The Federal Reserve (the “Fed”) is often criticized for policy mistakes, such as Paul Volker’s “inflation fighting” in the late 70s/early 80s or the “kept interest rates too low for too long” Alan Greenspan.

The mistakes, no doubt, largely fuel the fire of critics, with the missteps acting as an indication that Fed lacks sufficient foresight to provide reliable policy guidance.

Detractors of the Fed don’t stop there (at least the smart ones don’t just want a “I told you so” moment).  They, instead, ask the question – if the Fed lacks any reliable foresight, then why allow the Fed’s “money bureaucrats” to manipulate financial asset prices?

It’s a realistic question for anyone willing to see past their status quo bias.

Among the wide-reaching effects Fed policy has, one distributional aspect seems to always be forgotten.  And that is the demographic component.

(What’s implied by distributional effects?  In a nutshell, Fed policy hurts some in order to benefit others.)

Fed’s low interest rate policy

The remainder of this article looks at what interest income has done by Metropolitan Statistical Area (MSA) since the Fed began lowering interest rates in August 2007.

How has the Fed’s unprecedented low interest rate policy affected interest income?

Here’s a look at the U.S.

Perhaps unsurprisingly, interest income gained by individuals dropped like a rock after the third quarter of 2007, from a high of $1.38 trillion to a low of $1.18 trillion, a decline of about $200 billion. If one accounts for the interest income trend prior to the Fed’s market manipulations, the missing interest income is about $250 billion.

U.S. Personal Interest and Dividend Income Fed

Of the age groups most affected by the Fed’s interest rate moves are older Americans.

Here’s the evidence.

The following is a geographic plot of interest income as a percentage of total income by MSA.

(On explanation: a rank of 1 (or color blue) indicates an MSA has a high portion of income from interest income; conversely, MSAs more light orange to dark orange place less importance on interest income.)

Where are the losers?  By simple inspection, individuals in Florida, individuals living along the west coast, and individuals in the financial centers and the east beltway are certainly losers.

Interest Income as a Percentage of Total Income

The following chart puts the geographic view in a bar chart.  It includes a list of the 25 biggest losers, as measured by the change in interest income from 2007 to the end of 2013.

On top of the list is the New York-New Jersey-Long Island, NY-NJ-PA MSA, down about $10.8 billion in interest income since 2007. The remainder of the top five biggest losers include Chicago-Joliet-Naperville, IL-IN-WI, down $6.7 billion, Miami-Fort Lauderdale-Pompano Beach, FL, down $6.0 billion, Los Angeles-Long Beach-Santa Ana, CA, down $3.4 billion, and San Francisco-Oakland-Fremont, CA, down $2.8 billion.

The full list of losers is available from the author upon request.

Loser MSAs as Measured by Forgone Interest Income

Isn’t it interesting how much manipulating power the Fed has. One thing is for sure – the Fed certainly does hate savers. At least if you believe actions speak louder than words.