Aren’t We Making Too Big Of A Deal About The Fed’s Balance Sheet?

BusinessPolicyAren’t We Making Too Big Of A Deal About The Fed’s Balance Sheet?ByJohn Tamny,Contributor.Follow AuthorApr 26, 2026, 10:00am EDTFacade of the Marriner S Eccles building of the United States Federal Reserve, on a bright and sunny day in Washington, DC, United States, July 24, 2017. (Photo by Smith Collection/Gado/Getty Images)Getty ImagesThe Federal Reserve doesn’t “print money” to “monetize” the debt of the U.S. Treasury. The view presumes that a creation of the federal government could fund that same government. If Treasury were reliant on the Fed’s so-called “printing press” to remain upright, then Treasury would have no debt. That’s because no one buys Treasury income streams, rather careful investors buy U.S. Treasury income streams for what they can be exchanged for: think real resources including trucks, tractors, buildings, computers, paper clips, copy paper, and most important of all, labor. To which some will ask how - if it isn’t and hasn’t been printing – the Fed has built up such a sizable collection of interest-bearing assets since 2008. For all that time the Fed has been paying banks interest on their reserves, only to exchange those reserves for credible, interest-bearing assets. Savings for savings. The obvious question from this is why banks would ever rent money to keep it at the Fed. Furthermore, no bank ever sidelines money that could be generating returns, so why the Fed as the proverbial warehouse? In the answer we can see why so many (or perhaps so few) were against the bailouts in 2008. The banks saved were gun shy, which meant the Fed was a safe place to get a risk-free return on monies in their control. From this, is it any surprise that “private credit” and other more risk-focused forms of lending got their wings? With banks some of whom stared death in the face pulling back on all but the safest of safe lending (the low rates were paradoxically a sign of difficult bank lending conditions), riskier lending or “systemic risk”...