The Phaserl


Having Removed Money Competition, Bernanke Contemplates an Artificial Moral Hazard

from The Daily Bell:

Bernanke Says Failing Bank Process Needed to Reduce Crises … Federal Reserve Chairman Ben S. Bernanke said a process under development that would allow regulators to take down a failing bank will help ensure investors discipline weak firms and prevent them from taking risks without consequence. “As we try to make the financial system safer, we must inevitably confront the problem of moral hazard,” Bernanke said today in remarks at an International Monetary Fund conference in Washington. “Market discipline can only limit moral hazard to the extent that debt and equity holders believe that, in the event of distress, they will bear costs.” – Bloomberg

Dominant Social Theme: We need more competition, even if we have to fake it.

Free-Market Analysis: Bernanke wants to scare the bankers, as we can see from the above article excerpt. But why not just let the marketplace do it? Competition can provide the necessary discipline.

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