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Message Subject THE ECONOMY & YOU # (Daily Updated Videos & Articles)
Poster Handle RoXY
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Skimming Profits Off Bad Loans: Bankers And Their Dirty Tricks
By Mike Whitney
September 29, 2012

Didn’t Ben Bernanke promise that another round of bond purchases would lower unemployment and boost economic growth?

We think he did, which is why we’re wondering why all the benefits from QE3 appear to be going to the banks. According to Bloomberg News: “The Federal Reserve’s latest mortgage bond purchases so far are helping profit margins at lenders including Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) more than homebuyers and property owners looking to refinance…Since the Fed’s Sept. 13 announcement that it would buy $40 billion more securities per month, the rates offered for new 30- year loans have fallen by just 0.11 percentage point, compared with a drop of more than 0.6 percentage point for yields on the bonds into which the loans get packaged.”
(“Fed Helps Lenders’ Profit More Than Homebuyers: Mortgages”, Bloomberg)

Well, how do you like that? That means that Mr. Bernanke’s trickle down monetary theories aren’t really working at all. Instead of the savings being passed along to homeowners in the form of lower rates, the banks are juicing profits by taking a bigger share for themselves. Who could have known?

Keep in mind, that Bernanke is not some madcap scientist who doesn’t fully grasp how QE works. That’s not it at all, in fact, he’s considered one of the world’s foremost authorities on the topic and has written extensively on Japan’s deflationary woes and their “broken channels of monetary transmission”, which is shorthand for saying that loading the banks with trillions of dollars in reserves won’t do a blasted thing except pump a little ether into stock prices. (which it has done in the last 2 rounds of easing) So, Bernanke’s been down this road before. He knows what QE will do and what it won’t do, which is why he instructed members from the Bank of Japan (BOJ) to implement fiscal-monetary policies that would have a chance of succeeding. His advice was: “BOJ purchases of government debt could support spending programs, to facilitate industrial restructuring.”

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