The Fed’s Futile Move

by Dick Morris and Eileen McGann

Right now, there is about $800 billion-plus currency in circulation sitting in wallets, purses and cash registers around the country. Another $800 billion is sitting in a vault at the Federal Reserve Board, for a total monetary supply of about $1.6 trillion.

In a vault? Yes. When Congress voted the TARP program to bail out banks, the banks actually took only a small part of the money. The rest they used to offset losses on their balance sheets while letting the Fed hold onto the money.

Why didn’t the banks want the money? Because they’re not about to make loans in this economy. They’re more than happy to let the cash sit at the Fed earning them interest. (The Fed decided to start paying interest last November).

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http://townhall.com/columnists/DickMorrisandEileenMcGann/2009/03/20/the_feds_futile_move