Bill Frezza: Big Banks Prop Trading With Fed Money

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Bill Frezza, a fellow at the Competitive Enterprise Institute, discusses big banks and quantitative easing.

"It's a moral hazard problem that makes Fannie Mae look small," Frezza said on CNBC. "We've got Ben Bernanke pushing on a rope, pushing all this liquidity onto the bank balance sheets. We've got banks that really don't want to lend that money out at zero interest rates because the small business owners who are supposed to be the recipients of that money according to the Federal Reserve are too risky to take loans at that rate. So it's being hypothecated and, according to Zero Hedge, it's being hypothecated and used to gamble in derivatives markets. So, all this is happening opaquely, off balance sheet, and the big fear is what happens when the Black Swan comes along and everybody calls in their collateral."

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