Saturday, August 16: An Apology for Quantitative Easing

“I can only say: I’m sorry, America.”

These sound like the words of a treasonous diplomat or disgraced politician. Instead, they made up the opening line of an article written for The Wall Street Journal by Professor Andrew Huszar, a former Federal Reserve official whose work back in 2009-2010 earned him the title “Quarterback of Quantitative Easing.”

In the article, Huszar apologizes profusely for the government’s bond-buying program, blaming the initiative for failing to solve the country’s economic problem and instead creating another ‘bubble’ on Wall Street.

Today’s Crash Proof Retirement Show features a panel discussion moderated by Phil Cannella. Along with co-host Joann Small, Cannella welcomes Huszar and political insider Dick Morris to discuss whether there is a retirement crisis taking place in America.

Panel Discussion Highlights – 4/19/14 by Crash Proof Retirement on Mixcloud

Huszar worked for the Federal Reserve for seven years before leaving for a job on Wall Street in early 2008. In the spring of 2009, he was recruited back to the Fed with a promise that he would be managing the largest economic stimulus in United States history—a program, built on the purchase of $1.25 trillion in mortgage bonds, that would come to be known as quantitative easing.

“This was a dream job, but I hesitated,” Huszar wrote for the Journal. “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 bank’s credibility, and I had come to believe that the Fed’s independence was eroding.”

Ultimately, Huszar took a leap of faith—one he soon would regret. “Despite the Fed’s rhetoric, my program wasn’t helping to make credit any more accessible for the average American,” he wrote.

Even more to his frustration, each day the Fed deviated farther from the course it had followed for nearly 100 years. The Fed had never purchased a single mortgage bond, but Huszar’s program bought so many that the pure volume threatened to crash worldwide confidence in the financial markets.

Wall Street, however, was well on its way to recovery. By the time Huszar’s program ended in March of 2010, the markets had regained about half of what was lost during the 2008 crash.

And that was just the first round of quantitative easing. By November, the market was dropping again, so “QE2”—the second round of quantitative easing—was approved by the Fed.

“That was when I realized the Fed had lost any remaining ability to think independently from Wall Street,” lamented Huszar. “Demoralized, I returned to the private sector.”

Today, almost four years later the Fed has announced that quantitative easing—now on its third round—will end this October. But is it truly an end, or just a suspension until the next market correction? Andrew Huszar, for one, hopes this misguided experiment is finished for good.

“The central bank continues to spin QE as a tool for helping Main Street,” he wrote. “But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.”

email

Leave a Reply

Your email address will not be published. Required fields are marked *