1 post tagged “federal reserve”
it's no secret that the market has loved the fed's bailout of bear stearns as it supposedly removed the systematic risk of a large u.s.-based financial institution falling victim to it's own subprime lending blunders. you don't have to look farther than the market's performance since the announcement of the bear stearns transaction to see this:
many of you will agree with me that patchwork bailouts (such as the one i mentioned above) do not help to solve two major, interdependent issues in our financial system: 1) flaws in risk management and 2) operation under the assumption of a "fed put" - a belief that the federal reserve will make policy adjustments to bailout the stock market and financial institutions from a potential crisis, even if that crisis is of there own making (which leads to a question of moral hazard).
i wanted to discuss the problems with the fed's numerous rate cuts since september of last year, and how these reactive measures will ultimately prove to be in vain. instead, i came across this intelligent cartoon in this week's economist that does it for me:
i wanted to discuss the problems with the fed's numerous rate cuts since september of last year, and how these reactive measures will ultimately prove to be in vain. instead, i came across this intelligent cartoon in this week's economist that does it for me:
we have yet to feel the full weight of a pull back in consumer spending. while the fed exhausts what little ammo to delay this phenomenon, it is an inevitability. all we can do is wait.
