Can the Fed help while the Treasury bailout is ramping up?

It may be a couple of weeks or even a month before the full-blown Treasury bank bailout ramps up and is open for business. The question is what happens between now and then and what the Federal Reserve can do. One BIG thing the Fed can do is to have a temporary relaxation of their discount window rule that says that money lent via the discount window cannot be used to create new loans or mortgages and to allow banks to declare "troubled assets" that are intended to be converted to fesh cash via the Treasury program once it becomes operational. Money from the discount window is primarily for liquidity and is temporary, not to recapitalize the bank. But, since the Treasury program will become available in short order, the Federal Reserve discount window might be a way to let banks get an "advance" on the Treasury bailout that is unemcumbered and literally "as good as cash." The point here is that the banks need to quickly turn a "troubled asset" that "clogs" their books into "fresh money" that can be used to finance new credit for loans and mortgages. This is only one idea. I am sure there are plenty of other ways the Fed can help bridge the gap.

-- Jack Krupansky