Central banking 101:

WHAT THE FED CAN DO AS “LENDER OF LAST RESORT”

We’ve seen behind the curtain, as the Fed waved its magic liquidity wand over Wall Street. Now it’s time to enlist this tool in the service of the people.

The Fed’s invisible hand first really became visible with the bailout of AIG.

House Speaker Nancy Pelosi said in June 2009:

"Many of us were, shall we say, if not surprised, taken aback when the Fed had $80 billion to invest -- to put into AIG just out of the blue. All of a sudden we wake up one morning and AIG has received $80 billion from the Fed. . . . So of course we're saying, Where's this money come from?

‘Oh, we have it. And not only that, we have more.’”

How much more -- $800 billion? $8 trillion?

Continue . . .