MORAL HAZARD AT THE NY FED?

In the Bloomberg story about the Fed cutting the discount rate, there was this interesting little item that I overlooked:

Among the New York Fed's directors are JPMorgan Chief Executive Officer Jamie Dimon, Lehman Brothers Inc. CEO Richard Fuld and General Electric Co. chief Jeffrey Immelt.

Over at The Big Picture, I found this item:

In the free market, those that made bad credit decisions must be allowed to pay the price, and only by paying dearly can lessons truly be learned. Borrowers who were unwitting and took on too much debt must learn that there are consequences for their actions. Homebuilders that built too many homes or overpaid for land need to face the consequences. Wall Street firms that provided credit to all of these activities with too much laxity must also pay a price. This is all part of a healthy correction.

All of these players reaped benefits during the housing boom that preceded the current crisis. Certain homeowners were able to temporarily live above their means. Homebuilder and bank profits have been exorbitant, and shareholders and executives of these companies have profited mightily in the boom. To not permit losses now would be a direct violation of the free-market ideals at the foundation of our economy.

So, JPMorgan may lose $1.4 billion in profit and its chairman gets to vote on a bailout? Isn't this called "crony capitalism" and a violation of what the Free Market Fairies believe in?