s/balajisFED POLICY•Apr 24
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Hanke backs QE resolution fund to dump Fed balance sheet fast
The fight is over how to unwind the Fed's huge QE-era balance sheet without blowing up markets, and the proposed answer is to offload it fast through a dedicated "QE resolution fund" instead of dragging it out. That keeps rates, not a giant securities book, as the main policy lever.
On April 23, Steve Hanke lined up behind Kevin Warsh's plan and called that fund the only clean, rapid route. He paired it with stopping interest on reserves, shrinking the Fed's market footprint, and going back to old-school open-market operations to steer the interbank rate, arguing the Treasury duration cleanup is manageable rather than a shock event.
On April 23, Steve Hanke lined up behind Kevin Warsh's plan and called that fund the only clean, rapid route. He paired it with stopping interest on reserves, shrinking the Fed's market footprint, and going back to old-school open-market operations to steer the interbank rate, arguing the Treasury duration cleanup is manageable rather than a shock event.
Timeline3
Apr 21
Kevin Warsh said the Fed has to find a way, working with Treasury, to shrink its balance sheet and that rates are a better tool than securities purchases.
Apr 23
Steve Hanke said the Fed could stop paying interest on reserves, shrink its balance sheet, and restore open-market operations as the way to influence the interbank rate.
Apr 23
Hanke explicitly backed Warsh's balance-sheet plan and said a QE resolution fund is the only clean and rapid way to do it.
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Apr 24