I guess they are trying to stop the stock market from going into the tank today?
The markets were already going into the tank. There’s no way to stop them.
The Fed’s action is to show that:
a) the Fed is no longer completely clueless as to what is going on in debt markets (cf the problems in Ambac and MBIA)
b) that Bernanke isn’t going to be a stupid academic here
c) that the Fed would like very much for the traders to quit digging when they hit the bottom of the hole.
Oh, that, and there’s going to be a new call for short-term liquidity due to margin calls as a result of this sell-off.