Treasury Secretary Steven Mnuchin’s $454 billion first-loss investment in Federal Reserve lending programs, provided at his request in the CARES Act, got the Treasury significant co-control of the Federal Reserve’s so-called pandemic response. But there has been zero indication that Mnuchin has used it to direct Federal Reserve currency issuances anywhere not already planned by the Fed governors, BlackRock LLP, and Larry Fink’s fellow Wall Street “geniuses” (the victim-President’s word). The Federal Reserve’s balance sheet shows what has actually happened.
As of Aug. 6, that balance sheet stood at $7 trillion (actually 6.993 trillion) for the sixth week in a row. Some $6.45 trillion of that consisted in Treasury securities and mortgage-backed securities, bought from major banks. This is the same old quantitative easing (QE) — roughly $2.7 trillion in new QE, in fact, since Oct. 4, 2019 when the Fed started QE4. Another $105 billion consists in currency swap lines with foreign central banks for their QE operations; and $70 billion is holdings of foreign currencies and gold.
What’s “new,” then, totals about $370 billion over the past four months, and it appears that is backed by some of the $454 billion allocated to the Fed by Congress under the CARES pandemic relief act, as noted above. The only serious loan assets the Fed has are $84 billion from all its 11 “facilities” announced with fanfare in March and April, $67 billion of them representing Payroll Protection Loans — a very small part even of the PPP program — which the Fed bought from the lending banks at a 5% discount. Beyond that, the Fed has bought $44 billion in new corporate loans and $37 billion in municipal loans from the megabanks.
That is the Fed’s “pandemic response.” This is so derisory in the face of the huge need for business and household credit, to say nothing of infrastructure credit, that at his Aug. 5 press conference Fed Chair Jerome Powell was asked by CNBC reporter Steve Liesman, “Why don’t you just give the $454 billion back to Congress, to spend in the next relief bill?”
