There is not a lot of "loose cash" on the FED balance sheet when you compare it to all the toxic CDO's MBS and assorted trash they hold as collateral from the banks that caused the crisis in the first place. The last time the FED went to the market to offload a portion of its "portfolio of securities" the market response was a no thank you, but keep the checks coming.
Do the following programs have anything in common? TARP TALF POMO QE1 QE1.5 QE2 Why yes, yes they do. The largest bank bail out in recorded history.
The fact that the FED paid Treasury $77 billion underlines the amount of investment the FED has to do to keep the market liquid.
The amount the FED returns to treasury is much lower on a normal basis. But, these aren't normal times. Which is why the FED invests in member banks and provides them with low interest loans to keep them above the waterline.
The FED created the reserves it has to recapitalize the banks that were insolvent. Tier 1 Capital requirements can really be a pain in the ass for banks. Now had the banks not engaged in fraud on such a massive scale and leveraged themselves beyond the hilt, the crisis, the great recession, could have been avoided.
Then again, FED policy of easy money under Greenspan was too much of a good thing for them. Like a five year old with a gallon of ice cream, a spoon and no parent in sight. We all know how that works out.
So all this low interest rate poor banking industry can't make money nonsense is nonsense.
They are corrupt. They need to be prosecuted. They need to be regulated and held accountable.
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