In response to David and Bryan, I do not think that Ben Bernanke and other Fed officials are sitting inside their offices plotting to ruin the economy while saving banks. They have convinced themselves (and most pundits) that saving the banks is saving the economy. They have failed to convince Scott Sumner, and they have failed to convince me, but in the grand scheme of things, that means little.

We will never know whether the bailouts made us better off or worse off. The conventional wisdom is that without the bailouts things would have been much worse, but that is just an incantation not an empirical truth.

I would note, however, that

1. Relative to expectations in the fall of 2008, banks are doing better and the economy is doing worse.

2. If the Fed were focused solely on stimulating the economy with conventional monetary policy, then there would be no need to buy mortgage-backed securities and no reason to pay interest on reserves.