President Trump wants to spend. He also wants, where possible, to avoid congressional interference and bigger deficits. Enter the balance sheet.
The big picture: The president is going through the couch cushions of government — $200 billion from Fannie Mae and Freddie Mac for mortgage bonds, $20 billion from a Treasury fund for Argentina — to advance his policy priorities.
- Critics say it's nontraditional at best, and autocrat-adjacent at worst.
What they're saying: "The executive branch is getting very creative using the pockets of money at their disposal with no congressional oversight," Ed Al-Hussainy, portfolio manager at Columbia Threadneedle, tells Axios.
- On a call with clients, BCA research strategists compared the latest Trump policies to those of both New York City Mayor Zohran Mamdani and Chinese leader Xi Jinping.
- It's "communism with capitalist characteristics," Al-Hussainy says.
State of play: Here's how government money has been used in unconventional ways:
- The Treasury's Exchange Stabilization Fund was tapped to underwrite a currency swap with Argentina.
- Administration officials floated the use of unspecified pools of capital to backstop oil assets tied to Venezuela and to potentially purchase Greenland.
- Now, Trump is directing Fannie Mae and Freddie Mac to buy $200 billion worth of mortgage-backed security (MBS) in an effort to lower rates.
The other side: "The American people gave President Trump a resounding Election Day mandate to smash Washington, D.C.'s broken status quo and actually put Americans and America First," White House spokesman Kush Desai tells Axios.
- "That includes advancing an America First agenda to turn the page on Joe Biden's affordability crisis and safeguard our national security without needlessly blowing taxpayer money."
Between the lines: Investors should assume Trump will keep looking for ways to access capital to achieve his goals without getting congressional approval, Peter Tchir, head of macro for Academy Securities, said on a call with clients.
- "I would not think that they will stick to traditional methods to accomplish their goals. They've said what they want. The market seems to be ignoring them," Tchir said.
Threat level: The "ultimate win" for Trump? Tapping the balance sheet of the Federal Reserve to use as he pleases, Al-Hussainy says.
- This can have consequences.
- Look to Japan: Years of central bank bond-buying made government borrowing easy, and debt exploded as a result.
- When inflation arrived post-pandemic, the Bank of Japan had less wiggle room to respond, and the yen took a hit.
Yes, but: Treasury Secretary Bessent has criticized the Fed's use of the balance sheet as a crisis response tool.
Zoom out: Another way to have more money to spend is to increase the deficit, but that would be out of alignment with traditional Republican values around curbing government sending.
- That would also require tax hikes at some point to pay down the deficit, which is a non-starter, Al-Hussainy said.
The bottom line: In order to not increase the deficit or raise taxes, Trump is getting creative.
- Investors should take note and follow the money to determine how the executive spending could impact their investments.
