federal reserve

By Don Lee
January 25, 2014, 8:44 p.m.

WASHINGTON — As Ben S. Bernanke walks away from the Federal Reserve’s marble headquarters on the Mall after presiding over his last policy meeting Wednesday, he will leave behind a bittersweet legacy.

On one hand, his unprecedented efforts to drive down interest rates and stimulate the economy are widely credited by his peers with saving the nation from a second Depression, strengthening the economic recovery and leaving the nation’s financial condition poised to take off this year.

Yet those same policies have added momentum to one of the greatest surges in economic inequality in U.S. history, helping the wealthiest Americans add to their enormous riches while the incomes of almost everyone else stagnated.

By driving interest rates down to historic lows, the Fed chairman helped fuel a huge surge in the stock market, where the wealthiest 1% of Americans have been far better positioned to take advantage of gains than their less affluent fellow citizens.

To be sure, his policies have helped those with 401(k) and retirement plans tied to the stock market. Also, low interest rates have stimulated housing sales and permitted many homeowners to save money by lowering their mortgage costs through refinancing.

But unemployment remains high by historical standards, and the financial strength of many workers has deteriorated. Most economists see little chance of that picture changing radically anytime soon.

Fed policy “did a wonderful job of keeping the financial system from falling off the table,” said Jack Ablin, chief investment officer with BMO Private Bank in Chicago. “But as a side effect or consequence, it’s driven a wedge between the haves and have-nots.”

Bernanke, whose term expires Friday, has repeatedly rebuffed the notion that his policies have done little for the masses.

“It’s simply not true,” he said publicly in November before rattling off ways that the Fed’s low-interest policies have benefited Main Street — cheaper car loans, recovering home values, stable consumer prices and more jobs.

Even so, from mid-2009, when the Great Recession ended, to 2011, the average net worth of the wealthiest 7% of households surged 28% to $3.2 million, according to Pew Research. For everybody else, such wealth — assets minus debts — fell 4% during that period to $133,817.

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