Treasury Secretary Attacks Journalist Over Fed Expansion Request

US Treasury Secretary Scott Bessent recently celebrated what he called one of the 'highlights' of the Warsh-led Federal Reserve on social media. However, his post wasn't about monetary policy but rather a jab at mainstream financial journalists.

Bessent took issue with Wall Street Journal reporter Nick Timiraos for questioning his attempt to persuade the Fed to expand its Foreign and International Monetary Authorities Repo Facility (FIMA). The Treasury Secretary wanted to increase the borrowing cap from $60 billion per counterparty, allowing Japan to borrow dollars against its US Treasury holdings without selling large chunks of them.

The FIMA facility allows foreign institutions to temporarily exchange Treasury securities for dollars. By using this facility, Japan can get the dollars it needs to purchase yen and boost demand for its currency without having to sell Treasuries, which would increase US Treasury yields.

The conventional narrative holds that the Fed is independent of the Treasury, but according to a 1951 Treasury-Fed Accord, their relationship is characterized by 'cooperation' and 'coordination'. This arrangement has been in place for decades, with officials repeatedly describing it as such.