Swagel and Neel Kashkari dusted off the ten-page “Break the Glass” paper they had prepared the previous spring: In the event of a liquidity crisis, the plan called for the government to step in and buy toxic assets directly from the lenders, thereby putting right their balance sheets and enabling them to keep extending credit. The authors knew that executing their plan would be complicated—the banks would fight furiously over the pricing of the assets—but it would keep the government’s involvement in the day-to-day businesses as minimal as possible, something conservatives strongly desired.
