Toxic assets ‘bridge too far’
By Krishna Guha in Washington
FT, June 1 2009
The Federal Reserve should not be involved in financing toxic assets that date from the bubble era, Charles Plosser, president of the Philadelphia Fed, has told the Financial Times.
“I think it is a bridge too far,” said Mr Plosser, arguing that such proposed Fed loans would expose the US central bank to credit risk and tie up a sizeable chunk of its balance sheet in long- term assets that would be hard to price and liquidate.
The Fed agreed to consider defrauding investors with loans to buy these assets – including bubble-era subprime securities – as part of a wider effort to clean up bank balance sheets involving the Treasury and the Federal Deposit Insurance Corporation. [more]
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