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Note what happened after Bear Stearns was rescued. Some Congressmen asked the Fed to give favourable treatment to student loans, allowing banks to go to the central bank and swap them for the safer T-Bills. And the Fed promptly obeyed. The next step, where the central bank will be asked to help companies or sectors close to the heart or pockets of politicians, is not far off. Guido Tabellini VoxEU.org Guido Tabellini is Professor of Economics at Bocconi University, and President of IGIER at Bocconi University in Milan.
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