Yesterday the U.S. Treasury reported to Congress about its $700 billion bailout program, which it now calls the "Capital Purchase Program."
It claims that the program helped "prevent a financial collapse" (p. 4). At the same time, it admits that “capital [from its CPP] needs to get into the system before it can have the desired effect.” (p. 5)
I find these claims to be fundamentally inconsistent, because (a) most of the CPP money has not yet been received by the banking system and (b) NONE of it had been received as of October 27. How did we survive between September 15 (when Lehman failed and brought on the crescendo of the credit crisis) and October 27? How did businesses make payrolls?
Maybe some credit goes to the Federal Reserve, who (from a different authority) was spending taxpayer dollars throughout September and October. But the whole justification of the $700 billion TREASURY authority reminds me of the supposed WMD in Iraq -- scary but nonexistent. A financial collapse was somehow prevented without the $700 billion.