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Former Head of Fed’s Open Market Operations Says Bailout Might Make Things Worse

George Washington’s Blog [1]
Friday, Oct 3, 2008

Another key insider has said that the Paulson plan might make things worse. Specifically, the former head of the Fed’s open market operation – the key Fed agency which has been loaning hundreds of billions of dollars to Wall Street companies and banks – was quoted [2] in Bloomberg:

“Every time you tinker with this delicate system even small changes can create big ripples,” said Dino Kos, former head of the New York Fed’s open-market operations . . . “This is the impossible situation they are in. The risks are that the government’s $700 billion purchase of assets disturbs markets even more.”

In other words, it might do more harm than good [3].

Mr. Kos joins a long list of other leading experts who question the bailout, including:

  • A prominent economist [11] (Nouriel Roubini) says “The Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown.”
  • A highly-regarded economist [12] (Michael Hudson) says that the bailout is a giveaway that will cause hyperinflation and dollar collapse