If there is a genuine danger that a near term credit “crisis” will prevent payment of payrolls or other vital functions, the Federal Reserve, Treasury, and U.S. government clearly have other more effective options to inject needed funds into the financial system than to purchase valueless assets from incompetent financial firms.

For example, the Federal Reserve can make available funds at the discount rate which can be lowered to 0% if necessary to those banks, credit unions, and other financial firms that have not made bad lending and investment decisions. These firms can then take over providing credit for payrolls and other vital functions. The Federal Reserve can also attach a “use it or lose it” requirement to such loans to ensure that they are used immediately to cover payrolls or other short term needs that may be in danger due to the screwup by large badly run investment banks.

Federal Reserve loans should be considered a privilege for well run banks and financial firms and not a right. There are undoubtedly many, often small, financial firms that have made prudent investments and avoided mortgage backed securities, sub-prime loans, and other junk.

There are, of course, other options such as a federal emergency loan fund to meet payrolls and so forth to avoid a near term credit collapse that do not involve the purchase of valueless assets and will ensure that the money is used to keep vital functions in operation and not further enrich incompetent financial executives.

If there is a genuine danger that a near term credit “crisis” will prevent payment of payrolls or other vital functions, the Federal Reserve, Treasury, and U.S. government clearly have other more effective options to inject needed funds into the financial system than to purchase valueless assets from incompetent financial firms.

For example, the Federal Reserve can make available funds at the discount rate which can be lowered to 0% if necessary to those banks, credit unions, and other financial firms that have not made bad lending and investment decisions. These firms can then take over providing credit for payrolls and other vital functions. The Federal Reserve can also attach a “use it or lose it” requirement to such loans to ensure that they are used immediately to cover payrolls or other short term needs that may be in danger due to the screwup by large badly run investment banks.

Federal Reserve loans should be considered a privilege for well run banks and financial firms and not a right. There are undoubtedly many, often small, financial firms that have made prudent investments and avoided mortgage backed securities, sub-prime loans, and other junk.

There are, of course, other options such as a federal emergency loan fund to meet payrolls and so forth to avoid a near term credit collapse that do not involve the purchase of valueless assets and will ensure that the money is used to keep vital functions in operation and not further enrich incompetent financial executives.

You also have to consider the status and reputation of the US after whatever action is taken.

First you state the goal. Second you state the plan to accomplish the goal. Third you state how the plan will meet the goal. Fourth you outline all the advantages and disadvantages to the plan. Fifth in our present government you outline how all the possible abuses, self interests and stealing would be prevented. Sixth you state how the decision makers would make the operational decisions and how they would be responsible for the decisions they make. Seventh you outline how the plan would prevent anything like this from happening again.