Big day for stocks

Near the close of trading the Dow was up more than 400 points, the biggest one-day boost in five years. Much of the credit goes to the Federal Reserve's efforts to ease the jam-up in the credit markets (Sam Zell calls it constipation). The Fed announced this morning that it will allow banks to borrow up to $200 billion by using their garbage-grade mortgage-backed securities as collateral. Seem too good to be true? From the NYT:

The new program, dubbed the Term Securities Lending Facility, will effectively allow strapped financial institutions to hand over potentially damaged securities to the government in exchange for either cash or easily traded Treasury securities, some of the safest in the market, "If If these institutions are able to extend out more credit as a result of this, it may take more pressure of the housing market and mortgage quality,” said Mark Zandi, chief economist at Moody’s Economy.com. But Mr. Zandi said he was skeptical that the Fed’s actions would address the root of the current problems in the credit market. “I don’t think it helps determine the appropriate price for these securities,” he said. “It doesn’t solve the underlying problem of mortgage delinquencies and defaults, which could at some time threaten the Triple-A securities.”