Far from being a market failure, the financial crisis stemmed in good part from the federal financial “safety net” and the incentives for excess risk-taking it created, and the best way to avoid future crises is to put “credible limits” on that safety net, Richmond Federal Reserve Bank president Jeffrey Lacker said yesterday.

The only alternative is to impose onerous regulations on financial institutions, which would prove “costly,” said Lacker, a voting member of the Fed’s policymaking Federal Open Market Committee this year.

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