Why the Fed can't prevent a recession and why I am still short

The gap between what the Fed provides the banks and how the banks provide money to the consumer is becoming bigger and bigger. The Fed rates are cut but they are overnight lending rates and hence the banks are borrowing more cheap money AND hoarding the liquidity provided from other sources the Fed.
In other words, banks which are supposed to lend CONSUMERS money to grease the flow of goods and services are NOT doing that since they are afraid they will go out of existence. It is perfectly rational for banks to do so. Additionally, the banks are concerned that people who have lost their jobs, have seen the value of their houses drop a lot, have no health insurance, and have to send kids to college will not be the best parties to lend to....
So the bank has to charge such people a higher rate of interest AND lend them less money....

All this above is the reason why the real economy will suffer quite badly. Also, there are many illiquid assets, the effect on which is not felt quickly. The losses are NOT all fully realized. So I think there will be more pain to come.

How to Trade this?
I like buying puts - Dec 08 750 strikes. May consider selling 1150 calls to fund it ( same maturity). The way I like to do it is to put in a limit order and wait for the market to reach my price. If I don't get it at the price I wanted I don't trade since I don't have enough time to monitor...