There was an interesting segment on NPR this evening while I was out buying electrical parts. They were talking about the current banking situation and its effect on the stock market, and the point was made that one could say the current subprime crisis came about in part because the Fed was doing too good a job. Not that the Fed did anything wrong — the trouble is that it did too much right. The banks and, in particular, the financial investors and speculators got into the mindset of thinking that it was OK to take chances, because the Fed would always be there to bail them out if it all went pear-shaped, and whatever they broke, the Fed would be able to fix.
What was that again about perceived-risk adaptation...?
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