Fed makes another Star Trek move
Does the Federal Reserve listen to Bill Gross? The manager of the world’s largest bond fund posted a commentary yesterday urging the central bank to intervene in the commercial-paper market, and today the Fed obliged. The decision to directly purchase private securities – three-month commercial paper in this case – is the latest in a series of moves that seem designed, to paraphrase the old Star Trek slogan, to boldly go where no central banker has gone before.
Is it working? Bloomberg notes that the Fed’s statement was vague in some ways – it doesn’t say when how much the Fed will buy — and that the market’s initial response was mixed:
Yields on top-rated overnight U.S. commercial paper dropped 0.74 percentage point today to 2.94 percent, according to data compiled by Bloomberg. Borrowing for seven days increased 1.25 percentage points to 4 percent.
Gross, by the way, also urged the Fed to cut overnight interest rates in half, to 1 percent. Tim Duy has some thoughts on why the Fed isn’t responding to that plea.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
I have a better solution to the entire credit crunch mess:
Let all private entities and individuals borrow from the Fed at the same rates that banks can, but adjusted for a person’s credit score. Remember that this is taxpayer money anyway, so why can’t we borrow against it. Take payments directly out of people’s normal paychecks like we already do for various taxes.
I’ve just eliminated the middleman and helped the taxpayer. Now, let’s see how the economy would recover and it would be a longer lasting recovery. As for the banks, they are on their own for their own mistakes and so is Wall Street.