Leave your feedback Share Copy URL https://www.pbs.org/newshour/economy/how-is-the-fed-to-be-blamed-if Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter How is the Fed to be blamed if financial institutions are reckless and greedy during periods of low interest rates? Economy Dec 14, 2007 4:01 PM EDT Question/Comment: Many commentators have blamed the Fed for the mortgage mess. How is the Fed to be blamed if financial institutions are reckless and greedy during periods of low interest rates? Paul Solman: You’re cheating, Lloyd. This is two e-mails in a row. But good questions deserve answers. The Fed is blamed because it kept interest rates low. That enabled financial institutions to be more reckless than if the cost of money had been high. In general, cheaper money means more loans, which then means looser terms. (“Greedy” is a loaded term, and has no more to do with the current situation than it did with the advent of Donkey Kong or the fall of Enron.) We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now
Question/Comment: Many commentators have blamed the Fed for the mortgage mess. How is the Fed to be blamed if financial institutions are reckless and greedy during periods of low interest rates? Paul Solman: You’re cheating, Lloyd. This is two e-mails in a row. But good questions deserve answers. The Fed is blamed because it kept interest rates low. That enabled financial institutions to be more reckless than if the cost of money had been high. In general, cheaper money means more loans, which then means looser terms. (“Greedy” is a loaded term, and has no more to do with the current situation than it did with the advent of Donkey Kong or the fall of Enron.) We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now