QE3 & American Jobs

QE3 provides a risk free tool for banks to profit from the sale of bundled mortgages known as mortgage back securities (MBS) to the FED in exchange for cash.  As QE3 is implemented the cost of a mortgage for consumers should decrease spurring growth in housing construction and other real estate related industries.  Banks remove the risk of mortgage defaults through the sale of MBS to the FED allowing them to lend at cheaper rates to consumers.  For a simplified version of the process note the following:

FED "Creates" Cash -> FED buys MBS from the banks -> Banks use money to issue more mortgages at cheaper rates

The unfortunate consequence of QE3 is the Fed is subsidizing banks by providing them with a risk free way to profit from the miss-allocation of capital into real estate related industries -Capital that is sorely needed by entrepreneurs and small businesses. Bank lending to higher risk small businesses and entrepreneurs is restricted by the opportunity for banks to profit from risk free returns resulting from the issuance of mortgages and the subsequent sale of MBS to the FED.

If America wants to bring back jobs, they need to get funds into the hands of entrepreneurs and small businesses.   The books of corporations are chock full of cash while small businesses and entrepreneurs with good credit are facing difficulties securing lending from reluctant banks.  98% of all businesses in the USA are small businesses and the government estimates they create 60% to 80% of all jobs.

QE3 should result in the following:
1) A weaker American dollar as the FED "creates" more money.
2) Lower interest rate mortgages for consumers.  
3) Increased profits for banks and businesses involved in real estate related activities
4) Higher priced commodities.

"We have to make sure that peoples 401's and IRA's go up so that there will be a wealth effect and people will go out and buy more things." -Ben Bernanke