Why nationalize the US banks when you can just nationalize the Federal Reserve?
That’s in essence what the White House did Friday by putting the Fed under Treasury Department supervision.
But it does not stop there. President Trump is now the world’s banker as he takes control of the Fed’s balance sheet folding it into Treasury’s Exchange Stabilization Fund, which will now contain the International Monetary Fund’s Special Drawing Rights.
Treasury Secretary Steve Mnuchin now will be the 800-lbs gorilla in all debt markets, not just the Treasury market. Commercial Paper, Asset-back securities, corporate bonds and bond ETFs and small business loans are just a few of the markets the administration will be securing through the Exchange Stabilization Fund.
Blackrock will be the firm executing all these trades using the Fed’s balance sheet but employing Treasury’s new special purchase vehicles to lawfully prop up these flagging markets.
Is this the first step towards ending the Federal Reserve? Unknowable right now, but should this operation last through the end of the year, the Treasury Department will control the majority of US and corporate debt markets directly.
This is a very good column though it might be more accurate to say that the UST and the Fed are now more closely integrated and will cooperate to a far greater degree. This has been a slow evolution since 1929 then the Bank Act of 1935, the Fed Treasury Agreement if 1951, and other lesser changes (evolutions) through the 2008 to 2015 period.
If anything Mr. Powell has been the undertaker for the Fed .
Is Mr. Trump the World’s central Banker? Not really as this is not how USG policy is formed and Mr. Trump operates within this policy formation protocol.