This depends on how we might define work.
There’s a perspective, to be sure.
It can be argued that the Fed is intentionally holding rates at zero in the hopes of forcing investors, concerned about long-term challenges that include retirement, to invest in longer-term riskier assets instead of collecting “little or nothing (Bernarke)” on money market or CD’s.
Worse now for the Fed is the impression that monetary authorities work first and foremost for Wall Street.
Of course, Fed officials see this a bit differently… They see supporting Wall Street as their mechanism for supporting Main Street.
Ultimately, without the former, the latter is locked out of capital markets, and economic chaos could follow.
The purpose of Wall Street is supposed to be, or was designed to be (when it was founded in 1913) channeling investment funds into Main Street.
But most Americans no longer view Wall Street as ultimately working in their best interests – and, I believe they are mostly correct. This is the same Wall Street that aggressively pushed garbage loans onto the American people as policymakers praised the wonders of financial innovation. When did the purpose of finance evolve into simply a mechanism to enrich the relative few at the expense of many? And when did policymakers embrace this view? As Paul Krugman has noted, the Fed cannot envision a world not dominated by the magic of structured finance. Yet this is a world that failed us completely.
Look for my forthcoming post outlining the federally funded Goldman Scam that almost took AIG to it’s knees.
But, here’s the pattern outline, because I know you can’t wait:
1. Goldman creates or sells $23 billion (or more) of CDOs and stuffs them into AIG.
2. Goldman proclaims to the world they have no exposure to CDOs and warns that banks and insurers with CDO exposure will get downgraded.
3. Goldman initiates the mark downs of CDOs with AIG and others, acelerating the market’s downward spiral.
4. Huge mark to market losses lead insurer and bank credit to freeze, short term markets to lock up, ABCP to collapse.
5. AIG posts as much collateral as it has to Goldman, who has more aggressively marked down the exposure.
6. Bond insurers are downgraded, banks begin commutations with them.
7. AIG fails, Fed steps in, Goldman gets bailed out at par.
Come on! This is no accident. And no one in authority wants to find out where the truth lies.
The House has passed a bill to audit the Federal Reserve. However, we find ourselves hands-on-knees with a fast-action response from the the Fed claiming that an audit would interfere with its “independence”.
Sing me the song of irony.
Even though the Bill was buried, word got out, and 79% of the American people support at least the notion of a full audit.
NOTE: The Constitution does not empower what is becoming a central bank. And Congress, which created the Federal Reserve in 1913 (and, it coincided, oddly, somehow with the creation of Wall Street) which has the power to create credit and money (rather like Wall Street), and, certainly has the power to audit, dissolve, or do whatever it likes with the central bank (including stripping it of the power to create credit).
Point of reference: Can we agree that the Fed has bungled efforts to manage the economy, keeping unemployment low, and regulating banks?
Just in cases that white van finds me soon, the the independence argument is a red herring./1
Peace be to my Brothers and Sisters.
Brian Patrick Cork
1/ Something that draws attention away from the central issue.