We’ve already laid out in detail how Ben Bernanke and the Federal Reserve practically forced bankers to lend with the launch of QE3. Now here are a few thoughts from America’s biggest bankers on QE3, the third round of money creation and bond buying from the central bank, as captured by post-earnings conference calls over the last couple of weeks. Not long ago, the conventional wisdom on Wall Street and among the Fed-haters was that the central bank was pretty much unable to do much besides move financial markets around. But that’s not the picture that comes through from the earnings calls.
On his conference call with analysts, JP Morgan Chief Executive Jamie Dimon acknowledged that the Fed’s move had helped drive mortgage activity higher.
Dimon: Lower rates hurts you a little bit, but it obviously helps mortgage origination and, ultimately, housing prices, because low rates can drive that part of the economy a little bit. If it were to drive the economy, and I’m not sure it will, that would be a plus for us. So I think they’re doing their job not to help things or hurt things, but to try to drive the economy and drive jobs. If that works, it’s a good plus. I personally think that the fiscal policy is going to be more important than the Fed policy soon. The Fed needs help with rational fiscal policy.
Citigroup chief Vikram Pandit suggested that the the fiscal cliff remains a worry despite the positive impact of QE3.
Pandit: I think the real question to me of QE3 is a bridge to the [fiscal] cliff. And, we’ve got to get the cliff on the other side and that could start creating the kind of growth that we think is really pent up in the U.S. And, if that happens, anything that happens on the other side of QE3 will be married with a stronger growth rate and better economy so, again, very difficult to predict in any case. Generally, a stronger economy is a good thing for everybody but for us particularly, given that about half of what we do is in the emerging markets, stronger growth in [that] part of the world probably dominates for a period of time.
John Stumpf, the chief executive of the largest mortgage maker in the US—Wells Fargo—suggested pretty conclusively that QE3 has had a real impact.
Stumpf: We didn’t know QE3 was coming and now we’re adding people. And if QE3 lasts—if the volumes last for 12 months versus six months, we will make adjustments, up or down, based on that.
So next time you happen to hear the old “no one is hiring because of QE3” trope, you can confidently tell them they’re wrong.