No I don't know what precise legal authority the Fed has to do such things, but roughly speaking what happened is that the Fed gave all the Banksters a giant do-over on all of their bad bets. But the rest of us didn't get any such do-over. If they gave us a do-over, by, say, giving everyone a 30% haircut on their debts, then people would have more money to spend.
But only giant mega banksters, the smartest guys in the room, the ones who destroyed the economy, get a do over. The rest of us have to suffer so that they economy can continue to be in recession. No I don't know why this is. In "normal" (full employment) times all these crazy ideas would be bad policy. But we aren't in normal times, and giving people lots of free money would actually be very good policy. Better policy than giving it to the Banksters anyway.
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