Today Feds had to give $5 bln at 2.17% with treasury collateral. Even after that it was a drain of $24 bln. But the most interesting is that the mortgage-backed sloshing flopped from $23 to $5 bln. The banks got stuffed with mortgages again, but they are still refusing to borrow above 2.17% with non-crappy collateral. This 87 bps below the target rate even after 125 bps of cuts. Frankly I’m puzzled.

I also want to say about consumer spending and prisoner dilemma. The government tells us all the time how they want us to spend more in those troubled times. At the same time it’s obvious that right now is a good time to actually curb your spending and pay off some debts. The employment, real estate and social security prospects are not so bright, putting aside at least 15%-20% of your income is a very good idea. The prisoner dilemma is that the economy will avoid a very hard lending only if we all start spending like mad, much more than before, but when some people defect tho ones who still spend are the real losers. In that situation defecting is much better. And you don’t need more proof that the administration is valuing its own political interests well above the interests of the real people. Not that it should surprise you