No Biden White House Would Ever Do This to the Fed

Nov. 20, 2020 (EIRNS)—President Donald Trump continues to show that the time-hallowed “independence of the Federal Reserve” is something he is quite willing to encroach on, and quite transparently. In a move which Fed Chair Jerome Powell had just told Congress the Fed did not want made, Treasury Secretary Steven Mnuchin announced Nov. 19 that the Treasury would pull back a large chunk of the $454 billion in taxpayer funds put up in early March to back the Fed’s huge 2020 bailout of financial markets and megabanks. An interesting question is whether this is connected to Mnuchin’s sudden restart today, of negotiations on a new “stimulus” bill, but this time with White House chief of staff Mark Meadows and House and Senate Republicans—not “Chuck and Nancy.”

The large chunk of Treasury cash Mnuchin “invested” in the Fed’s bailout was actually put into special-purpose vehicles designed by the giant Wall Street fund manager BlackRock, Inc. These were designed such that whatever money the Fed lost in its nearly $4 trillion 2020 bailout binge, buying every stock and bond and derivative in sight worldwide, would actually be lost by the Treasury. Mnuchin is now primarily taking back the nearly $200 billion Treasury put into vehicles that were supposed to aid “Main Street” rather than Wall Street—participating in municipal bond issues, buying small and medium-sized business loans, helping banks make Payroll Protection Program loans. Since the Fed and its megabank clients showed no interest in any of this lending for “deplorable” businesses, households and municipalities, even financial media reporters have been asking Powell for months, “Why don’t you give those funds back to the Congress and Treasury for another COVID relief bill?”

However, Mnuchin hit some Wall Street bailout programs, too. Specifically, he requested the expiration of the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Municipal Lending Facility, the Main Street Lending Program, and the Term Asset-Backed Securities Loan Facility by Dec. 31.

But the Fed, which appears—from its asset book in recent weeks—to be preparing to extend and expand quantitative easing, is not happy. It immediately issued this heartfelt statement: “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.” Bank analysts were more direct: “The White House has stabbed the Fed in the back,” said Bank of America.

Chair Powell had just stabbed the President in the back by moving publicly to join the Prince Charles-Mark Carney-Mike Bloomberg Network for Greening the Financial System and by backing the Paris Climate Accord. Push is coming to shove—President Trump could take moves toward actually nationalizing the central bank.