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Tuesday, September 30, 2008

FDIC already has the power?

This from Tyler Cowen:

And did you know that the FDIC currently has the power to guarantee short-term interbank lending? The Paulson plan was in fact quite slow, so maybe its failure will force us to look for other and better options.

No, I didn't know that. But then I'm not the head of the Federal Reserve, Treasury or FDIC.

So here's what I don't understand. If the credit freeze is due to banks being afraid to lend to each other [and aren't they supposed to be lending to people and other businesses, not each other?], why didn't we do this? There are probably good reasons; just wondering what they are.

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