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February 11, 2009

The Dangers of Fed/Treasury Cooperation

Good comments from fellow San Diegan Jim Hamilton on the dangers of the continuing confluence of Treasury and the Federal Reserve in the TARP II plans:

There's a very real danger in going as far down the road of Fed-Treasury cooperation as we already have. The Administration starts to think of the Federal Reserve as another cookie jar it can draw on to cover all these pesky bills which, if Plan A fails, we'll find are impossible to pay by any means other than monetization and a huge inflation.

And fear of that, if it catches fire, would be a far more destabilizing event than a controlled receivership for a few more big financial institutions.

More here.

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