An alternative interpretation of Fed policy is that it is either a nasty political payoff to banks or a desperation move to hide banking-sector insolvency: the Fed bought MBS likely above their marked-down value and pays interest on reserves, which subsidizes banks by encouraging them to park money at the Fed.

causalpending

Speaker

Russ Roberts

Evidence Quote

the Fed continues today to pay a quarter of a percent of interest on reserves which is a historically unprecedented I think policy which encourages banks to keep their money at the Fed and just receive that nice flow which is a subsidy from me to them

Source

John Taylor on the State of the Economy 07/19/2010EconTalk
Created: 6/15/2026, 9:17:28 AM

My Notes

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