The Financial Rescue Plan from A to G

Brad DeLong has a very succinct and understandable description in The Guardian of the financial rescue plan as it has unfolded thus far. We are now at Plan F:

It was time for Plan F. If the prospect of buying up mortgage-backed securities did not boost asset prices and bring banks enough investment profits to create confidence that they were not all going bankrupt next month, governments could invest public money in the banks whether they liked it or not, thus making them so well-capitalised that their failure would be inconceivable.

The American left - the Dean Bakers, the Paul Krugmans, the Doug Elmendorfs - had been calling for Plan F for a month. With the failure of Plan E's passage to move markets, monetary economists from Chicago to Berkeley to Cambridge united in their demand for Plan F. Gordon Brown and Alasdair Darling in Britain led the way, closely followed by the rest of Europe, thus forcing the hand of Paulson, who was ideologically opposed. He had not moved into 1500 Pennsylvania Avenue thinking that he would one day wake up to find himself part owner of and living in sin with a whole harem of banks addicted to the hard stuff that are derivatives built from mortgage-backed securities.

DeLong thinks there is a good chance F will work, but if not there is Plan G:

If Plan F fails, we move to Plan G: we pull the Keynesian fire alarm and begin an enormous government infrastructure building programme in the whole North Atlantic to keep away depression.

Krugman already thinks we are going to need it.