Proposed Bank Liquidity Reforms Could Boost Lending and Affect Treasury Yields

Citrini Research suggests that Federal Reserve Chair Kevin Warsh and Treasury Secretary Scott Bessent are coordinating efforts to reduce long-term bond yields, partly through proposed changes to bank liquidity rules. The specific reform sought by Treasury Secretary Bessent involves allowing banks to count borrowing capacity at the Fed's discount window towards meeting liquidity coverage rules, which could free up $500 billion to $1 trillion in extra capacity for lending and Treasury purchases.