October 17, 2007 (LPAC)--A German economist who has followed U.S. Treasury Secretary Paulson's actions on the "Master Liquidity Enhancement Conduit" scheme supposed to revive commercial paper markets, told EIRNS that "many people think this will work--if it works in any way--as the bad-debt facilities that were set up in Japan in the 1990s, which failed even though the Japanese government wound up buying from the banks all sorts of loan paper and even stocks."

The big U.S.-based international banks, he said, have lost some of their capital already. They do not have the capital adequacy to buy up these hundreds of billions of bad loans based on mortgages, etc. on their own. So they will have to borrow still more new money injections from the Federal Reserve, in order for this Master Liquidity scheme to buy anything, and contribute any new liquidity to the financial markets.

This lack of bank capital to stop the collapse of asset based bad loans, has been revealed by a number of sources. At an hearing of the U.S. House of Representatives Subcommittee on Capital Markets, for example, Rep. Paul Kanjorski (D-PA) specifically asked economics Prof. Joseph Mason of Drexel University, "You say that 10% of U.S. bank assets are based on structured investment vehicles (SIVs), specifically several trillion dollars in CDOs; can these banks survive the collapse of these CDOs? Do they have the capital base to survive that?" Mason answered, "No, and the FDIC does not have the resources to handle that event either."

Paulson of Goldman Sachs and the big U.S. banks involved--including Citicorp and JPMorgan Chase--are being suckered into a British bankers' scheme that can only produce hyperinflation, and a further collapse of the dollar.