Barry Ritholtz once again questions what exactly the US Fed's mandate is as they continually bail out speculators with cheap credit rather than exposing them fully to the risks they took:
The Fed is supposed to be an independent entity, whose mission is a) price stability (inflation) and b) maximizing employment (growth). However, today's action reveals an apparent third obligatory goal - protecting investors and market prices. I had no idea that back-stopping speculators and hedge funds was part of their mandate...This is not the market. It is state intervention to make losses from speculation born by the public purse.
How much so? Chris Martenson on the New Hope Alliance and the Federal Home Loan Bank system, the latter which lent 182 billion of digital money to banks with bad investments:
What needs to happen is very clear. The bad debts need to be wiped out. The malinvestments need to be written off. The people and institutions that behaved recklessly deserve to lose their money while the rest of us should not be asked to pay for their mistakes.I concur. A market is dysfunctional when the negative results of risk taking are removed.
