Fed's Lacker: Government Safety Net Encouraged Financial Risk.

[elleng]

A Federal Reserve policy maker called on Monday for U.S. government protection of the financial industry to be rolled back because it had encouraged excessive risk taking at the heart of the current crisis.

"The financial safety net, especially those parts that were more implicit and perceived than explicit and written into the laws, played a significant role in the accumulation of risks that ultimately led to the turmoil we are still experiencing," said Richmond Federal Reserve President Jeffrey Lacker.

"While deployment of the financial safety net is often viewed as an essential response to the financial crisis, I believe we need to give serious thought to the extent to which the safety net was actually a significant cause of the crisis," he said in remarks prepared for delivery to a banking conference in Beijing.


http://www.nytimes.com/reuters/2009/05/11/business/business-us-fed-risk.html

[aquart]

1. I'll accept his resignation, too.

[Lasher]

2. How the hell would he know?

This fool is arguing for more of the same laissez faire idiocy that got us into this trouble in the first place. If you wonder why he doesn't mention the lack of government oversight as the main cause of the current crisis, consider this:

So, overall, I think that we should look at the deregulation of the banking industry and the resulting rise of interstate branch banking as a welcome occurrence. The U.S. financial system, I believe, will become more efficient over time. And for the reasons I have discussed, I think it also will become more stable. Both are healthy trends for consumers.

Does Deregulation Undermine Stability? by Jeffrey Lacker, Winter 2005

And now he wants to lecture us about the moral hazard while never bothering to mention that it would not have been a problem without the deregulation that he so enthusiastically endorsed. He is clearly trying to fit his libertarian square peg into the round hole of reality.

[Demeter]

3. Not to Mention the Corruption In Banks and Government