Yes Wall St profits are up. Free market cheerleader Lawrence Kudlow says this is the free market and uses Wells Fargo bank as an example:

The Messages Behind the Wells Fargo Profits:

"Big numbers on mortgage refis and purchases helped Wells Fargo. So did the interest-rate spread, where banks can borrow short at a zero rate and lend long at 5 or 6 percent. This is the upward-sloping Treasury yield curve that I’ve been talking so much about."

Kudlow fails to point out that part of the reason this interest rate spread exists is, banks for the moment have an implicit guarentee of government support if these loans fail. Banks are taking short term government debt, marking it up 5-6%, and (in the short term at least) the government bears all the risk of default. So it should be no surprise they are making money!

In the medium term, we have to worry if we're re-inflating various asset bubbles. We also have to worry about what I call the Treasury Bubble, which is the idea that private capital, soverign wealth funds, etc. will continue to finance US debt forever, as if that debt is essentially risk-free (it is not).

I am as much a fan of free markets as anyone, but we shouldn't give them credit for monetary policies that are set by central banks.