I was thinking – in that vague sort of way one thinks when all you see is murkiness – that perhaps financial stocks are now beaten down enough, with even the best positioned banks starring in their own shrinking market-cap horror movie. They’re so absurdly cheap, surely it’s not a bad idea to put a little money in a financial sector mutual fund with value orientation.

Then in the past few days it became clear that this is still a bad idea. The Treasury’s new bailout plan obscures more than it reveals, so it caused the murk to thicken. Now we have less confidence as to what’s going to happen to financial firms. The full implications of this point was driven home for me as I read Stanford professor John Taylor’s analysis of Federal Reserve policy.

By his contrarian take, the Fed caused the twin real estate and credit bubbles through excessive money creation from 2002 to 2006. Then in 2007 and 2008, the Fed misdiagnosed the problem and took steps that worsened the crisis. In particular, by arbitrarily saving Bear Stearns bond holders while letting Lehman Brothers debt sink, the government demonstrated that its interventions are unpredictable.

The Fed and the Treasury acted together in coming up with successive versions of incoherent bailout policies. Nothing has changed, except that Timothy Geithner moved from the NY Fed to the Treasury. The joint forces of the Fed and Treasury continue to reinforce the market’s perception that policymakers don’t know what they’re doing.

Mr. Taylor shows that they caused immense harm when they thought they did know what they were doing. He has summarized the main points of his forthcoming book in a Wall Street Journal op-ed piece.

Many of the same people who made the bubble-inducing policy of 2002-2006 are now making crisis-deepening policy. What a comfort.

If you harbor a special deep love for risk, financials are for you. For the rest of us, I’m still keeping faith that we’ll live to see the day when markets hit bottom and financials become a buy. It won’t be thanks to the Feds, though.

Chidem Kurdas maintains the blog MutualFundSmarts.com, an informative outlet for sophisticated mutual fund investors; and the blog Manhattan Capital (www.JenniferKerfuffle.com), a hilarious, libertarian news-spoof. Chidem is also a contributor to ThinkMarkets.