The fact that the Fed bears no credit risk places a limit on how far down the Fed can drive the cost of capital to private nonbank borrowers. For various reasons the Fed might well be reluctant to incur credit risk, as would happen if it bought assets directly from the private nonbank sector.
The traditional problems of moral hazard and adverse selection that hinder financial sector growth have been minimized. Ladies and Gentlemen: These innovations have seen our financial sector experience transformation as evidenced by the following outcomes:   Exponential growth of bank branches from 740 in 2007 to 1,072 in April 2011.