If you think Ben Bernanke is going to stand by and watch the banking sector crumble, the money supply nose dive and deflation take hold of this economy, rethink it. And then forget it man.
The Federal Reserve has been changing the composition of its balance sheet by offsetting discount and other loans with open market operation sales. It may be possible and I do not have a final answer, but, just thinking out loud, it seems unlikely that what is described below will be 100% offset or "sterilized" in econ jargon.
From Greg Mankiw's blog:
The alternative is to close the discount window and other borrowing avenues banks have at the Fed. "That will teach 'em boy...give them a lesson they won't soon forget...we'll show them who's boss...they aren't gonna pin this on Joe Six Pack...Wall Street ain't gonna make a monkey outta me, see? " Just like Treasury Secretary Mellon said during the Depression, liquidate everything, it will "purge the rottenness from the system."
And your Congressional Representative may well have said: "Made it Ma, I rejected the Bailout Package, Top Of the World" htttp://www.youtube.com/watch?v=OjzKiEs_pHI
"I did it Ma! I showed 'em. I rejected the Bailout Ma!"
God help us.