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Fed presidents warn about lending to securities firms.

Global Banking News-6 June 2008-Fed presidents warn about lending to securities firms(C)2008 ENPublishing -

Global Banking News - 06 June 2008(c)2005 - Electronic News Publishing -

Two Federal Reserve Bank presidents have criticised the American central bank's decision to lend to securities firms.

Charles Plosser, president of the Philadelphia Federal Reserve Bank, and Jeffrey Lacker, president of the Richmond Fed, have said that the decision by the central bank could lead to more problems in the financial sector.

According to them, 'the effect of the recent credit extension on the incentives of financial market participants might induce greater risk-taking.' They argued that greater risk taking could lead to more frequent financial crises.

The remarks were a strong warning about the consequences of the Fed's proposed aid to securities dealers. This is the first time that the Fed will be lending to non-banking companies since the Great Depression.

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Publication:Global Banking News (GBN)
Date:Jun 6, 2008
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