Sunday, December 12, 2010

Anat Admati, in his post on 12/4/2010 on Baseline Scenario, makes a point that by its monetary policies of the past decade our government has been subsidizing risk.  See the full post here:
I would go even further and say that, by its policies (as addressed in my previous post "Who Cased The Financial Crisis), our government is sponsoring FRAUD (i.e. risk raised to 100%).  Indeed, once you are a bank and are subsidized to use leverage and take risk, why not make the risk 100% by creating a junk loan bound to fail and immediately dump it on the federal government? You make money on your fees, and the tax payer picks up the tab when the loan fails.  Ain't that a brilliant system...

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