Even more importantly, contrary to Paulson's claim, credit is not frozen, the US banking system is still lending significantly to the economy, as clearly demonstrated by the Fed's data, with bank credit still expanding at a high rate of 9% per year as of July 2008.
Only speculative loans face problems. Loans invested in real and economic-generating activities in agriculture, industry and commerce remain sound. The non-financial sector continues to have access to credit at low interest rates.
Bernanke, only concerned with investors' uncertainty, seems to ignore a basic and essential principle of central banking: it is the central bank, and not the Treasury, that manages, provides or withdraws liquidity from the financial sector. The Fed has injected massive liquidity since August 2007, put in place large lending facilities to banks and worked out large swap facilities with major central banks around the world to inject further liquidity.
It is absurd to have the government (ultimately the taxpayer) pay for the speculative losses of banks and hedge funds. Had banks invested wisely in productive activities they would not have faced their current problems of frozen speculative assets. In the case of hedge funds it is even more galling in that their billionaire executives pay a lower tax rate than do their secretaries!