TALF Is Reworked After Investors Balk - WSJ.com
This subsidized lending program just looks like major league subsidy to the securities industry with layers of transaction costs that incentivize people to trade in potentially irrational way with cheap money and are likely to contribute to TARP assets price inflation . Why not just do market making as I have repeatedly suggested?
The key mistake here is that policy makers seem to confuse
- incentivizing trade on securities with high economic impact which should be the mission of the government here and would lead to a more rational underwriting industry practices going forward
vs
- encouraging the potential reckless issuance of new securities which may in fact perpetuate the practices that led to this mess.
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