Government's Growing Alphabet Soup

Special Weapons and Tactics (SWAT) was one of my favorite shows in television growing up, and it’s clear to me that Ben Bernanke was a fan, too. The man, hellbent on saving the world (and not one bailout at a time) has tossed more acronyms into the mix than I can keep up with. Here are the latest:

The Money Market Investor Funding Facility (MMIFF) sets aside $540 billion to help finance assets from money market mutual funds, which have experienced $500.0 billion in outflows since Reserve Primary Fund broke the buck back on September 19. This program will buy CDs, bank notes and commercial paper with 90 days or less to maturity. JP Morgan (JPM) is managing the five units set up to handle this latest rescue effort.

The Commercial Paper Funding Facility (CPFF) goes into effect on October 27 and will focus on the purchase of highly rated US 3 month unsecured and asset backed commercial paper issued by US companies. This program will be handled by PIMCO. The goal is to stabilize the $1.7 trillion commercial paper market.

The Asset-Backed Commercial Paper Money Market Fund Liquidity Facility (AMLF) was established on September 19 to loan money to banks to purchase asset-backed commercial paper from money market mutual funds. Right now the plan is going to last until January 30, 2009.

This bailout situation is so dire that it’s gone beyond just the SWAT squad as the folks in charge have called out the equivalent of the National Guard, The Marines, and the cavalry and still there is a feeling we need even bigger guns. The problem is nobody knows what the big gun is at this point.

In the meantime, the focal point of the rescue, housing, has more or less been abandoned to help the banks. Now there are reports that the big banks will be able to use funds invested into them by the government to buy smaller banks. And once again I say the fix was in from the very start: $125 billion was supposed to go into healthy banks, but why would a healthy bank want to take on additional partners?

Anyway, there are probably a lot of letters left in the government’s bag of tricks, but something has to give: the printing presses or ingenuity. Of course, we're still watching the Troubled Assets Relief Program (TARP) evolve and at some point they may find time to help homeowners with this bill, which was marketed by Congress and the administration as a homeowner’s bill.

Perhaps next time homeowners will ask for a bill of rights before they get a bill of goods. Then again, few people were keen on this rescue plan anyway and they are looking smarter and smarter each day.