Until 1935, Federal Reserve Banks from time to time purchased short-term securities directly from the United States Treasury to facilitate Treasury cash management operations. The authority to undertake such purchases provided a robust safety net that ensured Treasury could meet its obligations even in the event of an unforeseen depletion of its cash balances. Congress prohibited direct purchases in 1935, but subsequently provided a limited wartime exemption in 1942. The exemption was ren...| www.newyorkfed.org
Nathan Tankus is the director of research at the Modern Money Network, and a research fellow at the Global Institut| Mercatus Center
Ending the Global Dollar Shortage with Special Drawing Rights| Notes on the Crises
This Economic Commentary explains how warehousing—a seemingly innocuous institutional arrangement between the Federal Reserve and the US Treasury—came to threaten the Fed’s independence. Warehousing began as an arcane procedure designed to help the Treasury cover a specific type of foreign-exchange exposure. It then grew into a supplemental source of funding for the Treasury’s foreign-exchange interventions. Eventually the procedure morphed into a sizeable off-budget source of funding...| www.clevelandfed.org
(I write a monthly-ish opinion piece for Barron’s. This is my most recent one. You can find earlier ones here.) | jwmason.org
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Subscribe Readers may recall that I wrote a Politico Op Ed at a critical moment in the debt ceiling showdown. That piece, was entitled “Biden Can Steamroll Republicans on the Debt Ceiling”, and I aimed squarely at debunking the idea that the Federal Reserve would step on any “unilateral actions”| Notes on the Crises
