Former Fed Official: 'Quantitative Easing' Is a Huge Mistake (Click on this headline to read more)
In
2009, just after the Great Recession struck, Andrew Huszar got a job at
the Fed managing its "Quantitative easing" program— a huge purchase of
bonds designed to stabilize the economy and get credit flowing. Now,
Huszar says the program is a failure.
Huszar wrote an op-ed in the Wall Street Journal today—the sort of op-ed that will be forwarded around Wall Street and gossiped about endlessly, because (like Greg Smith's op-ed
about Goldman Sachs) it is that rare creature, the Insider Speaking Out
Against His Fellow Insiders. In it, Huszar calls the Fed's QE programs
(now in their third iteration,
with $85 billion of bond purchases per month) "the greatest backdoor
Wall Street bailout of all time." He says that rather than accomplishing
its goal of getting banks lending again, it succeeded only in juicing
Wall Street's profits and artificially propping up stock prices. From Huszar:
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...
Because QE was relentlessly pumping money into the financial markets during the past five years, it killed the urgency for Washington to confront a real crisis: that of a structurally unsound U.S. economy. Yes, those financial markets have rallied spectacularly, breathing much-needed life back into 401(k)s, but for how long?
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