The right course of action is for
the US government to establish a Resolution Trust Corporation to take
over failing financial institutions, including hedge funds and private
equity firms, and leave the Fed to tackle inflation. But a Republican
administration could not go to a Democratic Congress for money to
capitalise such a corporation. It could not justify spending US$1
trillion to bail out those who deceived investors around the world and
destroyed the finest financial institutions in America for their own
gains. Instead, the Fed will be called on to save the financial system,
boost the economy and suppress inflation at the same time.