Yesterday's article in the WSJ is basically a less hysterical and more detail-oriented regurgitation of my Daily Reckoning article from the end of January (and which I actually wrote in December). I explained in that article that Bernanke had painted himself into a corner, because the Fed's balance sheet had grown enormously, meaning massive price inflation had been built into the system once things calm down. But, since that build-up in the balance was designed as life support for the banking sector, how could Bernanke pull the rug out once a tepid recovery begins?

Here is how the WSJ article describes the situation:

A day after the Obama administration announced plans for a massive expansion of a joint-Federal Reserve and Treasury program to revive consumer lending, signs are emerging of challenges facing the central bank.

A growing number of the dollars the Fed is lending out to revive markets are long-term loans. Those long-term commitments could be difficult to pull back when the economy recovers and the Fed wants to drain the financial system of cash to raise interest rates.

When the Fed believes the time has come to raise interest rates, it would seek to pull cash out of the financial system by reducing the size of its massive portfolio of loans and securities. But if it is loaded down with long-term commitments, that could be tricky to pull off....

Because the Fed worries about preserving its monetary-policy options, it could be hesitant to push much further on long-term lending. Selling off such holdings down the road "could be a problem in thin and illiquid markets," said Vincent Reinhart, an American Enterprise Institute economist and former Fed staffer.

Incidentally, I agree with Jim Chappelow--in the comments of my post on collapsing borrowing from the Fed--that the drops in base and other measures is probably just a temporary blip, while Bernanke gets his ducks in a row for the massive injections that are going to be necessary to keep all of Obama's plates spinning. The Fed is going to have to "help" with just about every economic initiative being discussed, and I think when the optimistic scenarios fail to materialize (and they will), everyone will say, "Ah forget it, Ben, just print it."