Washington's ultimate solution
How to solve the financial crisis?
Let me tell you a little secret, folks. Even though they're scurrying around like everyone else in this game, I think the crisis managers at the Federal Reserve Board and the Treasury have quietly adopted a technique that has helped us deal with previous financial crises - what I call the "play and pray" approach.
They don't teach it in Economics 101, and none of the players dealing with the current meltdown will talk about it on the record. But it's a time-tested strategy - think of the mortgage crisis of the late 1970s and early 1980s, the bank problems in the early 1990s, and the Asian contagion of the late 1990s.
The theory is that if you give stricken financial institutions like Fannie Mae (FNM, Fortune 500) enough time, profits from their basic operations can help them dig out of the capital pit into which they've fallen. A few years of nice profits will help offset the big losses from past blunders, provided the company stays alive long enough.
In fact, Fannie Mae's underlying business - using borrowed money to buy mortgages - is showing increasing profitability. That's because while the Fed has cut the short-term Federal funds rate that it controls to 2% from 5.25% since September, rates on long-term mortgages have risen.
HSH Associates says fixed-rate 30-year mortgages cost 6.70% in early August, up from 6.47% when the Fed first cut rates.
So do not be fooled by anybody who says that the central bank should cut interest rates for the benefit of innocent citizens
Who gives a damn about inflation?
Svaret på galaxens alla frågor är inte 42.