We went on a
bond-buying spree that was supposed to help Main Street.
Instead it was a feast
for Wall Street.
By Andrew Huszar
The Wall Street Journal
Tuesday, November 12, 2013
I can only say: I'm
sorry, America. As a former Federal Reserve official, I was responsible for
executing the centerpiece program of the Fed's first plunge into the
bond-buying experiment known as quantitative easing. The central bank
continues to spin QE as a tool for helping Main Street. But I've come to
recognize the program for what it really is: the greatest backdoor Wall
Street bailout of all time. ...
It wasn't long before my
old doubts resurfaced. Despite the Fed's rhetoric, my program wasn't helping
to make credit any more accessible for the average American. The banks were
only issuing fewer and fewer loans. More insidiously, whatever credit they
were extending wasn't getting much cheaper. QE may have been driving down the
wholesale cost for banks to make loans, but Wall Street was pocketing most of
the extra cash. ...
Trading for the first
round of QE ended on March 31, 2010. The final results confirmed that, while
there had been only trivial relief for Main Street, the U.S. central bank's
bond purchases had been an absolute coup for Wall Street. The banks hadn't
just benefited from the lower cost of making loans. They'd also enjoyed huge
capital gains on the rising values of their securities holdings and fat
commissions from brokering most of the Fed's QE transactions. Wall Street had
experienced its most profitable year ever in 2009, and 2010 was starting off
in much the same way. ...
Where are we today? The
Fed keeps buying roughly $85 billion in bonds a month, chronically delaying
so much as a minor QE taper. Over five years, its bond purchases have come to
more than $4 trillion. Amazingly, in a supposedly free-market nation,
QE has become the largest financial-markets intervention by any government in
world history. ...
... For the complete commentary:
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