Excerpt
GWEN IFILL (NewsHour): The mission of the Federal Reserve has long been the subject of debate, especially since the 2008 financial crisis. Six years later, the economy is recovering, but the Fed’s role is still being questioned.
Paul Solman has the story, part of his ongoing reporting Making Sense of financial news.
PAUL SOLMAN (NewsHour): For the Federal Reserve, today marks an historic moment, the end of six years of unremitting financial stimulus, the money creation programs known as quantitative easing.
This is actually the third easing the Fed has done since the crash. We met Brian Sack on the floor of New York Fed back in 2009, when it all began.
BRIAN SACK, Former Markets Group Chief, Federal Reserve Bank of New York: The way we create money is by buying securities.
PAUL SOLMAN: Securities like U.S. Treasury bonds and mortgage-backed bonds from banks and other financial institutions.
BRIAN SACK: So when the Federal Reserve buys a Treasury security, it’s putting funds into the financial sector.
PAUL SOLMAN: Now, since the crash of ’08, the Fed has created $3.5 trillion. Why? To lower interest rates and thus spur consumer and business spending, creating new jobs. But, of course, creating too much money risks serious inflation. So the Fed frets about both, jobs and sound money, a reason it decided today to stop injecting cash into the economy.
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