in "equity" the Fed will have supplied by the end of March will leave the Federal Reserve owning roughly 9.1% of the total bank equity."

But the conclusion of the two article is fairly similar, that the Fed is doing more bad than good.

"There are (unfortunately) banks that are "too big to fail", whose abrupt disappearance could cause widespread disruption and harm. These should be nationalized when they fall to the brink. But they should be nationalized overtly, their equity written to zero, and their executives shamed. "

I wonder who is too big to fail... uhmmm... Citi?