Like junkies eager for the next fix, traders are applauding a short headline from the White House that Treasury Secretary Henry Paulson is "actively considering" capital injections into troubled U.S. banks.
Never mind that many traders consider such dilution anathema; the idea that the Feds will, every single day, have a new "fix" for the markets is now firmly entrenched in the traders' imagination.
There are more. Because banks are afraid of counterparty risk, traders now want the Federal Reserve to guarantee all interbank lending.
This is the new Nirvana, this is the one that will solve the problems. So they say.
- US to Start Buying Stakes In Banks by Month's End
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