Volcker questions Fed's Bear Stearns bailout

A bit off topic, but worth noting: Former Fed Chairman Paul Volcker (pictured) is raising questions about the Fed's rescue of Bear Stearns.

Volcker's chief questions: Why is the Fed rescuing a non-bank that it does not regulate? Isn't that a job for Congress? Why is the Fed guaranteeing bad loans? The Fed regulates --  and lends to -- banks, not investment houses.

Volcker calls the Bear bailout "... a new departure. And at some point, the government ought to — in my view, the government ought to be taking responsibility for that kind of action, not the Federal Reserve, which is an independent agency designed to provide an ample supply of liquidity to the economy but not too much, protect against inflation, not to protect particular sectors of the economy from bad loans.

In other words, rescuing companies other than banks, and guaranteeing bad loans, is a job for Congress and the White House. You want to bail out Carlyle Capital, or Chrysler or K-Mart? Go ahead, knock yourself out. Just don't ask the Fed to do it, because it's not their job.

Of course, potentially catastrophic failure was imminent and the Fed evidently felt it couldn't wait.  Volcker: "… They stepped into a vacuum, and I think quite appropriately, it’s a judgment they had to make. But is this what you want for the longstanding regulatory support system? My answer is no."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Associated Press

Comments

[the problemwithcaring]

When you can brew a cup of premium coffee @ home for, what, 15 cents MAX, who are you trying to impress at the YokelShop? Michael, 'when Starbucks started doing gangbusters, the end was near!'
Posted by: bottom line |

The Starbuck's concept & execution was excellent until they decided to saturate their market...
Posted by: Michael Snyder |

IMO, these comments are a handy illustration of the boomer conundrum that has become the pervasive mentality of the American cultural landscape. We simply cannot see/accept that our own misguided sense of entitlement and a wholly financial definition of "success," lies at the heart of much of our current angst.

In a world where something that costs pennies to produce then jacked up for retail is hailed as an excellent concept, is it really so irrational that homeowners in the sfv don't won't to lower the asking price on their homes? I mean, if value by definition is what the seller is CONCEPTUALLY entitled to...it makes perfect sense.