November 25, 2008 8:30 AM

Federal Reserve Does the Heavy Lifting

This morning, the Treasury and Federal Reserve announced new steps to stimulate the economy through the creation of a Federal secondary market in certain consumer and mortgage securities. None of the funds would flow straight to distressed consumers or homeowners, and bizarrely, the program intended to spur consumer borrowing won't even start until February. Is it too much to ask that those overseeing the bailout notice that there is a critical holiday spending season that starts in a week and ends in a month?

The great majority of the funding for the program will come from the Federal Reserve - with only $20 billion coming from the Treasury's $700 billion TARP program. Here is how I read this - the Treasury is more pessimistic than they are letting on, and want to hold most of the remaining funds for additional bank bailouts. There is no good news in this announcement.