#404 Chris Whalen Answers Your Questions on the Fed, Rates & the Next Bailout

<p>In part one of The Wrap&#39;s viewer question special, Chris Whalen takes on a full slate of audience questions about the Fed, the Treasury, and where rates go from here. He explains why Kevin Warsh and Scott Bessent have largely written off war-driven inflation as something monetary policy can&#39;t fix, and what it would actually take to change that posture. From there he walks through the plumbing most commentary skips: why shrinking bank reserves would push short-term yields <em>down</em> rather than up, how the Treasury can run its own version of quantitative easing through repurchase agreements, and why the Fed&#39;s mortgage-backed securities book — much of it now carrying an average life measured in decades — represents what he calls a study in hubris. He also fields the practical questions: whether long Treasuries are worth owning (his answer is no), where he&#39;d park cash instead, what a 5% 10-year does to the deficit math, and how big the next crisis-era bailout would have to be. The episode closes on the yen carry trade, the limits of what Washington can do about it, and Whalen&#39;s expectation that nothing difficult gets attempted before the midterms.</p><p><br></p><p><br></p><p>Thank you to our sponsor, Monetary Metals. Learn more at https://www.monetary-metals.com/THEWRAP/</p><p><br></p><p><br></p><p>Links:    </p><p>The Institutional Risk Analyst: https://www.theinstitutionalriskanalyst.com/  </p><p>Twitter/X: https://twitter.com/rcwhalen    </p><p>Seeing Around Corners book: https://www.theinstitutionalriskanalyst.com/product-page/seeing-around-corners-achieving-success-in-business-and-life-hardcover</p><p><br></p><p>Use the code TheWrap2026 for 25% off your first year of The Institutional Risk Analyst <a href="https://www.theinstitutionalriskanalyst.com/plans-pricing" target="_blank">https://www.theinstitutionalriskanalyst.com/plans-pricing</a></p><p><br></p><p>Timestamps:</p><p>0:00 — Cold open: shrinking reserves and the Treasury&#39;s repo plan</p><p>0:33 — Welcome + what this episode is (part one of viewer Q&amp;A)</p><p>1:10 — How long will the Fed stay indifferent to inflation?</p><p>4:08 — Could we cut the Fed out of rate decisions and just use SOFR?</p><p>5:02 — Would you buy a 30-year bond at these rates?</p><p>6:35 — If the Fed shrinks its balance sheet, don&#39;t rates go up?</p><p>9:43 — What does &quot;Treasury doing QE on the short end&quot; actually mean?</p><p>12:30 — A word from Monetary Metals</p><p>13:56 — Can the Treasury handle 5% on the 10-year?</p><p>15:26 — T-bills — pros, cons, and better alternatives</p><p>16:25 — How big does the next bailout have to be?</p><p>18:48 — The yen, intervention, and the carry-trade squeeze</p><p>21:16 — The biggest macro story of the back half of the year</p><p>23:37 — Parting thoughts: Florida, earnings season, and UWM next week</p>