Saturday, September 27, 2008
The credit squeeze
As I understand it, one of the primary problem with today's market is that lending institutions are afraid to lend money to each other on a short term basis. It would seem that one way to alleviate this problem is for the Federal Government to guarantee some of those short term loans. Since the FDIC knows a lot about the state of various banks, it should be able to determine which can be backed by a Federal guarantee. (Of course, that would put those not on the list in jeopardy of a run.) It might also make a similar determination about other elements of the monetary and banking structure.