To ease the credit crunch, the Fed recently announced that it's implement steps it designed to enhance its emergency lending program for banks and primary dealers. For banks, the Fed said it would lengthen some of the credit it extended to 84 days. Previously, the loans were for only 28 days. The Fed also said it will officially extend its primary-dealer loan program to the end of January from mid-September. In addition, the Financial Accounting Standard Board (FASB) recently gave banks a one-year reprieve from having to mark up to $5 trillion of offshore debts to market prices on their balance sheets. FASB chairman Robert Herz said that he made the decision reluctantly after realizing there might not be enough time for all companies to account for their off-balance-sheet instruments. Gerz said it pained him "to allow something that has been abused by certain folks to go on for another year." The net effect is that the Fed and the FASB are helping banks to continue artificially boosting their capital and hiding their losses.

Obviously, the Fed, FASB and the SEC are all working together to resolve the credit crisis that's threatening to sink more major financial stocks, such as Citigroup. However, in the end, credit markets remain in shambles and the Fed, FASB and the SEC may be just postponing the day of reckoning. According to Alan Greenspan, the U.S. is now in the worst credit crisis in 100 years. Considering that there was a Great Depression about 75 years ago, Greenspan's comments are very eerie. But at least Greenspan did not mention the "D" word.

It's no wonder that Treasury Secretary Hank Paulson vowed to not return after President Bush leaves office on January 20, 2009. The fact that the Fed's looser capital requirements for banks are due to expire on January 30, 2009 is a clear example that Paulson and others want to get out of town before their "band-aid" is exposed.