Out of ammunition, out of options, spent shell casings littering the deck around it... The jig is up. The real pain begins now, unabated and mercilessly. Locate your air sickness bags. http://www.bloomberg.com/apps/news?pid=20601068&sid=aPuzCCUm9TlQ&refer=economy Fed `Has Done About as Much as It Can,' Hoenig Says (Update1) By Vivien Lou Chen and Craig Torres Nov. 17 (Bloomberg) -- Federal Reserve Bank of Kansas City President Thomas Hoenig said the central bank has ``done about as much as it can do'' to revive the economy, which has worsened faster than he expected. ``Interest rates are extremely low,'' Hoenig said today in an interview with PBS's Nightly Business Report. ``The fact that we have the recession now is a little bit more than what I had anticipated,'' he said in a transcript of an interview provided by the show prior to a scheduled broadcast tonight. The Fed has tried to mitigate the worst credit crisis in seven decades by reducing the benchmark interest rate to 1 percent and channeling more than $1 trillion in loans to banks and other financial institutions. Some central bank credit has gone to non-banks, such as insurer American International Group Inc., and U.S. automakers are also seeking federal assistance. Policy makers should provide emergency lending programs only to financial institutions that create credit and handle payments, Hoenig said earlier today in a speech in New York. ``The focus should be on protecting the intermediation process and payments mechanism,'' he said. ``I would argue for at least drawing a sharp line between banking and commerce, with our discount window only used to fund institutions and markets that play strictly a financial role.'' President-elect Barack Obama said yesterday the government needs to provide a ``bridge loan'' or other help to auto companies on condition that management, labor and lenders come up with a plan to make the industry ``sustainable.'' ``For the auto industry to completely collapse would be a disaster,'' he said in an interview broadcast on CBS News's ``60 Minutes.'' Federal Aid General Motors Corp., Ford Motor Co. and Chrysler LLC need federal aid before Obama takes office Jan. 20, United Auto Workers President Ron Gettelfinger told reporters on Nov. 15. Democratic lawmakers would like to use part of $700 billion in bank rescue money approved this year to help automakers, a move opposed by U.S. Treasury Secretary Henry Paulson and President George W. Bush. An impasse in Congress may put more pressure on the Fed to provide temporary assistance. Loans and other assistance from the Fed and the Treasury have brought several unintended consequences because the U.S. lacks a framework for aiding troubled non-bank financial institutions, Hoenig said. ``Many of the steps taken have raised important issues with regard to moral hazard and the subversion of market discipline, equitable treatment of different institutions and segments of the market, and public interference in credit allocation,'' he said at an Institute of International Bankers conference. Emergency Credit Hoenig, Richmond Fed President Jeffrey Lacker and Philadelphia Fed President Charles Plosser have called for a framework limiting emergency central bank credit. ``An expanded role for the discount window may bring central banks more directly into allocating credit as collateral requirements are selectively relaxed, and lending is used to support specific segments of the market,'' Hoenig said. The Kansas City Fed president said he was ``especially concerned'' that loans to institutions beyond banks put the Fed in the position of ``mixing banking and commerce.'' ``Such assistance could put public authorities into the process of allocating credit and selecting the winners and losers,'' he said. ``A long-standing concern is that central- bank lending should not be used to prop up insolvent institutions.'' The U.S. Treasury has set aside $250 billion of a $700 billion taxpayer-funded bailout package for direct capital injections into banks. Changes to the program have created ``confusion out there,'' he said.