Sunday, October 12, 2008

Soros says...

In the Financial Times, Soros has offered some ideas on how to fine-tune the Emergency Liquidity Provisions and implement them practically. It's an action plan, really, and it appeals in that sense.

Especially on point, he suggests what should be obvious (he often does that, but because he's Soros, it is received as though it's inscribed on a tablet of stone):

The Fed would also guarantee interbank borrowing by banks eligible for recapitalisation. This would reactivate the interbank market and return the spread of Libor over Fed funds to normal and reduce the abnormally high interest rates on business and mortgage loans linked to Libor.

Of his action-plan, he estimates with characteristic modesty:

It would help restart the economy and likely produce returns for taxpayers comparable to my fund’s.

This will undoubtedly appeal to Barney Frank and friends, who tried to get the government into the hedge fund business via Fannie and Feddie.

Not a big fan of the big man, but, given his stature and experience, even his utterances of the obvious have a certain authority.

Something that should be obvious, but was omitted from his to-do list is, "Get the government the heck out of the markets as soon as possible thereafter."


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