Different goals, you note, complicate oversight. Were the goals to: stabilize financial markets and reduce systemic risk; support the housing market by avoiding preventable foreclosures and supporting mortgage finance; and, protect taxpayers? Alternatively, were they to increase lending and revive the economy?
Not all the above, you suggest, because “you can’t get everything for only $350 billion when you’re dealing with a $14 trillion economy”.

Yet, $350 billion is a one-time intervention. The US economy may be $14 trillion a year but the global economy is at least $30 trillion, and this is a global economic crisis. If $350 billion, or even President-elect Obama’s $1 trillion, are more than a drop in the US bucket, they are little more in the global context.

I get the sense from your recent posts that economists are beginning to realize the futility of these actions (backlash, indeed!). If you cannot solve these problems by throwing money at them (because you have not enough) what can you do?

The first step is to accept that the global economy is a complex adaptive system with a life of its own and the ability to learn, adapt, grow and change. The natural equilibrium of such systems (“homeostasis”, in the jargon of complexity science) means that actions top-down and from the centre (like TARP) are almost certainly doomed to fail and more than likely to have unintended and harmful consequences.

This is a tough one for macroeconomists and politicians because it seems, at first, to put them out of a job. We have to control complex adaptive systems indirectly. Management is about seduction not coercion, pulling not pushing. In the end, we have to place the problem back in the community by putting it in touch with itself, raising the “collective mindfulness”.

The first step in managing relationships this complex is to transform the messy network of connections, with some parties talking to too many others and other parties inadequately engaged, into a “small-world network” of interfaces, tightly connected within the interfaces and loosely connected between interfaces.

The next step is to clarify the aims (goals) of each interface by embracing the unknowns (such as, obviously, the dynamics of the global economy) and challenging the knowns (the unfounded certainties of traditional accounting, economics and finance, for example).

Different interfaces will certainly formulate different goals.

When physical and financial assets have lost their value, the only way forward – for all of us – is to improve the quality of the discourse. Such actions help.

making loans willy-nilly when consumption is dropping rapidly is not smart. after capital injection some of the larger banks did start re-working mortgages and citi just agreed to let motgages become part of bankruptcy. both smart.

tarp started with working on the bank balance sheets and should move to consumer balance sheets. it helps put a floor in for consumption.

once we can see the floor (or about where it might be)the lending and risk taking can start in earnest again.