If you were the Fed/Bank of England, what would you do to alleviate the credit crunch?

Question

What policy recommendations would you propose?

How would you adjust interest rates in order to stimulate Economic growth, whilst at the same time avoiding inflation?

Would you increase regulation to ensure better risk management on behalf of financial institutions?

Anything else?

Answer 1

in a sense, it's like asking 'what's the remedy for shooting yourself in the head with a 22 pistol'?

'there isnt one'

central banks just completed the stupidest and most financially irresponsible crime of all time - deliberately inflating the housing vlaues way above what can be supported

of COURSE lending will dry up once the inevitable bear market begins, because new loans are GUARANTEED to be 'under water' almost immediatly - who in their right mind wants to lend for overvalued housing once the downtrend begins?  you're almost certain to lose part of your capitol for very small returns

like the pistol to the head, the only remedy is not doing it in the first place

afterwords, it's too late

Answer 2

That's a very tough question.  Whatever happens, someone will get hurt and cry foul.

I believe that loan salepeople need tighter regulation.  A lot of the mess was caused by people on high commissions pulling wool over the eyes of uneducated borrowers.

A cultural shift away from credit needs to be encouraged.  If people hadn't taken out loans this wouldn't have happened in the first place.  It's too late to remedy that now, but it could stop it happening again in the future (after this mess is cleared up).