The New York Federal has just published a new report entitled "The Shadow Banking System: Implications for Financial Regulation".
One of the main conclusions of the report is that leverage undermines financial instability:
That is true.
In fact, every independent economist has said that too much leverage was one of the main causes of the current economic crisis.
However, notwithstanding the NY Fed's recommendations, the Federal Reserve and Treasury have, in fact, been encouraging massive leveraging.
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