Friday, February 29, 2008

The Fed has my back

I despise the Fed as much as the next guy (or at least as much as the next guy should despise the Fed), so it was interesting to see today that the President of the St. Louis Federal Reserve bank has my back regarding moral hazards and GSEs:

I am more skeptical of the financial strength of the GSEs, and believe that we could see substantial problems in that sector.


I would put the GSEs at the top of my list of sources of potentially serious problems. If those problems were realized, they would be a direct result of moral hazard inherent in the current structure of the GSEs.

I'm actually a bit surprised to see a Fed bank President acknowledging any moral hazard. Apparently there's a limit to how far some people will go to ignore the obvious.