What was the impetus behind the White House meeting between President Obama, Vice President Biden and Fed chief Yellen and the two special expedited Federal Reserve meetings late last month?
My hunch is it had everything to do with Saudi Arabia and its reaction to the possible release of 9/11 documents formerly redacted from official reports.
The Saudi’s with more than $750 billion in Treasuries sitting on their balance sheets probably threatened to create a fire sale by dumping our paper on the market, which would have cratered equities and bond prices across the globe.
We know the Saudis are desperate for cash after seeing oil prices suppressed for so long that they are looking to sell a 5% stake in Aramco — the crude oil production arm of the country — for $100B to most likely the Chinese.
We also know that all these meetings did not revolve around the statement or actions the Fed made at its April meeting. Both the no rate rise and the forward guidance were well anticipated by the markets.
So the only reason for the White House — sans Treasury Secretary Lew — to get involved was if national security was on the table.
It appears the Saudis won the bluff by going all in on Treasury bet, since we have not heard anything further on the matter of releasing the documents.