The Federal Reserve is running the risk of fomenting an eventualfinancial crisis by easing banking regulations at the same timethat it's cut interest rates.

So say some former Fed officials, including ex-Vice ChairmanAlan Blinder and financial stability experts Daniel Tarullo andNellie Liang. They worry that the combination of looser credit andlaxer rules will prompt financial institutions and investors topile on leverage and take excessive risks. While that may spureconomic growth in the short run, it could end up triggering arecession once the speculative bets are unwound.

"When you lower rates and put incentives in place to increaseborrowing, it should not be surprising that risks will increase,"said Liang, former director of the Fed's financial stabilitydivision. "That means this is not the right time to be alsosignificantly loosening financial regulations."