Markets are down for a reason: Also the Fed’s response, capital requirements, opportunistic M&A and securities fraud

Matt Levine has many good things to say today. Here's some talk about the Fed:

The mechanics of the financial markets have been seizing up, as demand for cash increases, so the Fed is pouring cash into the markets—by buying bonds, but also by freeing up banks’ cash—to fix those mechanics. That’s what the Fed is for.

It is not a wholly adequate response to economic conditions but then why would it be? Fixing the fundamentals is not exactly the Fed’s job.

What would be a wholly adequate response? I don’t know. Here is my Bloomberg colleague Joe Weisenthal:

The problem, as Larry Summers eloquently put it, is that “economic time has been stopped, but financial time has not been stopped.” In other words, if we all cocoon for two months, we might physically survive, and the infrastructure of h modern world would be waiting for us upon our re-emergence, but in the meantime the bills pile up. The rent’s due. The mortgage is due. … What we need is cash to keep people from going bankrupt or evicted. Cash to keep the lights on. Cash to keep people employed; to keep their healthcare. Cash to buy basic necessities, like food or medicine. So let’s not think in terms of reviving growth for now. Let’s think in terms of cash, so that for as long as we’re in deep freeze, people can stay alive and continue to meet their financial obligations.

In some ways you can think of the Fed’s response as slowing down financial time for certain parts of the financial system: If you own securities and have financial obligations, the Fed is making sure that you can get cash for those securities to meet those obligations. But if you have a job and need to pay rent, and your job has stopped paying you, the Fed will not backstop your liquidity. Again, not its job, but you might reasonably feel aggrieved that the bit of government responsible for backstopping financial-market liquidity is so much better and faster at its job than some of the other bits.