The world according to Fortune

In a commentary on last night's Nightly Business Report (PBS), Allan Sloan, senior editor at large of Fortune magazine, argued that the "real bailout" was not TARP (the Troubled Assets Recovery Program), but rather such measures as the Federal Reserve's keeping interest rates close to zero. He said, among other things:

"The real bailout is the stuff you don't see and that didn't have a dramatic congressional vote, the way TARP did. The Fed keeping short-term interest rates at almost zero is a huge, huge subsidy to banks and investment houses. It's a major reason they're now making so much money and it's a huge penalty to America's savers and retirees, whose income on money market funds and short-term CDs is almost nothing."

How nice to see that Mr. Sloan is concerned about America's "savers and retirees." But what about America's workers and the economy as a whole? Wouldn't things likely have been worse than they were, and for almost everyone, if the Fed had not kept interest rates close to zero? One hardly needs to be an economist to see that an extraordinarily severe recession prompted this reaction and that the Fed would have been criticized if it had not lowered interest rates in the face of mass unemployment and severe contraction. Now, it's true I don't know how much low interest rates actually helped the economy, and I'm aware of reports that it remains difficult for small businesses to borrow because banks are still wary of lending. But it does seem to me that describing the policy of low interest rates as nothing more than a subsidy to banks and a penalty on savers, without any reference to its intended effect on the economy generally, is not likely to promote (to quote Mr. Sloan again) "understanding" as opposed to "grandstanding."

P.s. On a somewhat related note, see today's Wash Post article about the Democrats' renewed emphasis on the U.S. manufacturing sector.