In December, the Fed had $775B worth of Treasury securities. That
stock will soon have dwindled to $300B, give or take. The difference,
about $475B, represents an investment by the central bank in risky
assets of the US financial sector.
$475B is an extraordinary sum of money. It is as if the Fed borrowed
more than $1500 from every man, woman, and child in the United States,
and invested that money on our behalf in Wall Street banks that private
financiers were afraid to touch. For bearing all this risk, if things
work out well, taxpayers will earn about what they would have earned
investing in safe government bonds.
…If the Fed were to blow through the rest of its current stock of
Treasuries, it would have invested more than $2500 for every man,
woman, and child in America. Public investment in the financial sector
would have exceeded the direct costs to date of the Iraq War by a wide margin.
Here is much more; the Interfluidity post focuses in fact on the implications of paying interest on reserves. The sad thing is: if I had my finger on the button, I would not have reversed these loans. Ouch!