I'm tired of seeing this argument. What they are putting at risk is the faith of investors who trade in USD and the belief that the US economy is robust and healthy.
Creating $ out of thin air also creates inflation within the financial system, benefitting debtor institutions and hurting creditors. It also sets a precedent that the Fed will simply push the magic money button whenever something goes wrong, which affects market behavior.
The Fed pays a price every time it takes any action - you just have to think harder about what that price is.
If FED takes a position on their balance sheet that get's wiped out (very theoretical since cost of carry for FED is 0) This does very little to erode investor confidence compared to having full blown meltdown. In any case FED eventually increased it's balance sheet to almost 20% of GDP around 2012
so it might have being cheeper to bail out lehman brothers
Creating $ out of thin air also creates inflation within the financial system, benefitting debtor institutions and hurting creditors. It also sets a precedent that the Fed will simply push the magic money button whenever something goes wrong, which affects market behavior.
The Fed pays a price every time it takes any action - you just have to think harder about what that price is.