While the house sent the stabilization act south, the Fed has already spent the $ 700 billion:

$150 billion emergency lending to banks

$ 330 billion swap lines to foreign national banks

$ 230 billion to AIG

That's a grand total of $ 710 billion to be financed and covered by the taxpayer in the case that is going wrong. Are they in fact asking the taxpayer to back $ 1.4 trillion (over 10% of GDP)?

The banks got those funds despite the fact that they are not good for it. This is nothing less than throwing good money after bad.

The Fed is failing the people. It is looking at the wrong end of the equation with orthodox economics and rearview mirror Great Depression tunnel vision. THIS IS NOT THE GREAT DEPRESSION. We have a entirely different environment and the tsunami in waiting at the financial institutions is not mortgage, not, stocks, not commercial or private lending. The tsunami is going to come from the derivatives' house of cards. The more the Fed gets involved, the more it puts the taxpayer on the hook for something that banks and derivative speculators can sort out amongst each other.

The financial system has to sort the problems out under Chapter 11 bankruptcy protection and not through a backdoor bailout. Legislators can add special provisions in order to keep the institutions working while they restructure.

Watch the three-month tresury bills and you know where the money is flowing to. The market does create its own liquidity problem while there is liquidity. It is a change of paradigm towards prudence. The return of sanity means that we look at a hefty economic contraction.

A message to Obama and McCain: there is no book to this crisis. It is unique, which is why it is a crisis. It needs unorthodox approaches and swift acting to protect the people. Fundamental change is needed, not just tweaking a bit the red and a bit the blue. People are screaming out for change of the entire system the world over. Either you do it, or at this point, the people will.

It starts with eliminating the income tax and replacing it with VAT altogether. Jumpstart, so to speak. My other posts are more specific about this.

Then the teeth of the red/blue struggle for power have to be pulled. Make them focus on the issues, instead.

Enough (is Enough, is Enough)!

H.R. Tschudi, economist and entrepreneur, Vancouver