Collateral Damage: QE3 and the Shadow Banking System

[Lefty Thinker]

1. QE has had far less effect than most would have predicted

But it is, after all, just a swap of non-interest-bearing government obligations for interest-bearing government obligations. In essence, it "undoes" the borrowing back of the money disbursed by the Treasury, except that the debt-instruments still exist and are still tallied against the debt ceiling.

Since the borrowing back of disbursed funds is primarily of benefit to the banks (creating a floor for returns on excess reserves), I'm surprised more banks haven't been squealing about QE. I'm guessing they either don't really get how the system works or they're frightened of spilling the beans publicly.