Federal Reserve Significantly Weakening Its Balance Sheet

I remember Jim Grant being one of the first ones to point out how the FedRes balance sheet was turning into a disaster but it looks like Paul Krugman shares similar views on his blog as Grant:

Third world America?

One thing I learned way back in grad school was that there was a big difference between the assets of first-world, mature-country central banks and those in rickety developing economies. The Fed and its peers had clean balance sheets, with basically nothing but Treasury bills on the asset side. Third world central banks, on the other hand, did a lot of direct lending to the private sector, and had all sorts of dodgy assets on their books.

Now the Fed is in the business of directly buying commercial paper, in some cases unsecured. Wow.

Apart from agreeing on the above point, the difference between Grant, a follower of Austrian Economics, and Krguman, a follower of Keynesian economics, is that Grant thinks the FedRes shouldn't be undertaking these actions whereas Krugman says Bernanke is being forced to do something until the US Treasury rolls into action (hmm... this is probably the longest sentence I have written. Run-on sentence?)