It also cut the discount rate this weekend, he ads. “The action comes on top of Chairman Ben S. Bernanke’s other balance-sheet commitments totaling as much as $430 billion through other auctions, repurchase agreements and $30 billion in financing to help JPMorgan Chase & Co. purchase Bear Stearns Cos.”

The Fed can throw another grenade into markets when it meets [today]. If it acts true to its recent form, you can expect to see the Fed funds rate slashed by a full one percent. Pretty soon Bernanke is going to run out of bullets. He’ll have to throw the gun!

Here’s the question though, how does any of these help Americans pay their mortgage? Does it? Making inter-bank credit cheaper isn’t even encouraging banks to lend to one another. The Fed has had to step in and become a direct lender to prime brokers.

Air Marshall Bernanke is in trouble. As soon as he runs out of his stock of Treasury bonds to lend to distressed banks, he’s going to have to buy more. He’ll have to create new money to do it. And if he somehow escapes that necessity, he may have to purchase outright the collateral held by Fannie Mae and Freddie Mac. That will take new money too.

It is probably Henry Paulson’s turn to do something to save the system, although we are not sure what. Paulson opposes a bailout of investment banks. But maybe he won’t be as opposed to the creation of a new authority set up to purchase the assets of Fannie Mae and Freddie Mac and hold them in trust. Then, millions of Americans will have Uncle Sam as their landlord (overlord).

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