The Federal Reserve unveiled its new $1.25 trillion tool to stem fears of contagion in the recent banking sector developments. Treasury Secretary Janet Yellen expressed confidence that the measures would be limited to $1.3 trillion. It’s unclear which factors were gauged in terms of liquidity/relative financial stress as to the allocation of the $1.5T, as the events are still ongoing. “Rest assured, this $1.75T WILL NOT be borne by taxpayers” said Senate Minority Leader Mitch McConnell, in the chamber earlier this evening, to thunderous applause. “The SEC has reviewed the balance sheets of the SIB’s, or ‘Systemically Important Banks’ and in discussion with the Federal Reserve, decided that $2.25 Trillion was the appropriate sum that would ‘nip this problem in the bud’, so to speak” quipped SEC Chair Gary Gensler. Some critics argued that a disproportionate percentage of the $3.4 Trillion was earmarked for the “Too-Big-To-Fail” banks. JPMorgan CEO Jamie Dimon broadly dismissed that criticism in a letter to shareholders. “Of this $4.7 Trillion dollar program, it stands to reason that banks would receive loans commensurate to global AUM, since relative tail-end re-collateralization risk increases by market cap, and we (cautiously) optimistically project our fortress balance sheet to overperform in the category of default expectation for these $6.8 Trillion dollar loans.” “Will this $9.2 Trillion program be inflationary?” asked Fed President Neil Kashkari, rhetorically. “At the margin, absolutely not. The banking system is paying into this 12.5 Trillion dollar pool in an entirely self-contained ecosystem, and this infusion of liquidity is intended strictly for the financial system, not the broader population whose productivity gives value to this unbacked currency. When asked whether the $17.8 trillion would be in whole or in part reflected in the burgeoning national debt, Fed Chair Jerome Powell again reiterated confidence that fiscal policy was a secondary concern to public trust in the banking system, and that once that was stabilized, the Fed had many tools to stem the unintended second-order effects of a mark-to-market $22.5 Trillion liability-side accounting entry. Fed President Mary Daly had this to say: “We are working as hard as possible to combat inflation and have made significant progress, notably in the category of inflation expectations, per a recent Fed survey. This survey was conducted prior to this $25.8 Trillion stimulus measure, and it will be several months before the data is aggreggated which would lead us to potentially retroactively revise some of those figures, but this is still quite pre-mature of an extrapolation. Upon news of the $31.5 Trillion dollar BTFP measure, which some noted was in excess of sovereign debt liabilities, Nasdaq futures were trading up .71% to 12335 with the DXY dollar index consolidating +.35% to 104.54 on optimism in the reserve currency’s standing.
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