Jeremy Warner: Confusion of the American policy response

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Outlook If you think British policymakers are still flailing around in the dark trying to address the banking crisis, it looks even worse on the other side of the Atlantic, where there was yet another massive attempt yesterday to kick-start markets in mortgages, car, student and credit card loans.

Almost total confusion now surrounds the nature of the American policy response to the crisis, with not a dollar of the $350bn sanctioned by Congress so far applied to the TARP's original purpose of buying up toxic mortgage debt.

Instead the money has been applied to a variety of alternative policy responses from recapitalisation of banks to now this impossible-to-get-your-head-round blancmange of measures. Whether it will succeed any better seems open to question.

Whatever the answer, the sooner the new team of Geithner and Summers is installed in the US Treasury to impose sanity and consistency on the response, the better. The scatter-gun approach of a dying administration is only adding to the confusion and mayhem. If it is capable of interpretation at all, it looks close to the nuclear option of simply creating cash to buy up debt and prevent a deflationary spiral. Come to this.