“I’m sorry, America,” writes Andrew Huszar, formerly of the Federal Reserve, where from 2009-2010 he was in charge of “Quantitative Easing” — also known as “buying huge amounts of bonds with money created by the Fed for that purpose.” (For a good explanation of what that actually means, you might want to check out this Planet Money piece from 2010.) In an opinion piece published by the Wall Street Journal, Huszar concludes that QE (as the cool kids call it) was (and remains) a mistake.
Of particular interest is the following:
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.
QE was never what you might call popular, but this dude actually ran the program. And he’s really not happy with the result. Or with the decision to go for a second round of QE, known as QE2, rather than face the dismal music.
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?