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TO THE RESCUE….The feds have finally decided to stop screwing around and rescue Wall Street once and for all:

Treasury Secretary Henry Paulson announced plans Friday to quickly set up a “bold” government program to take over troubled mortgage assets from financial institutions, along with other efforts to step up the purchase of mortgage-backed securities.

….President George W. Bush warned that a “significant” amount of taxpayer funds will be put at risk with the government’s plan to bolster shaky markets, but said intervention is necessary to keep the financial system from grinding to a halt.

A year ago (like most people, I imagine) I wouldn’t have supported something like this. The credit markets were freezing up because banks had trillions of dollars in assets tied down in complex debt vehicles that, thanks to the tanking subprime market, no one could value. That made every bank suspect and every extension of credit a huge and unknown risk. But eventually, I figured, all the SIVs and CDOs would get unwound, the assets would be slowly and painfully revalued, and life would continue.

Well, it’s a year later and that hasn’t happened. I still don’t understand all the gory details, but the SIVs haven’t gotten unwound and no one knows how much the subprime toxic waste they contain is really worth — and there aren’t any signs that that’s going to end soon. And that in turn means the credit markets are still frozen.

So I’m all in favor of the feds stepping in. Sure, I’d like to keep punishing all the corrupt bankers and boiler room operators who caused this, but I’d like to avoid a global depression even more. In the end, the bankers are going to take a massive hit on this regardless, the feds will probably break even or maybe make a few dollars on the toxic assets, and (I hope) some eyes will be opened about the need to regulate this stuff in the future. For now, though, it’s time to unstop the global economy and get things moving again.

I notice that the SEC has also halted short selling in a few hundred financial stocks, just like John McCain wanted. That’s maybe not a bad idea, but I wonder if it’s really necessary now. With the announcement of the rescue plan, stocks are booming and the short sellers are taking a bath. The rescue is a fundamental solution, and I suspect that’s really all we needed. Short selling probably would have taken care of itself.

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