Right now credit is paralyzed because of the toxic paper that's flooding the market. If a prospective lender is holding toxic paper, it can't know how much money it can afford to lend. If a prospective borrower is holding toxic paper, lenders can't tell whether the borrower is solvent. Given that any toxic paper held by a borrower is in effect also held in some measure by the lender, almost everyone in the market is exposed to toxic paper.
The more quickly the toxic paper is cleared from the marketplace, the more quickly the market resume functioning.
We’d be better off letting these banks fall to the level they’ve made for themselves. Add some serious tax cuts and we’ll get over the rough patch pretty quickly. Maybe even a limited morotorium on forclosures for a the duration. (Family homes)