First of all, from the Fed does all money flow. The Fed sets interest rates and bank reserve requirements. It could have easily said, no you can’t make these risky loans, by raising reserve requirements. SK you obviously don’t remember the Fed issuing exemptions to the big banks allowing them to loan more than 10% of assets to their pet investment funds in 2008. Previously that was verboten but the Fed allowed it, to buy more time. Essentially to deepen the crisis that already had to happen.
True it didn’t loosen credit quality, but it certainly didn’t object to Congress doing so either. It had a choice, to uphold the legal/credit nexus that you say they had no part in creating, or along with the Treasury they could print to inflate to allow all the bad actors in the system off the hook, also known as changing the rule book when the game moves against your customers, the large banks. Where do you think the money came from to buy all that Phony/Fraudie debt? Taxes collected? The Fed printed it.
Josh
