If excess liquidity has caused these investments that are now going bad, how does the Fed increasing liquidity with lower interest rates help the economy?

BY Paul Solman  February 19, 2008 at 10:52 AM EDT

Question/Comment: If excess liquidity has caused these investments that are now going bad, how does the Fed increasing liquidity with lower interest rates help the economy?

Paul Solman: Because it prevents the system from freezing up entirely. It’s a calculated risk. But what’s the alternative? A credit crunch that cripples the economy, combined with a crash that lowers everyone’s net worth?