Mr. Diamond, who resigned on Tuesday following a rate-fixing scandal, deflected questions onto other banks and the integrity of the rate-setting mechanism as a whole.

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Of course, in order to use this as an argument that inflation is not a problem, he has to assume that the market has enough wisdom in it to properly gauge future inflation, but then he immediately turns around and forgets the wisdom of the markets when he overrules its price setting mechanism with an unprecedented series of operations, from open market to twist.

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"We're working with certain government entities on setting up the mechanism" for continued funding, said Mr. Wang, a former securities regulator in China who is also known as Jesse Wang.

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One component is setting up a mechanism where people who just can't afford their mortgage right now are able to renegotiate with banks, and the banks lower their interest, and the homeowner assures that they're going to make a commitment to pay a certain amount every month, and the government helps to step in to bridge the gap.

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Worse still, transparency in the mechanism of setting rates may well have exacerbated the tendency to lie, rather than suppressed it.

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Only one government, Argentina's, appears to rely on this sort of mechanism (and it has balked at setting a yield-cap on the subordinated debt).

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The WEF this year is setting out to create a stronger risk mitigation framework and early warning mechanism for the globe, specifically designed to deal with the tensions and dilemmas that abound.

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Last month, the FTC notched a win for its guideline approach when the online-advertising industry voluntarily agreed to one of the main privacy recommendations: the development of a "Do Not Track" mechanism that would let users limit Web tracking using a single setting in Web browsing software.

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