A word on the FED action
FED has lent 200 billions Treasuries to banks for 28 days… In fact, it is not at all a liquidity injection as it seems at first glance and often said! More a kind of exchange of high quality US Treasuries versus low quality debts from financial intitutions, with the hope that it may help their balance?!
This said, the release of the FED indicates that it is 200 bUSD over 900 bUSD in its balance: 200 bUSD is not nothing! Yes, it is a rescue plan but a quite dangerous one… What is the risk? the FED is just taking the credit risk in its own book… Can you imagine? A central bank with a credit risk. It means that the sovereign debt of the US is likely to be downgraded if the crisis is not contained rapidly. Then, US bonds would be less attractive etc. (you know this kind of scenario).