This is the Cato Daily Podcast for Tuesday, December 9, 2008. I'm Caleb Brown.

If anyone believes that under regulation was the root cause of the financial crisis,

and shouldn't they also believe that government is blameless in the run-up to that crisis?

Lawrence H. White is the F.A. Hyek Professor of Economic History at the University of Missouri,

St Louis, is an expert on banking and monetary policy.

We spoke at the Cato Institute's Monetary Conference in November.

A year ago on the stage of the Cato Institute, Ben Bernanke unveiled a whole bunch of new transparency measures that he would be taking at the Fed.

When I spoke with William Poole, senior fellow here at the Cato Institute,

he showed me a chart of reserves at depository institutions that had just shot up in the last six, eight weeks.

And his question was, where's the transparency?

There was no formal adjustment.

I mean, clearly we're in uncharted territory here,

but do you see a particular risk of these types of large movements without any type of announcement?

Well, it's not only been the large movement, it's been the way in which the Fed has brought about

the large movement in bank reserves that's really

unprecedented. It used to be that bank reserved moved when the Fed conducted open

market purchases or sales of Treasury bills.

In the last year, they've actually shrunk their holdings of Treasury bills,

but they've enormously expanded all kinds of special purpose loans

that never used to appear on their balance sheet.

They've created special purpose vehicles for investing in Bear Stearns and in money market

assets, things they never used to do.

...