Wall Street loved [former Fed chairman Alan] Greenspan and with good reason. Every time the market ran into trouble, he would ride to the rescue with a cut in interest rates. Like a spoiled child, Wall Street came to believe it could get away with any amount of bad behaviour without being punished. The indulgence shown by the Fed became known as the Greenspan 'put' — as in a put option which allows an investor to sell shares at an advantageous price even when they have fallen below it. It was belief that the 'put' lived on with [current chairman Ben] Bernanke that brought about last week's turmoil. Rarely has there been a crisis easier to predict, yet speculators continued to take high-risk bets even as the warnings piled up. (Guardian, Monday)
We must be nuts to let one man have so much power.
FEE Timely Classic
Banking Without the Too-Big-to-Fail Doctrine by Richard M. Salsman