The Fed's $3 Trillion Problem | Maroon Macro & Joseph Wang
Forward Guidance
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The Limits of Leverage
The Federal Reserve or the US government made an exception for banks whereby Treasuries would not count as assets in a numerator. And therefore, and that's, and then banks loaded up on Treasuries. The conclusion that a lot of people had was, Oh my God, banks are so worried about a depression, but actually they were just given a free amount of risk assets to hold or leverage to hold. Yeah, basically. So it was not necessarily reflecting economic factors. There's just sort of, uh, they were relatively more advantageous compared to other types of assets.
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