Financial 411: Did the Fed's Quantitative Easing Work?

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The Federal Reserve's sometimes-controversial program of quantitative easing, or QE2, comes to an end in 15 days.

Under the program, the Fed bought $600 billion in U.S. treasury bonds, in an effort to keep interest rates low and spur economic growth. Federal Reserve Chairman Ben Bernanke gave QE2 tepid support at his news conference last April.

"We were very clear from the beginning that while we thought this was an important step, this was not going to be a panacea, that it was only going to turn the economy in the right direction," he said.

Was Bernanke right? Did QE2 turn the economy in the right direction?

Lawrence White, Professor of Economics at NYU's Stern School of Business, said yes.

"There was more lending, the banks were not just sitting on the cash. They were out-lending more than otherwise would have been the case," he said. "I think the economy would have been in more serious difficulties had the QE2 not happened."

White backs up his case, and speculates on what may happen, now that QE2 is coming to an end.


Stocks ended sharply lower, as unrest in Greece further destabilized global financial markets. Major indexes had their biggest drop since June 1. The Dow dumped 179 points, to close below 12,000 for the second time in two weeks, at 11,897. The S&P 500 dropped 22 points, to close at 1,265. The NASDAQ shed 47 points, to 2,631.