Volcker: Fed’s ‘Extreme’ Intervention ‘Raises Some Real Questions’
The Wall Street Journal reports that former federal reserve chairman Paul Volcker ’said the Fed’s decision to lend money to Bear Stearns Cos. to keep it from collapsing is unprecedented and “raises some real questions” about whether that’s the appropriate role for the Fed.’
‘The wisdom of the decision depends on “how severe this crisis was and their judgment about the threat of demise of Bear Stearns,” Mr. Volcker said on the Charlie Rose Show on Tuesday evening.’ Although it is “a judgment they had to make and an understandable judgment,” it is nonetheless “absolutely” not “what you want for the longstanding regulatory support system.”
Moneyquote:
Rose: Somebody said to me that we entered a period in which they were worshiping mathematical models … And mathematical models had no business sense.
Volcker: The market was being run by mathematicians that didn’t know financial markets. And you keep hearing, you know, god, that event should only happen once every hundred years, according to my model. But those every hundred years events are coming along every two or three years, which should raise some questions.
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