Figment of investors' imagination-Kohn disputes "Bernanke put" or "Greenspan put&quot

Discussion in 'Economics' started by ASusilovic, Sep 21, 2007.

  1. Federal Reserve vice chairman Donald Kohn disputed Friday the notion that either Fed chief Ben Bernanke or predecessor Alan Greenspan operated in a manner intended to bail out investors who made bad bets, thereby implicitly encouraging them to make worse bets in the future.
    In short form, this perceived tendency is known as the "Greenspan put" or the "Bernanke put," so coined because a put option protects its holder from a loss on an investment. The existence of such a "put" has been a popular debate in the financial press since global markets erupted in turmoil early last month.[...]

    In a speech at the German Bundesbank on Friday, Kohn said that Fed officials "have always focused sharply on the macroeconomy" and not on investors' profits or losses. The notion of a "put" arises as the Fed tries to cushion the downward effects on the broader economy of a financial shock, he said.{366BFFAE-BC6B-4FA5-9912-A9F032228001}