From Prof Perry Mehrling.

Sir, US Treasury secretary Hank Paulson’s turnabout on the troubled asset relief programme (“Tarp goes same way as superSIV”, November 14) leaves the valuation of illiquid securitised credit products with no floor. The proposed non-recourse lending by the Fed to buyers of asset-backed commercial paper promises only to expand further the central bank balance sheet, already more than doubled in size since Tarp was first proposed.