The Fed has been engaged in a policy of acting in concert with the Executive Branch in a non-arms length fashion since this crisis began. All of the liquidity programs and backstops the Fed has implemented are not just about liquidity, they are subsidies that lower the cost of capital and increase profits in the banking sector. As such, these subsidies are actually a part of America’s fiscal policy – stimulus, if you will.
via The creeping power grab by the executive branch and Federal Reserve « naked capitalism. Gives a strong argument that the Fed may be violating the U.S. Constitution through its takes on debts that only Congress can authorize.
Keeping interest rates at zero benefits the banks by enabling them to borrow money at close to nothing. But it also means that savers are paid near zero interest – and consequently is a transfer of wealth from savers to bankers.
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