As part of the aftermath of 2008's economic crisis and bailouts, the Fed is being forced to show that it will be different next time - a variant of the most dangerous words in investing - "it's different this time."
An article on Bloomberg News highlighted a remarkable comment. John Mack, CEO of Morgan Stanley (MS), stated, "We cannot control ourselves. You must step in and control the Street." In 2007, as markets were running wild and Mack's compensation exceeded $40 million, Mack was silent.
The first step of the 12-step program of Alcoholics Anonymous states, "we admitted we were powerless over alcohol - that our lives had become unmanageable." Apparently Mack now feels the same way about greed.
Later in the article, he states, “We have probably 15 to 20 Fed regulators in our building 24 hours a day. They test our models. They question everything we do. I’ve never been regulated like that before. It’s a different environment. Someone said to me, ‘What do you think of it?’ I love it.”
It is disconcerting that the guardian of our financial system (the Federal Reserve) has been forced to post 24 hour a day, on-duty guards. If this financial institution lacks the capability to police itself, how is it possible that the Fed will be able to do so?
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