Former Fed Quantitative Easer Confesses; Applogizes: I Can Only Say: Im Sorry, America Confessions of a Quantitative Easer We went on a bond-buying spree that was supposed to help Main Street. Instead, it was a feast for Wall Street. I can only say: Im sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Feds 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 Ive come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time. Five years ago this month, on Black Friday, the Fed launched an unprecedented shopping spree. By that point in the financial crisis, Congress had already passed legislation, the Troubled Asset Relief Program, to halt the U.S. banking systems free fall. Beyond Wall Street, though, the economic pain was still soaring. In the last three months of 2008 alone, almost two million Americans would lose their jobs. The Fed said it wanted to help—through a new program of massive bond purchases. There were secondary goals, but Chairman Ben Bernanke made clear that the Feds central motivation was to affect credit conditions for households and businesses: to drive down the cost of credit so that more Americans hurting from the tanking economy could use it to weather the downturn. For this reason, he originally called the initiative credit easing. My part of the story began a few months later. Having been at the Fed for seven years, until early 2008, I was working on Wall Street in spring 2009 when I got an unexpected phone call. Would I come back to work on the Feds trading floor? The job: managing what was at the heart of QEs bond-buying spree—a wild attempt to buy $1.25 trillion in mortgage bonds in 12 months. Incredibly, the Fed was calling to ask if I wanted to quarterback the largest economic stimulus in U.S. history. This was a dream job, but I hesitated. And it wasnt just nervousness about taking on such responsibility. I had left the Fed out of frustration, having witnessed the institution deferring more and more to Wall Street. Independence is at the heart of any central banks credibility, and I had come to believe that the Feds independence was eroding. Senior Fed officials, though, were publicly acknowledging mistakes and several of those officials emphasized to me how committed they were to a major Wall Street revamp. I could also see that they desperately needed reinforcements. I took a leap of faith. zerohedge/news/2013-11-12/former-fed-quantitative-easer-confesses-aplogizes-i-can-only-say-im-sorry-america
Posted on: Tue, 12 Nov 2013 12:00:39 +0000
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