Letter: Spreading the Money Around

To the Editor:

The Federal Reserve, as part of its program to help the economy, purchases $40 billion in distressed assets (mortgage-backed securities) every month from commercial banks because these policies help banks feel better about extending credit to consumers. That’s half a trillion dollars per year, created by the U.S. central bank, all geared toward helping stimulate private lending. How about this: Instead of coming to the rescue of the banks, the Fed creates $500 billion, all of which is dispersed to the states on a per capita basis. While inflationary concerns remain the same as with current policy, in the latter scenario the private banks are passed over and the funds go directly to the people who really need it. The states use the windfall to subsidize small-business growth, fund infrastructure projects, etc.

Of course this will never happen. The fuel that powers the engine of our economy is credit, and in our financial system, private banks control the availability of this credit. Our political leaders claim that, above everything, we must bring down the national debt. It is interesting that they don’t seem overly concerned about the fact that, in order to grow our economy, the very banks that engaged in the fraud and malfeasance that plunged us into the Great Recession must be rescued so that they can lend more money to an already debt-saturated populace. Seems sketchy to me.

Dan Weintraub