September 22, 2009

FDIC Dilemma

As the New York Times reported today, the  F.D.I.C. ,  experiencing its own version of a possible cash-flow bottleneck, is considering plans that to borrow funds from some of the Banks it regulates. 

While this may be somewhat of a relief for tax payers, lets cut through the clutter for a second here and consider  what this really means:  Massive potential conflicts of interest! 

Can a regulator objectively regulate when it owes money to an institution it needs to oversee?

What about: Never bite the hand that feeds you?


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