Abstract

The topic of this paper is the general responsibility of government for the stability of financial markets. Here in the United States we have had in the recent past marked volatility in financial markets—stock market ups and downs, junk bond bubbles, massive thrift institution insolvencies—and all of these have caused questions to be raised about banks and other financial intermediaries. Such an environment could well prompt a central bank to consider what it should be doing to ensure the stability of financial markets and the costs and benefits of its possible actions.