The Fed Scandal That Isn’t Being Reported
The Fed Scandal That Isn’t Being Reported. The Fed is making payments to Wall Street to the tune of $450 million every day. More than 3/4 of those payments don’t even go to American firms. They’re foreign financial institutions.
EJAntoni joins us right now. He is the chief economist at the Heritage Foundation, heritage.org And I want to kind of reverse the conversation here by going over some things that you tweeted that made me say, OK, is this proving my own thesis my own philosophy that what I what what I’m told versus what I see doesn’t jive that things are better than we thought they would be. But maybe things aren’t great. Or does this mean things are excellent? There comes a moment where it’s too many numbers. Let me get into what I mean here. EJ, you posted this, you started. With this post right here and you said, can we just fire the Board of Governors at this point?
And I thought that was a really kind of fascinating thing to say. This is remittance. Remittances due to the US Treasury in millions of dollars and it is basically. Starting in 2023, a straight line down. What the heck am I looking at here?
Tony, these are essentially all of the monies that the Fed should have been paying to the Treasury. A lot of people are surprised to learn this, but the Fed actually turns a small profit because of the nature of of its operations. All of those profits, however, once it clears its operating expenses, have to be turned over to the Treasury. It’s not as if the Fed, even though it is a private corporation, it’s not as if the Fed gets to keep those profits. However, beginning in in September of 2022, the Fed stopped having any profits at all and it started piling up losses… what has never happened before is to have sustained losses of this nature and it is all due to complete and total monetary mismanagement at the Fed. And it is all the more reason why, not just Powell, but frankly, the entire Board of Governors, all of them need to go.
So, I guess we start with asking a basic question. How does this happen?
Great, great question. How do the people with a money printer somehow lose money? That’s where we’re at today. So basically, the Fed has both interest that it’s receiving and interest that it’s paying, kind of like a bank and in the same way that we had a regional bank crisis back in the spring of 2023, including the second largest bank failure in American history, the Fed put itself into the exact same situation. It put the banking system in general where it loaded up its own balance sheet with very low-interest rate assets, whether those were mortgage-backed securities, whether those were treasury bonds, whatever the case may be, these were things that that. Made very, very low interest rates, maybe 2 or 3%. Then as interest rates rose, which was because of the Fed, then interest rates on liabilities, things that the Fed is paying out every day, went up dramatically. They went up from a fraction of a percent to over 5% in some instances. So now the Fed and again, many banks like Silicon Valley Bank were, are, were and are in a position of paying 4 or 5% on liabilities while only earning 2 or 3% on assets. Obviously, that’s a path to insolvency. It’s negative cash flow. And if you’re a bank, sure enough, that can turn into bankruptcy, if you’re the Fed, of course you can just print the money and create inflation and accrue these massive assets hundreds of billions of dollars’ worth and you know to be clear this this is not without impact here. It has impact in terms of the Fed’s ability to conduct monetary policy. It also has an impact on taxpayers, Tony, because every dime that the Fed is not sending to the Treasury adds to the deficit and ultimately has to be made-up for by taxpayers. This is and these are not trivial amounts here. This is hundreds of billions of dollars… the only way that the Fed now entices banks to keep money parked at the Fed is by paying them interest on it. They’re also using something called reverse repurchase agreements, which are essentially short-term loans to the Fed, that the Fed is using that as another mechanism to soak up excess liquidity and they’re paying interest to financial institutions using both of these mechanisms right now. Work with me here. We’re paying insane amounts of interest via the Fed. Or I should say the Fed is paying insane amount of interest and we’re not. the Fed is not paying back the Treasury the way it’s supposed to. Exactly. So instead of making payments to the Treasury on behalf of taxpayers, the Fed is making payments to Wall Street to the tune of over $450 million every day. And actually, part of the scandal here, Tony, is the fact that if you look at something like the reverse repurchase agreement marketplace, more than 3/4 of those payments don’t even go to American firms. They’re foreign financial institutions. And we don’t even know how much of the interest on reserve payments are going to foreign institutions directly or indirectly because that information is not disclosed by the Fed. So I mean, it is an absolute scandal that the Fed has basically turned the monetary system. Now into a way to give free money to these different financial firms, many of whom aren’t even American. So that in and of itself is a national security concern, which I would expect and want to hear President Trump and others talk about.
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