The Fed's Financial Death Panels

As Ben Bernanke, Time's Person of the Year, heads toward his second term as Chairman, there is no sign of relief for the most hapless victims of the bank bailouts--millions of retired Americans whose fixed incomes have plunged as a result of the Fed's near-zero interest rates.

In his cover interview, Bernanke explains that "convalescent" banks, which have been taking taxpayer nourishment for a year, are in "much better shape than they were. They are lending, but they are not lending enough to support a healthy recovery..."

As fiscal conservatives bewail future deficits that will burden generations of American children to come, the immediate price is being paid twice over by their grandparents now, both as taxpayers and private individuals whose prudent behavior during years of Wall Street excess has been rewarded by slashing their retirement incomes to a fraction of what they were as recently as a year ago.

Frank Rich underscores the irony today: "The Fed chairman was just as big a schnook as every other magical thinker in Washington and on Wall Street who believed that housing prices would go up in perpetuity to support an economy leveraged past the hilt. Unlike most of the others, it was Bernanke’s job to be ahead of the curve. Yet as recently as June of last year he could be found minimizing the possibility of a substantial economic downturn. And now we’re supposed to applaud him for putting his finger in the dike after disaster struck? This is defining American leadership down."

Even after giving Bernanke the benefit of doubt about foresight and hindsight, here is the Fed this week confirming its free-money-for-banks policy by holding interest rates near zero, as the largest deploy their profits (at least in part the result of giving retirees nothing in return for using their life savings) to repay bailout loans so they can start rewarding themselves with pre-bubble bonuses instead of making loans to get the economy moving again.

Bernanke tells Time that "we are trying to work with banks to make sure that they are, in fact, able to make as many good loans as possible, that they have enough capital, that they have enough short-term funding, and that the examiners and the regulators who work with the banks are not unduly restricting the loans that they make."

In a world where greed were not a given, that theoretically would seem sound, but real people with a Sarah Palinish mindset might see that as setting up financial death panels for those too old to earn new income and too experienced to start gambling what they have left in Wall Street's rigged casinos.