The unspoken problem is the mass of toxic loans/mortgages remaining to be cleaned up by the fin. institutions
Reader comment on: Feldstein on Inflation
Submitted by Mark Michael (United States), Jul 4, 2013 16:29
Feldstein does not mention that what the Fed has been doing since 2008 is transferring hundreds of billions of dollars from savers to the banks so that they have more capital to clean up the bad loans on their books. Savers have seen the interest rates on simple MMFs, CDs, savings deposits drop from approx. 4% to 0.25% to 0.5%. The financial institutions still loan those savers' MMFs, CDs at 4% to 6% depending on the credit rating of the borrower. So they are rebuilding their profits - which they should be using to foreclose on piles of bad loans. BUT, our rules for foreclosures are mostly in favor of the borrower rather than the creditor. People stay in houses on which they haven't paid the mortgage for over a year! It's all one big mess IMO. And the "dual mandate" on the Fed tells them it's their job to lower unemployment - over which they have little control. David Malpass writes correctly about this now & then.
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