Bailouts put Fed's credibility on the line

FED rescues investment managers from their own mistakes at taxpayer expense ?

Bailouts put Fed's credibility on the line - International Herald Tribune: "The biggest danger is damage to the Fed's credibility if it is seen as unwilling to let financial institutions face the consequences of their decisions. Central banks have long been acutely sensitive to 'moral hazard,' the danger that rescuing investors from their mistakes will simply encourage others to be more reckless in the future.....At the moment, the Fed has committed cash and Treasury bonds that are in its own reserves that total about $800 billion. But having agreed to provide at least $400 billion in short-term loans, and probably more, it is pledging a big share of its own resources to the rescue.

"The Fed is now running on less than a half tank of gas," Laurence Meyer, a forecaster at Macroeconomic Advisers and a former Fed governor, wrote in a note to clients. "The Fed seems to be running out of room for these types of measures."

Comment by Norton: On a positive note, the Fed is aggressively attempting to stabilize the investment market and the economy. Should these temporary cash flow loans be turned into permanent and effectively unsecured loans to both FDIC insured banking institutions and now the non-bank investment businesses, then our taxpayer money will have been used without our consent via any elected body or referendum. The US Congress and the White House should only allow this with the full vote and consent of the House and Senate...just as the public should have a say before we go to war.