THE BUCK STOPPED ABOVE THEIR PAY GRADE:

Government's Trial and Error Helped Stem Financial Panic (DAVID WESSEL, 9/14/09, WSJ)

Experts say the leading candidates for most-successful moves are those that leveraged the credit and credibility of the U.S. government to replace broke and beleaguered private financial institutions and markets. The moves shored up rapidly dissipating confidence in the financial system before panic damaged it irreparably, and kept credit flowing while bankers and government officials debated how to rebuild banks' depleted capital.

Specifically, the Treasury rushed last fall to shield money-market mutual funds from what resembled a 19th-century bank run, and the Fed bypassed banks and markets by giving loans to credit-starved industrial companies. Then the government force-fed capital to the banks and, perhaps more importantly, guaranteed nearly all new bank borrowing so banks wouldn't all shrink simultaneously. More recently, the Treasury's "stress tests," to the surprise of their many critics, allowed big banks to take steps crucial toward renewed health.

One sign of success is the parade of people stepping up to take credit for what seemed, just a few months ago, an unpopular bailout of Wall Street. Mr. Bernanke, in speeches and interviews, recites the litany of Fed innovations. Former Treasury Secretary Henry Paulson is finishing a book that highlights the political risks he took last year to save the economy. .

Thanks, W. Just another way that having the first MBA president was a big help.

Posted by Orrin Judd at September 14, 2009 7:36 AM