How do you have your cake and eat it to? You make a new cake. Effectively that is what Zirpmeister Ben is doing by proposing a new debenture.
No longer owning enough assets to sell, their JV with the Treasury running low on powder, not able to see how they can change reserve requirements and get banks to lend to folks banks don't want to lend to or folks that don't want to borrow, unwilling to create the trillion or two in derivative scrip collateral to take the bad speculative bets off the insolvent balance sheets, B. S. Bernakke is reaching deep into an almost empty bag of tricks and proposing to replace the 'full faith and credit' with 'full faith and debit' by creating a new derivative scrip... Federal Reserve Naughts?
Ingenious in fact, creating a whole new class of bagholders, a super-SIV that will monetize the cows with imaginary money at an imaginary price to remedy the imaginary liquidity problem.
The Federales as bad bank / good bank ... what the heck we can ringfence it with the Naughts and then change to whatever foreign currency we desire! And when the Naughts come under fire what could we back it with.. hmmm can you say gold reserves? Gold Nauggets?
With the current derivative scrip rehypothecated into Wonderland (try harder Bloomberg), with cash paying more interest than bills, the Federales are trying to force the clearing price for cancer by pulling some SOMA(Some Other Monetary Asset) out of the rabbithole.
Seems like the Masters of the Universe have determined that ...with the markets expecting that the chance of U.S. default being greater than Campbell Soup, AIG needing another 10 Billion (whoopsie), Egan Jones stating the Federales are no longer a AAA credit, GMAC's bondholders extorting Congress to pony up more to finance their tin cup extended, Synthetic CDO's ready to blow, junk yields pricing Armageddon, a bill rate going pink ... this is the time for Bennie Bucks.