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August 2010

Warnings From the Past

On August 10, 2010, the Federal Reserve declared that it would prevent its multi-trillion dollar balance sheet from shrinking, in a continuing effort to spur the American economy.  The officials explained that they would take the proceeds from the maturing mortgage backed securities that they hold, and reinvest the proceeds into longer-term U.S. Treasury bonds. It is important to understand that the monetization of debt, known as quantitative easing, is …Read More

Moral Hazard at the FDIC

There has been a lot of discussion about Moral Hazard regarding the large bank bailouts (which the recent financial reform legislation apparently now has “institutionalized”).  And there has been a lot of commentary about the lack of help for America’s community institutions; in 2010 alone, the FDIC has closed 108 such banks (at least as of this writing).  It just appears to us that Washington protects the Wall Street firms …Read More