ZTE

The Fed: On the Cusp of Moral Hazard

A billion here, a USD 100 billion there, another USD 30 billion to act as a guarantor of any mishaps in the Bear Stearns portfolio, and then the release of USD 200 billion in excess capital by a change in the capital reserve requirements for Fannie Mae and Freddie Mac. And another USD 25 billion for another US government agence that can now guarantee about USD 300 billion in mortgages.
By the time you add what the UK and European Central Banks have done, the total amount of printing and guaranteeing will be over USD 1 trillion.
Printing money – or creating money – is the ultimate power of the central banks. And of politicians. Promises are made, and to pay these bills, currency notes are printed. Problems arise in the financial system and, to rescue the foolish, currency notes are printed. This is worrying.