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Yes. Of course, it's a subsidy. If the private sector did it, they would make bets and take positions, and that would be their incentive. That would be the way

Yes. Of course, it's a subsidy. If the private sector did it, they would make bets and take positions, and that would be their incentive. That would be the way that the liquidity is funded, and they get paid. If the public sector manages the finances, as is the case with this scheme, then the risk taking is subsidized by the fact that the "traders" don't have to have the incentive of a gain because they're well paid (by us taxpayers) and benefited (by us taxpayers) employees of the government.

tripletao 4y ago
> If the public sector manages the finances, as is the case with this scheme, I think the program might not work like you think? Beyond the initial decision to create the program, no one at the Fed exercises significant discretion. It's open to essentially all American banks, most of which are private businesses with the usual profit motives, whose managers decide when to borrow and how to use the proceeds. If such a bank gets in trouble, then its managers now have slightly greater incentive and ability to try gambling their way out, since their shareholders get all the upside and the Fed gets some of the downside. https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20230312a1.pdf https://www.federalreserve.gov/newsevents/pressreleases/file...