[Mike F]

The New York Times analyzes the proposal:

Some question the prudence of adding to the nation’s overall debt at a time when the Treasury relies on the largess of foreigners to cover the bills. Even so, there is wide agreement that a broad intervention like the one Treasury is proposing is necessary.

“It goes a long way. It ameliorates it very substantially,” said Alan S. Blinder, an economist at Princeton and a former vice chairman of the board of governors at the Federal Reserve, who has said for months that the government must step in forcefully to buy mortgage-linked investments.

Still, the prospect that the government is preparing to wade in deep — perhaps sparing families from foreclosure and banks from insolvency — has muted talk of the most dire possibilities: a severe shortage of credit that would crimp the availability of finance for many years, effectively halting economic growth.

“The risk of ending up like Japan, with 10 years of stagnation, is now much lessened,” said Nouriel Roubini, an economist at the Stern School of Business at New York University. “The recession train has left the station, but it’s going to be 18 months instead of five years.”