After catching the House of Representatives' Financial Services Committee Hearing Monetary Policy Report with Fed Chairman Ben Bernanke this week I have yet another reason confirming why the Fed has an impossible job to do. He could not admit that the main reason that after the current Fed quantitative easing policy, read ultra-low interest rates, banks are still not lending is that banks can't unload depreciating loans on unsuspecting investors anymore. So if you as a bank lend money to a borrower in good standing, inflation will make your loan worthless, to the point of loosing money by the time it gets repaid. Yes, the same inflation cause by the quantitative easing the Fed is using to help us recover from The Bust of the last year and half. The only way for banks to lend and make a profit is by charging high interest rates, which people do not want to accept. These same people will turn around and say that the banks are not lending. Well, they are, you just want the interest rate to be lower.
But the worst part of this political dance is that all representatives present had requests. Can you fix this? Can you fix that? Can you get them to lend to businesses? Can you get the regulators, whom ever they are, to ease of the banks so that they can lend? Can you make a political statement here about the current administration’s budget? Thereby saying something I can use in the next election? Can you…? Again, and again... According to the Fed quantitative easing is not working because banks do not want to take access to the money because it is stigmatized by the political environment. Genius… This is the way to blame every one and no one. The representatives are having a hard time believing the Keynesian policies are full of contradictions and never work. They have no problems asking the Fed for more wonder economic plans. Maybe next Christmas he’ll deliver, just remember to be nice. [more]