"The Federal Reserve's zero-interest rate policy (ZIRP) has been a resounding success. The economy is booming! Well, OK, it's not booming. Actually, the economy doesn't seem to be doing very well. In fact, the economy sucks. We appear to be on the verge of another recession. Nevertheless, the activist Fed must appear to be doing something. Yesterday the Fed governors voted (7-3) to hold short-term interest rates at their current very low levels for at least another two years, which takes us well into 2013.
The U.S. central bank’s policy of holding interest rates near zero is a subsidy for large banks and redistributes wealth from savers to debtors, said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City.
Banks can borrow at 0.25 percent and buy Treasury bonds that yield 3 percent, keeping the difference. “It provides them a means to generate earnings and restore capital, but it also reflects a subsidy to their operations,” he said to the House Subcommittee on Domestic Monetary Policy and Technology today in Washington"..........READ MORE
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