Markets melt down, $700 bln going to bail out Wall Street because banks threw good money after bad in crazy mortgages, … and now the Fed’s want to throw more good money after bad in chasing a crazy ethanol scheme.

Notice below - Secretary Bodman announces 1) we’ll invest in cellulose, 2) cellulosic ethanol is good, 3) but just wait for the study to come out next week that gives the details …..

WASHINGTON (Dow Jones)–Research and investment are the key components of a
broad plan released Tuesday by the Bush administration to help create a
commercially viable cellulosic ethanol industry in the U.S.

If the U.S. is to achieve the goal set by Congress, calling for 36 billion
gallons of ethanol to be produced per year by 2022, new feedstocks besides corn
will be needed.

U.S. refiners are expected to produce about 9 billion gallons of ethanol
this year, three times the amount produced in the U.S. five years ago, U.S.
Department of Agriculture Secretary Ed Schafer said. And all of that will come
from corn.

“But now we need to quadruple that level of production (and) create a more
diverse set of feedstocks to draw upon,” Schafer said.

The 36-billion-gallon renewable fuel standard calls for just 15 billion of
those gallons to come from corn-based fuel while 20 billion must come from
“second generation” ethanol from cellulosic sources like switchgrass and unused
parts of corn plants. Primarily soy-based biodiesel makes up the other 1
billion gallons of the government mandate.

One of those cellulosic feedstock sources will be corn cobs, a part of the
plant normally discarded.

DOE Secretary Samuel Bodman announced Tuesday the government’s intention to
invest $80 million into a $200 million ethanol plant. The plant will allow the
U.S. to, for the first time, commercially produce ethanol from corn cobs.

The plant, to be constructed by the Iowa-based Poet LLC, is scheduled to be
operational and producing an annual 25 million gallons of corn cob-based
ethanol by 2011, said Poet vice president Mark Stowers.

USDA’s Schafer stressed, though, that the National Biofuels Action Plan
released Tuesday is relying on many more types of cellulose ethanol than just
corn cobs. A USDA study, he said, is looking into the feasibility of a whole
host of different feedstocks and the results will be released in a few weeks.

“We have to look at the impact of everything from the soil when you start
growing the crops to moving the crops from the farm to the … refinery,”
Schafer said. “We have to look at converting those feedstocks to fuel. We have
to look at transporting the fuel to the final consumer.”