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Behold: A Record Plunge In Primary Dealer Treasury Holdings
If you were looking for data to help support the narrative that the Fed's silence on the looming expiration of supplementary leverage ratio exemptions is causing consternation, you could scarcely ask for something "better" than a record decline in primary dealer Treasury holdings.
Positions plunged by almost $65 billion in the week through March 3, the most recent data showed (figure below).
That's a big drop, and as folks were quick to point out, it makes for an ostensibly odd juxtaposition w
Who has the authority to extend the SLR relief? I thought it was the Senate and there are some objections from Democrats.
Powell has authority to extend.
Hmm, so the Fed folks finally got the proper fiscal support from DC (after years of pleading), and now they’re going to abruptly throw this little birdie off the tree limb and scream “fly, time to grow up kid!” … I mean, nothing surprises me anymore, but this scenario seems low probability. We’ll soon find out !
Thanks for clarifying @joesailboat
I’m pondering at least stepping aside from financials till this is sorted. One possible element in a “compromise” (i.e., better than cold turkey but worse than kicking the can) is Elizabeth Warren’s position that bank distributions of capital be limited so long as SLR exemptions in any form are in place. So the risk I’m contemplating is that the Fed could announce that relief will continue in some form but banks have to limit buybacks and dividends in the interim. Instead of potential generalized equity chaos, they could merely toss bank stocks under the bus while nudging the can with a toe.