I missed this until now, but a Paul Volcker, et al., editorial in today’s Wall Street Journal is required reading. The authors essentially argue for a new Resolution Trust Corporation, a government vehicle that can buy up toxic paper on the market, provide liquidity and keep credit markets moving while the current crisis is worked through.
The trouble, of course, is that this approach requires immense political will and foresight. It will end up costing "serious money", as Volcker says, and serious can be loosely translated as somewhere north of a trillion dollars. And all of that will almost certainly have to come from the U.S. taxpayer.
The alternatives aren’t very appealing, and they’re getting worse every day. But the status quo isn’t much of an option, as the most powerful quote in the piece shows:
The pathology of this crisis is that unless you get ahead of it and deal with it from strength, it devours the weakest link in the chain and then moves on to devour the next weakest link.
Precisely right. Precisely. It is time to get strong. But who in Congress or the Administration has the smarts, perspective and tenacity to make it happen — and do it in an election year, no less?