An Important Intervention

The markets can breathe easy. A deal has been done. Read about it here. Or if you must, here. But the first one is better, I promise.

Update. Turning from the flippant story to the serious one, it seems that in the cold hard light of morning, nothing has been agreed. As Bloomberg reports:

Negotiations for a $700 billion rescue of the U.S. financial system stalled as House Republicans undercut the Bush administration

We are going to have an interesting OIS spread today, doubtless. These are the most incredible times I have known in the markets, and I think that vatic prediction would simply be a matter of luck. Take care out there: here be dragons.

Further update. Brad Setser gives the following extraordinary account of some of the fire breathing:

In the last two weeks — if I am reading the Federal Reserves’ balance sheet data correctly — the Fed has:

Increased “other loans” to the financial system by around $230 billion (from $23.56b to $262.34b);

Increased its “other assets” by about $80b (from $98.67b to $183.89b);

Increased the securities it lends out to dealers by $60b (from $117.3b to $190.5b);

That works out to the provision of something like $370b of credit to the financial system in a two week period.