Trump and Kevin Warsh Propose Radical New Fed-Treasury Accord—What It Means for Your Money
A bombshell proposal is shaking the foundations of monetary policy. Former President Donald Trump and ex-Fed Governor Kevin Warsh are floating a new accord between the Federal Reserve and the Treasury Department—a move that could redraw the lines of financial power overnight.
The Blueprint for a New Era
Forget the traditional independence of the central bank. This framework suggests a tighter, more coordinated dance between fiscal and monetary authorities. It’s a direct challenge to the post-2008 playbook, aiming to streamline crisis response and, proponents argue, supercharge economic growth.
Markets on Edge
Whispers of the plan are already sending ripples through trading desks. The big question: does this mean easier money to fund government ambitions, or a more disciplined approach to inflation? Bond vigilantes are watching—and so is every crypto trader betting against the old system.
A Cynical Take from the Floor
Let’s be real—this smells like another attempt to monetize the debt with a fancier name. Wall Street gets a new narrative to trade, while Main Street gets the volatility. Some things never change.
The bottom line? When the rules of the game are rewritten, it pays to read the fine print first. This accord could be the trigger for the next great monetary experiment—whether we’re ready or not.
Trump backs tighter coordination with Treasury
Fast-forward to now. Donald TRUMP is back in the White House as the 47th President, and his pick for Fed Chair, Kevin Warsh, is floating the idea of a new accord. It’s not just about balance sheets or interest rates. It’s about control.
Trump made it clear last year that he thinks the Fed should be more mindful of how its policies affect government debt. Right now, the U.S. is paying nearly $1 trillion a year in interest, about half the annual deficit.
Kevin has talked about creating a written agreement with Treasury Secretary Scott Bessent. In a recent interview, he said such a deal could “describe plainly and with deliberation” how big the Fed’s balance sheet should be, and how the Treasury plans to issue debt. That might sound boring, but it could lead to a major shake-up.
A light version of the plan might just be cosmetic. But a more aggressive version could turn the Fed’s $6 trillion-plus securities portfolio upside down. Kevin isn’t alone either. Some Fed officials support dumping long-term bonds and loading up on short-term Treasury bills instead, which they say WOULD better match how markets actually work.
Warsh could tilt Fed toward short-term debt
Deutsche Bank thinks a Warsh-run Fed could be buying short-term Treasury bills non-stop for the next five to seven years. Right now, bills make up less than 5% of the Fed’s holdings.
That number could go as high as 55% if the plan plays out. But that only works if the Treasury plays along and starts selling more bills instead of long-term debt. And that comes with a cost.
Short-term debt rolls over fast. If interest rates spike, the government’s borrowing costs jump with it.
So while this plan might seem like a way to ease the burden now, it could backfire later. A heavier reliance on bills would make the Treasury’s costs more volatile, especially in a shaky market.
None of this is locked in yet. But even without a formal accord, Wall Street is watching closely. A tighter LINK between the Fed and Treasury could change how bonds are issued, how rates are set, and how much control the central bank really has.
The original 1951 deal said the goal was to “assure the successful financing of the government’s requirements and, at the same time, to minimize monetization of the public debt.”
But if Trump and Kevin MOVE forward, that balance could break… again.
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