Obama’s Financial Hope and Change: Free Money for Wall Street

A recent Pew survey revealed the nation’s big banks are drawing the most ire from the American public, and now that the Federal Reserve is poised to hand them another victory, it’s easy to see why Main Street’s anger burns deep.

Wednesday, Federal Reserve Chairman Ben Bernanke released a statement to the House Committee on Financial Services which detailed the accommodative policy the Fed implemented as a result of the Great Recession and outlined its exit strategy from that policy.

The objective of the Fed’s intervention was to alleviate the pressure on the balance sheets of the banks, which would provide them with the financial flexibility necessary to begin lending to consumers and businesses once again. To meet such an end, the Fed increased the size of its balance sheet through purchases of securities and real-estate loans from the banks, and decreased the interest-rate for interbank lending to nearly zero percent.

The banks’ first ‘Win’ came as a result of those sales to the Fed which produced billions of dollars in revenue. Afterwards, many of us were wondering why the banks weren’t lending again, despite raking in record profits, but the answer was simple. They quickly realized they had found themselves with a can’t lose proposition, as they could make guaranteed money instead of taking on more risk from lending to consumers and businesses during a period of economic uncertainty.

How could they do that?

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