[a_Username]

Originally Posted by syr74

Actually, loans straight from the Fed can and do happen, they have to. During harsh economic times the Fed will step in as a lender of last resort, which is one of the Central Bank's very necessary roles assuming it comes to that. Apparently it indeed came to that.

The Fed stepping in during "harsh" economic times is nothing more than prescribing poison in the promise of it being the cure. I do realize what the function of the Fed is supposed to be, although I should have clarified myself more; I thought I implied it in the context of economic stabilization or prosperity.

So yes, the Federal Reserve effectively lent money directly to the lending arms of Ford, BMW, Toyota, etc so they could continue to loan money on cars. If they hadn't done this the recession would have gotten a whole lot worse because what was actually happening is the private banks were stopping the circulation of money.

It seems you're implying Neokeynesian, government and central banks need to spend in order to reach full employment and full economic potential, and Monetarist, the resurrection of the quantity theory of money, theories here. These two doctrines, respectively mentioned, of Keynes and Friedman where contradictory ones; you can't have both. This has nothing to do with the circulation of money, yet it has everything to do with markets clearing themselves to show actual wealth and prices. Most mainstream economists were so confident in the powers of the Fed that nearly all did not see this crisis coming, yet, of course, the Austrians just lol'd and said I told you so.

Even better, all of those loans have been paid back and the Fed made a lot of money. Ultimately this was just the Central Bank doing the job of other banks when those other banks wouldn't. There are a lot of issues with how the Central Bank operates, but they got this one more or less right.

IIRC, the jobs of banks were to identify rather or not a potential debtor is worthy of credit, yet, obviously, they deemed most not to be. I also assume that you just overlooked my post showing the level of lending by commercial bank in relation to the enactment of TARP. The funniest part about your last statement is that even the mainstream economists, the ones who are obviously very Keynesian in nature, has begun to seriously question Bernanke's "solutions."