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Former Federal Reserve Employee Publishes Big Apology for a Policy Conservatives Love to Hate


"I'm sorry, America."

(Photo credit should read PUNIT PARANJPE/AFP/Getty Images)

A former Federal Reserve official who partook in the implementation of the agency's current quantitative easing (QE) policies, or what he calls an “unprecedented shopping spree,” has something he wants to tell America: I’m sorry.

"We went on a bond-buying spree that was supposed to help Main Street. Instead, it was a feast for Wall Street," Andrew Huszar said in an op-ed in The Wall Street Journal Tuesday.

The Fed is currently on its fourth round of quantitative easing, purchasing an estimated $85 billion in bonds each month until the unemployment rate reaches at least 6.5 percent.

Huszar, who currently works on Wall Street, was asked by his Fed bosses in 2009 to help manage “what was at the heart of QE’s bond-buying spree -- a wild attempt to buy $1.25 trillion in mortgage bonds in 12 months."

"I can only say: I'm sorry, America," Huszar writes:

It wasn't long before my old doubts resurfaced. Despite the Fed's rhetoric, my program wasn't helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn't getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash.

From the trenches, several other Fed managers also began voicing the concern that QE wasn't working as planned. Our warnings fell on deaf ears. In the past, Fed leaders—even if they ultimately erred—would have worried obsessively about the costs versus the benefits of any major initiative. Now the only obsession seemed to be with the newest survey of financial-market expectations or the latest in-person feedback from Wall Street's leading bankers and hedge-fund managers. Sorry, U.S. taxpayer.

In short, as he puts it, the Fed’s quantitative easing policies are Wall Street's new "too big to fail."

However, there are a few notes that should be made about Huszar's "apology." First, it's important to remember that he was a trader and didn't have anything to do with designing or executing the first round of QE.

Second, his claim that QE did nothing for the U.S. economy requires some examination.

True, one can certainly argue that quantitative easing may cause serious harm to the economy in the long run, but it's not strictly accurate to say, as Huszar does, that it had no effect on the economy. For example, look at the following chart of initial jobless claims. As you can see, initial claims peaked right around the time QE was implemented in 2009, Business Insider's Joe Weisenthal notes:

Lastly, Huszar's claim that QE did nothing for bank lending is questionable. Again, Weisenthal makes an important point.

"(T)here was a decline in inclination to tighten, and an increase in inclination to lend. Again, there was incredible damage and deleverage, but not long after QE began," he writes, "we started seeing real improvement in the attitudes and decisions of bank officer willingness to make loans."

You can read Huszar's full “apology" here.


Follow Becket Adams (@BecketAdams) on Twitter

This post has been updated.


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