framework was the wrong way to think about policy during a financial crisis because policy needs to be very aggressive in taking out catastrophic risk, and one can’t move slowly or precisely.13 That has proven true time and time again. Providing plenty of liquidity during a liquidity crisis leaves the government open to less risk and leaves the system healthier. In contrast, the moral hazard framework leads people to believe that if you let things burn, the government will assume less risk. In reality, if you let everything burn, the government will end up taking on all of the risk, as it will
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