The Fed’s crisis-era quantitative easing programs had something in common with the Congressionally-approved Troubled Asset Relief Program (TARP). Both were shiny objects to distract the public from the obscenely giant money funnel that the Fed was secretly providing to Wall Street through a mish-mash of acronyms too numerous for anyone to keep track of. When the Levy Economics Institute tallied it all up, the tab came to $29 trillion in cumulative loans and other forms of relief to bail out Wall Street. See Table 16 at this link. (The $29 trillion includes $1.85 trillion in purchases of agency mortgage-backed securities that overlap with part of the Fed’s quantitative easing operations.)
In the Fed video, Steve Meyer also confronts the elephant in the room: where is the Fed getting all of this money to bail out Wall Street for its greedy excesses that led to it blowing itself up.
Meyer says this at 3:42 minutes on the video:
“You may wonder how the Fed pays for the bonds and other securities it buys. The Fed does not pay with paper money. Instead, the Fed pays the sellers’ bank using newly created electronic funds, and the bank adds those funds to the sellers’ account. The seller can spend the funds or can simply leave them in the bank. If the funds stay in the bank, then the bank can increase its lending, purchase more assets, or build up the reserves it holds on deposit at the Fed. More broadly, the Fed’s securities purchases increase the total amount of reserves that the banking system keeps at the Fed.
“Whether the Fed’s purchases lead to an increase in the amount of money circulating in the economy depends on what banks do with the new reserves and on what sellers do with the funds they receive.”
Our IP Address: