Ben Bernake: Monetary policy and inequality
brookings.edu
brookings.edu
Instead of buying back bonds and bailing out banks, what if the Fed would have paid the monthly mortgages of home owning citizens for a year-or-two or paid them as much as they have put into purchasing bonds via QE?
Benefitting the little guy by paying the banks their respective mortgage payments would have kept both parties afloat (The banks and the home owner) and would have been a better trickle down policy?
Then again, this is hindsight. YMMV.
Most things outside the realm of the Fed's usual mechanisms require Congress to act (either to directly create the policy or to expand the Fed's mandate so that the Fed can execute the policy.)
It's not QE by the Fed that should have been replaced by consumer bailouts, but the congressionally authorized bank bailouts from the Treasury; that fiscal action might have relieved the pressure for the Fed pushing hard on its monetary policy levers for so long.
I swear I remember people calling for the same thing around the time of the bailouts. If the bank bailouts weren't rushed through unnecessarily then a "people's bailout" could've definitely happened.
Unfortunately the stimulus bill wasn't large enough (even though it was 787 billion dollars). This was the largest recession ever. The Great Depression needed a stimulus bill called World War II. What followed were over 2 decades of prosperity. The most recent stimulus plan simply wasn't big enough to allow companies to grab Wall Street's attention, so Wall Street parked its money elsewhere.
TL;DR: not enough jobs were created so people got poorer while Wall Street got richer.
Edit: phrasing
Once other countries caught up though, the world started getting a lot tougher for America. Luckily, it kept moving into other sectors via innovation. Unfortunately, most of these new sectors (Computers, BioTech, Finance, Robotics etc.) are just not as labor intensive so the benefits of economic growth are then limited to a few instead of many.
However I think we cannot ignore the fact that America itself was expanding. Demand within America was increasingly fueling GDP as our war-time infrastructure was converted to build materials for homes, highways and specifically cars. These industries are now mostly being reimagined off of American shores. The world is certainly getting tougher for American industries but I believe there is enough demand that exists within America that we could support ourselves more with "Made In America" goods than what we currently do.
I have read adding tariffs to some goods made offshore by companies incorporated in America could help out our economy, thus preventing the flight of corporations and capital outside of American soil. America still throws a lot of weight around regarding global demand so if we can force American corporations to stay in America by tariffing goods they make offshore, I think we could effectively keep jobs here, thus generating stronger demand.
This is totally self-serving historical revisionism. The Federal Reserve played a significant role in the Dot Com bubble, in the Housing Bubble, and in bailing out Too Big To Fail banks when there was a genuine chance for a much-needed reckoning. To think such a powerful "monetary policy" figure such as Greenspan or Bernanke would deny that their actions had anything but positive outcomes is utterly preposterous. Both did extensive damage to the middle-class, and Yellen is simply continuing the abhorrent tradition set by her predecessors.