he said they will NOT rescue investors on Wall Street: However, in a clear caution that policy-makers will not rescue Wall Street, Bernanke said the central bank should not shield investors from self-inflicted loss.
“It is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions,” he said.
This was an important reference to the moral hazard policy-makers run if they insulate financial markets from errors, hence encouraging more risk-taking. However, he acknowledged the Fed had wider obligations.
“Developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy,” he said.
(By Mark Felsenthal)
(Reuters) –
