The Fed: Our economy's protector?

There has been a curiously subdued muddle of finger pointing to the cause of the financial crisis. Apparently, after the Administration and Congress finish legislating appropriate remedies, at some point they will convene a blue-ribbon commission or some such to determine what actually caused the problem.

In the meantime, we cannot remind ourselves too frequently of the real cause of the asset price bubble and especially of the fact that the bubble itself was the cause of the current economic crisis. The bubble was the problem -- not the failure to sustain the bubble by either adding more monetary air to it or by omnisciently regulating business...

It is, thus, an amazing irony that the Obama Administration touts the Federal Reserve System as the logical choice to become a new "systemic regulator." Having recently financed the asset bubble that undermined the financial system, the Fed is the only institution that has the power to cause similar catastrophes in the future.

This will be our economy's protector?

[We must never forget that, contrary to the mantra emanating from Washington, it was the government regulatory interference in home lending rules which was the genesis (followed by other contributing components) that set the stage for our current condition. The solution isn't more regulation but less to assure market forces constantly and accurately balance risk and reward.]

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