The municipal bond business is 3.8 trillion. The progressives want the Fed to enter this business, maybe own a third of it and get monopoly gains. The monopoly gains become seignioage, spent, gone. So the Fed really cannot resell these bonds on the run as they will be more heavily discounted.
The Fed is stuck between distorted markets, the Treasury and municipal. It will ultimately realize much of that seigniorage as a loss if it ever normalizes. This is a case of minimizing government losses, no one presumes the imbalance is cost free.
The Fed has taken on the task of revenue sharing. Those loans will be backed by Swamp earmarks. If you find Texas Space Cadets then you find a Fed municipal market. The market further distorted, the Fed cannot recover monopoly gains to neutralize.
No comments:
Post a Comment