Conceivably, if the Federal Reserve became too dominant a buyer in certain segments of these markets, trading among private agents could dry up, degrading liquidity and price discovery. As the global financial system depends on deep and liquid markets for U.S. Treasury securities, significant impairment of those markets would be costly, and, in particular, could impede the transmission of monetary policy.
The Bundesbank has long been favouring the involvement of the private sector in crisis resolution. Arrangements where the private sector reaps the large profits of risky business while being bailed out in the event of a risky investment turning sour invite imprudent risk-taking, thereby putting the stability of the international financial system itself at risk.