Contrary to public perception that the Federal Reserve continues to reduce its holdings of securities on its balance sheet, the Fed is in fact in full bailout mode with regard to the long-unpayable $40 trillion debt of the U.S. Treasury, with the Fed’s balance sheet being back up to $6.7 trillion. While it is still selling off much smaller amounts of mortgage-backed securities, it is buying up – bailing out—far larger amounts of short-term Treasury Bills from the banks.
Some $305 billion in Treasury securities had been bought from banks by the Federal Reserve in the year ending July 16, 2026, according to the Fed’s own monthly Form H4.1, “Factors Affecting Reserve Balances”. Of that $305 billion, $311 billion – more than all—were shortest-term Treasury Bills, which mature and roll over in a year or less, ranging all the way down to a month.
Moreover, the Treasury is estimated (by Goldman Sachs) to be issuing $847 billion in short-term Bills this Fiscal Year 2026, which ends Oct. 31. That’s two-and-a-half times Treasury Bill issuance in FY2025; it has been relying more and more on this short-term strategy since 2023! That the United States can no longer repay its debt, has become clearer as it is resorting to such maneuvers just to keep paying the interest, which has become the largest mountain in the Federal budget. Moreover, the maneuver merely plays into the hands of hedge-fund money managers and bank trading desks, which have taken up the massive issuance of short-term Bills for purposes of speculation and financial derivatives trading.
A lengthy article in Reuters July 23, explained that while the Treasury may have thought it could steadily roll over short-term debt while waiting for interest rates to fall, rates have rather kept rising, making its interest payments much larger when it keeps rolling the same debt over. The interest rate on the one-year Treasury Bill has been rising steadily since February 2026, for example, and last week reached 4.14% along with other rising rates. Interest rates have kept slowly but surely rising, even while oil product prices have risen and fallen, showing a market which can still roll over, but cannot pay, America’s debt.
Hence the Fed has stepped in to buy the increasing flood of Treasury Bills, and is now in full “quantitative easing”, bailout mode.
