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[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

I think you have it backward:

1. Big companies don't need loans (they have huge reserves [$1.8 trillion worth]);
2. Small to mid sized ones don't want to take on added debt, even at low rates, given the volatile economic climate.

The policy is geared toward freeing consumer dollars because those are the ones that need to be unlocked first to create demand necessary to raise revenues justifying borrowing, expanding and hiring by businesses. You have to start with the consumer and let their dollars trickle up. What's monopolizing most of the consumer's money right now? Mortgages.

The policy is a macro one, aimed at the value of money, and it should affect everyone's behavior on the margin. It's aimed at the economy as a whole.

But we shouldn't waste too much time discussing this because ultimately it's an academic disagreement. In the end, BofA's $50bil is going to go where most of the money the Fed has created since this crisis started has gone: Asia, to seek better, lower risk returns. Hence, all the talk of Asian bubbles.

The point is that it's not BofA's $50 billion anymore. The Fed buys those bonds, and it essentially creates money to do so. But if your point is that the delta to the global money supply is rather small, I agree. It seems like the policy is aimed more at political critics who say the Fed isn't doing anything.