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

In part one of The Wrap'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'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 down rather than up, how the Treasury can run its own version of quantitative easing through repurchase agreements, and why the Fed'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'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's expectation that nothing difficult gets attempted before the midterms.

Thank you to our sponsor, Monetary Metals. Learn more at https://www.monetary-metals.com/THEWRAP/

Links:    

The Institutional Risk Analyst: https://www.theinstitutionalriskanalyst.com/ 

Twitter/X: https://twitter.com/rcwhalen    

Seeing Around Corners book: https://www.theinstitutionalriskanalyst.com/product-page/seeing-around-corners-achieving-success-in-business-and-life-hardcover

Use the code TheWrap2026 for 25% off your first year of The Institutional Risk Analyst https://www.theinstitutionalriskanalyst.com/plans-pricing

Timestamps:

0:00 — Cold open: shrinking reserves and the Treasury's repo plan

0:33 — Welcome + what this episode is (part one of viewer Q&A)

1:10 — How long will the Fed stay indifferent to inflation?

4:08 — Could we cut the Fed out of rate decisions and just use SOFR?

5:02 — Would you buy a 30-year bond at these rates?

6:35 — If the Fed shrinks its balance sheet, don't rates go up?

9:43 — What does "Treasury doing QE on the short end" actually mean?

12:30 — A word from Monetary Metals

13:56 — Can the Treasury handle 5% on the 10-year?

15:26 — T-bills — pros, cons, and better alternatives

16:25 — How big does the next bailout have to be?

18:48 — The yen, intervention, and the carry-trade squeeze

21:16 — The biggest macro story of the back half of the year

23:37 — Parting thoughts: Florida, earnings season, and UWM next week