Wealth for Wall Street, Poverty for the People
by Charles Goyette
It was just two years ago, a wealth transfer so brazen as to leave one breathless. The $700 billion Bush bailout met with so much hostility from the public that one congressman said his calls were running 50-50: 50 percent “no,” and 50 percent “Hell no!”
Determined not to let it happen again, people across the country began linking arms in activism and tea parties. By last week they had changed Congress. Dozens of bailout supporters from the house and the senate had been turned out of office. So you’d guess that would pretty much put a lid on bailouts and wealth transfers, at least for now, right?
With timing either stunningly inept or provocatively cavalier, on the very day after the election the Federal Reserve announced its latest money-creating, wealth transferring operation, euphemistically called Quantitative Easing II (QEII).
In an operation larger than either Bush’s $700 billion bailout or Obama’s $787 billion stimulus bill, the Federal Reserve Open Market Committee has decided to buy $900 billion in “longer-term” U.S. treasury bonds by the middle of next year; $600 billion in new purchases and $300 billion more by re-investing principal payments from assets it already holds.
That the policy is aimed at inflating stock prices is widely understood on Wall Street. As Art Cashin of UBS Financial Services wrote, its apparent purpose is “to lift the stock market and promote a wealth effect.” In his Washington Post defense of the move, Bernanke admitted as much, saying stock prices got a boost last time and “higher stock prices will boost consumer wealth.”