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Fed Weighs Risky Biz of Rate Cut  

Posted Aug 13, 07 4:03 AM CDT in US,  Business    Editor's Choice

(newser) – The Federal Reserve is facing a dilemma as it decides whether to ride to the rescue of  the market by slashing interest rates—and risk encouraging further recklessness and triggering an even worse crisis, reports the Wall Street Journal. The issue is what economists call moral hazard: protecting someone too well from consequences can encourage even riskier behavior.

"You don't want to see the Fed bail out these guys who have made a lot of money. They have made their bed and you want to see them lie in it," said one analyst. "Then again, you don't want to see the economy go into recession."

Source Wall Street Journal

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Fed Weighs Risky Biz of Rate Cut
(AP Photo/Henny Ray Abrams)   (Associated Press)
Fed Weighs Risky Biz of Rate Cut
AP Photo/Henny Ray Abrams)   (Associated Press)
Fed Weighs Risky Biz of Rate Cut
Federal Reserve Reserve Board Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, July 18, 2007, before the House Financial Services Committee. (AP Photo/Susan Walsh)   (Associated Press)
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Federal Reserve  • recession  • interest rate  • economics  • Alan Greenspan


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