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Soothing words from the Fed

Bob Moon Aug 22, 2007
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Soothing words from the Fed

Bob Moon Aug 22, 2007
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TEXT OF STORY

Doug Krizner: The problems in the credit market have put the Fed in a very difficult spot. Policy makers are reluctant to cut rates simply to bail out Wall Street or rescue hedge funds teetering on the brink because of bad bets in the mortgage market. But the real economy could be at risk. Here’s Bob Moon:


Bob Moon: The Fed flooded the banking system with $119 billion this month. Now, Bernanke’s renewing his vow to “use all the tools available” to him, to bring even more stability to the markets.

But the Cato Institute’s Daniel Mitchell argues that the Fed has been right so far not to use tools that would encourage irresponsibility:

Daniel Mitchell: A capitalist system without losses or bankruptcy is like religion without hell.

In other words, these are the wages of financial sin for those who’ve made bad investment decisions. At the Brookings Institution, Alice Rivlin suggests the overall economy can take the heat.

Alice Rivlin: With any luck, there will be few ramifications in the real economy — employment and consumer spending and the other things that Bernanke has to worry about — and they can ride this one out for a good long time.

The Cato Institute’s Daniel Mitchell says the Fed’s so-called tools don’t really amount to much now. He says there’s no way to undo “bad loans that have already been made.”

In Los Angeles, I’m Bob Moon for Marketplace.

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