Banks Perfect Trading Record

One of the effects of QE and one reason I believe the Federal Reserve's monetary policy is biased toward the big banks, a glaring conflict of interests, can be found in the earnings reports of major banks. I touched on this a few days ago when I asked what the bank's earnings would look like in an environment absent Quantitative Easing and POMO. JPM today and BAC yesterday both reported perfect trading results at their trading desks for the quarter.

It seems fairly clear that the Fed's massive stimulus nearing 2 trillion dollars has done little for price stability and arguably nothing for employment, their two mandates. However, it has given the banks windfall profits from trading operations, which probably has saved several banks from falling down the Lehman Brothers chute over the last year or two.

The evidence is there right in front of us, input costs are rising, consumer costs are rising, the value of the dollar has plummeted and unemployment has barely budged nearly two trillion dollars later, but the banks have consistently posted record trading profits. I wonder what the effect on the economy would be if the Fed removed this free bonus from the banks and made them rely on traditional profit structures? I wonder if housing would be in better shape, if small businesses would be better able to borrow and hire more employees, if credit standards would be relaxed a bit allowing consumers to spend reasonably to buy cars, houses, etc?

Why these questions are hypothetical for the moment, it seems we may find out the answers before year's end if we are to take recent Fed statements at face value. The banks have had time to sock away a nice nest egg under quantitative easing. Perhaps soon the public will be able to do the same, or at least see their savings accumulated over a lifetime worth something once again.