Theme: Crisis

UNDERSTANDING THE NEW FED-TREASURY

by Daniel Roland Anderson

(CD: Note: this is why I bait these things. because external confirmation is more persuasive than my prognostication.)

SUMMARY: “Trump has just built a system to collateralize the Fed with underlying real hard assets from the private sector.”

From Daniel:

I ran this by a contact with a solid background in banking and finance. He’s not as hard right as I am, but here’s his analysis:

Oh, this is interesting. I glad you shared it! We knew the Fed was buying assets to provide liquidity to investment funds but not like this. Even the Communist infiltrators that formed the Fed in 1913 never intended for the Fed to do this. The Fed was formed to:1) Serve as the government’s own central bank, and 2) Monitor and regulate the banking system by implementing mandated monetary polices. In other words, the treasury decides what needs to be done for treasury operations and the Fed executes the directives while accounting and reporting back to the treasury.

BlackRock is a huge, and historically excellent, fund creator/manager. What it appears Trump has done is appended a new huge division to Fed operations. Let’s call it “Private Market Asset Repurchase Operations”. Apparently up to $1T of private fund assets may be “purchased” by the Fed each month. That’s a huge number. So, if a mutual fund, ETF, etc. experiences a run on its fund by investors who want out, they just sell the underlying assets to the new Fed operation.

Trump has hired BlackRock to run the operation and use the Fed’s balance sheet to account for the transactions. BlackRock will surely be paid a customary fee, like 375% annualized, to manage the new operation.

The Fed has just been privatized in a sense because the direct private asset repurchase operations will ultimately dwarf traditional Fed operations. Somebody (or is it more accurate to say, “some buddy”) at BlackRock is really happy right now they stayed in Trump’s good graces.

BTW, if the term “Repo” is being used in a traditional sense, the buyer (the Fed) gives the seller (the fund needing liquidity) a contract allowing the fund the repurchase those assets at some point in future according to agreed upon conditions. Hence the term “repo”.

This is pure genius (and scary) at every level. There is also NO WAY Trump and Co. just dreamed this up. It has to have been in the works for a while.

Genius? Yes. Here are a couple of thoughts.

The Fed( now Trump), can decide what funds to let fail. Pissed Trump off in the past but now need liquidity? “Sorry Joe, the underlying assets in your fund don’t meet out investment standards. And when your fund fails? We are going to put you in prison for bilking your clients out of their money.”

“Hey Chi-na! Need cash to rebuild and want to sell the Treasuries back you bought and thought would cause us to default when you demanded your capital back? Well, here you go, paid in full! We’ll just add them to our new BlackRock Treasury Fund.”

Trump has just built a system to collateralize the Fed with underlying real hard assets from the private sector.

How’s that for a primer?