by Ellen Brown
The Fed could avoid collateral damage to the shadow banking system without curtailing its quantitative easing program by taking the novel approach of directing its QE fire hose into the real market.
One possibility would be to buy up $1 trillion in student debt and refinance it at 0.75%, the interest rate the Fed gives to banks. A proposal along those lines is Elizabeth Warren’s student loan bill, which has received a groundswell of support including from many colleges and universities.
Another alternative might be to make loans to state and local governments at 0.75%, something that might have prevented the recent bankruptcy of Detroit, once the nation’s fourth-largest city. Yet another alternative might be to pour QE money into an infrastructure bank that funds New Deal-style rebuilding.
The Federal Reserve Act might have to be modified, but what Congress has wrought it can change. The possibilities are limited only by the imaginations and courage of our congressional representatives.