In which I officially declare myself way out of my league

Hold on!  Hold on!  Wasn't the bailout supposed to take care of this?

WASHINGTON (AP) -- The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy.

The Federal Reserve, invoking Depression-era power under ''unusual and exigent circumstances,'' will buy ''commercial paper,'' a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.

The $99.4 billion daily market for this crucial financing, which relies on investors rather than banks, has virtually dried up. Most investors have become too jittery to buy paper for longer than overnight or a couple days.

That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week.

The unstable situation has left many companies vulnerable. The notion under the plan is for the government to provide a ''backstop'' that would give companies a new place to get cash, the Fed said. The action makes the Fed a source of credit for nonfinancial businesses in addition to commercial banks and investment firms.

How is this not more of the same? And if they could do this, then why didn't they do it in the first place?

How many more of these emergencies are going to pop up?

I think my mistake was trying to understand this as an economics problem.

That was like looking at what happened to New Orleans after Katrina as a meteorological problem.

It's a Look at the bastards in charge problem.

It's really looking as though Bush's base, his real base, the oligarchs, are using the crisis---crises---to get all our money officially declared theirs.

Or as Mr Sideshow put it a couple weeks ago, they're making one "final, monstrous smash-and-grab raid on the treasury before they leave office."

Or!

I'm missing something.  Again.  What?

Updated because I am compelled to plumb the depths of my own ignorance:  From Kevin Drum I've just learned that one of the things I'm missing is an understanding of commercial paper.

That's it.  Like it says up top.  I'm officially out of my league.  Nothing but TV shows and comic books from here on out.

Comments

[Mike Schilling]

If the credit markets can't be unfrozen, then businesses which rely on short-term credit for operating funds (i.e. almost all of them) start to fail, and everything goes to hell really quickly. The $700 billion was supposed to reassure the lenders and allow credit to flow again, but it hasn't so far. This is Plan B.

[Victoria]

Don't feel bad, Lance. I took a full year of MBA courses (As part of my MFA program. Weird, I know.) and I don't get it either. But I recommend last week's This American Life online for the best explanation so far. But, oy, depressing.

PS. Imagine my "mainstreet" reaction this morning when I opened this year's house insurance bill...saw that it has gone up over 25%...and is now with AIG. Then I read the Times and saw how brazenly AIG's executives splurged the week after their bailout.

[Linkmeister]

Victoria, I have a similar story. There are two of us in this house, and we just got our monthly electric bill. $400. That's $40 more than last month for almost exactly the same amount of KwH used.

Hawaiian Electric burns oil to make electricity.

[Ken Houghton]

The $700B was raping and pillaging; as soon as Paulson admitted it, they waited for the bill to pass and are now sitting back to Get Theirs.

Want proof? The Treasury Auction Facility today (for funding through the end of the year of dicey securities) was UNDERsubscribed. They took EVERY offer, and still didn't get the $150MM in securities they were expecting.

So, by conclusion, the banks have no impediments to free cash flow through 2 January 2009. Should be no reason they couldn't roll over some Commercial Paper for their best customers, or even, say, extend loans to MacDonald's for their kitchen ugrades.

If it's not working that way, we have to assume they got a better deal than TAF for those 'dodgy' assets. Only a cad would suggest that would be TARP. (Not only is the government keeping the market liquid, it's bidding against itself for the worst paper.)

[Victoria]

So anyway, I called our insurance broker today and asked if there was another company we could go with other than AIG. He asked me why. I said I didn't feel good about them. He sighed heavily and said, "This is no time to be moral about what you buy."

No, really. That's what he said. From his office in Berkeley.