Hi Jim,

Outgoing FDIC Chairman, Sheila Bair today warned regulators to be mindful of the “moral hazard” of creating a federal backstop for money market funds – a $2.7 trillion industry.

No surprise that she waited until she announced her resignation before addressing such controversial issues. This sounds a lot like the Brooksley Borne warning on derivatives.

God help us all.

Kind regards,
CIGA Black Swan

FDIC warns on moral hazard for money market funds

May 10 (Reuters) – Banking regulator Sheila Bair warned her fellow financial supervisors on Tuesday that a federal backstop for money market funds could induce careless corporate behavior because of a belief the government would always come to the rescue.

Outgoing Federal Deposit Insurance Corp Chairman Bair said regulators needed to be "mindful" of so-called moral hazard on creating a backstop for the $2.7 trillion industry.

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