“It’s a classic case of moral hazard.”

Michael Stephens | August 23, 2011

Levy Institute President Dimitri Papadimitriou, as quoted in the Huffington Post in reference to revelations of the Fed’s $1.2 trillion in “secret loans” to banks and other companies.

Papadimitriou told The Huffington Post that the Fed issued many of its biggest loans during the Bush administration, and that “they didn’t appear to have any difficulty supporting the financial sector, but very much difficulty supporting the real sector, households.” …

“One would assume banks are too interconnected, you have to help all of them,” Papadimitriou said. “But if you take households in total, they are also all interconnected. They are also too big to fail.”

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