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Jonathon Trugman

Jonathon Trugman

 Business

Ex-Fed insider confessed hatred of QE

By
Jonathon Trugman
Published Nov. 16, 2013, 8:16 p.m. ET

He’s the man from the Federal Reserve whose essay in the Wall Street Journal apologized for Fed Chairman Ben Bernanke’s hoax on the American public— quantitative easing — in order to start a discussion during nominated successor Janet Yellen’s confirmation hearings.

Andrew Huszar, 40, laid bare the Fed’s backdoor bailout of Wall Street’s biggest banks under the guise of helping Main Street. While it is clear that he thinks the people leading the Fed are smart, he thinks they have gone astray. It’s also clear he sees what Main Street sees: lots of risk and very little progress. After QE1, it should have been “1 and done,” not QE4ever.

“You have five or six banks controlling 70 percent of US bank assets,” says Huszar, emphasizing how “too big to fail” has only gotten worse due to Fed actions.

The concentration of assets controlled by Wall Street is one of the greatest concerns for the man who managed the Fed’s $1.25 trillion mortgage-backed security purchase program, the first of its kind in the central bank’s history.

Bernanke and the Fed’s actions allowed “QE to become Wall Street’s new ‘too big to fail’ policy,” Huszar says.

Huszar feels there is a far too cozy relationship between the Fed chief and Wall Street banks now, which has a dramatic effect on the US economy.

The former Morgan Stanley managing director says he doesn’t think QE justifies the various costs and risks to the US economy, but adds the markets “are now dependent” on the Fed’s purchases.

The Fed should be the lender of last resort — or “the fire station,” as Huszar put it — not assume the role of underwriter of the US economy.

Huszar points directly at Bernanke in his essay and, while he respects both the current chairman and Yellen, he feels the Fed’s actions provide cover for the politicians to dig in and not actually address issues.

Huszar sees Yellen as an “enabler” of the same policies.

He states that Bernanke made clear that the Fed’s central motivation for QE1 was to “affect credit conditions for households and businesses” by reducing their interest rates and driving down their costs. Bernanke called this “credit easing.”

But that never happened, Huszar points out. Credit was not being created — in fact, it was further constrained by other actions by the central bank and regulatory entanglement.

Huszar, who is now a senior fellow at Rutgers Business School, left after the first QE operation ended in 2010.

So why did Huszar write the apology?

As he posted on his Twitter page: “Because I want to try to help get our economy back on track for all Americans.”