A fucking stupid idiot......

Wall Street turns on Scott Bessent

The Treasury secretary’s credibility as a steward of U.S. financial markets is under threat.

By Sam Sutton and Victoria Guida

Wall Street celebrated when President Donald Trump tapped Scott Bessent to lead the Treasury Department. Now, the former hedge fund manager is being tested by the markets that catapulted him to power.

The Treasury secretary’s credibility as a steward of U.S. financial markets is under threat after he stunned traders last week with a new bond-buying plan designed to push down the interest rate the federal government pays on long-term debt.

The move sparked a brief market rally that sent rates down from near two-decade highs. But those effects were temporary, and traders were left wondering what Bessent, who has hinted that he has a “big toolkit,” might do next.

Treasury markets are the lifeblood of the global financial system. Some of the secretary’s longtime allies, including his former boss and Wall Street powerhouse Stanley Druckenmiller, have roasted the maneuver as a mistake that could push borrowing costs higher, erode guardrails against profligate federal spending, and — over time — undermine confidence in U.S. debt assets.

Mohamed El-Erian, a professor at the Wharton School and chief economic adviser at Allianz, told POLITICO that investors have been willing to overlook the federal government’s fiscal and trade policies thanks to private sector growth and strong earnings. But that isn’t assured if Treasury continues to intervene in debt markets during periods of relative stability.

“I’m worried,” said El-Erian, who’s written favorably about Bessent’s policy chops. “The intervention in the bond market takes us to a different place if it continues.”

The Treasury secretary has pitched himself as the nation’s leading bond salesman, and has leaned heavily into his pedigree as a Wall Street trader and economic historian in projecting authority and stability to markets. If traders lose confidence in his ability to deftly navigate the management of the federal government’s debt, it would diminish his ability to settle markets during periods of stress and hinder the U.S.’s ability to borrow cheaply.

“The market’s looking for what the Treasury Department’s objectives are,” one longtime Bessent ally told POLITICO. If the secretary doesn’t communicate that effectively, and “if the jawboning doesn’t succeed, you’re dead in the water.”

Bessent is also dealing with new responsibilities in setting foreign and economic policy even as his official staff has shrunk. On Monday, he unveiled new threats on countries that do business with Iran in an announcement branded as “economic D-Day” as markets continue to suss out the long-term prospects of the conflict that has upended oil markets.

Bessent has cited long-term Treasury yields — which are used to set mortgage rates and consumer loans — as a barometer for Trump’s economic agenda.

The White House has been pleased with his performance. Trump last week complimented Bessent’s “very good natural touch” in navigating the bond market. White House spokesperson Kush Desai in a statement said he is “not only a maestro of the financial markets, but one of the most transformative treasury secretaries in modern history.”

Allies cite the fury over the support of the Argentinian peso, which Argentina’s government ultimately paid back, as an example of his prowess. Joe Lavorgna, the chief economist at SMBC Americas who left earlier this year as senior aide to Bessent, noted that rates have been climbing globally. The buybacks may improve market functioning and increase demand for Treasuries, he added, and the U.S. economy is fundamentally strong.

The handwringing over the buyback program is “vastly overwrought,” another person close to the White House said. “His long bond efforts are just beginning. He has built credibility over decades.”

“Secretary Bessent has brought the pace, rigor and accountability of the private sector to government, with a singular focus on delivering results for President Trump and the American people,” said a Treasury spokesperson.

Others say the damage has already been done. Mark Dowding, the chief investment officer at BlueBay Fixed Income, said the market isn’t affording “Bessent the credibility that he wants to believe that he has.”

The dollar fell last week on the news of Treasury’s buyback plan, and the price of gold has climbed — a combination that often signals greater risk to U.S. assets. According to Dowding, “that really is speaking to the fact that some damage has been done to U.S. policy credibility.”

And the runup in rates on long-term U.S. debt is happening alongside — and in reaction to — a heaping stew of problems that Bessent is trying to deal with all at once.

Washington’s penchant for taxing less and spending more is feeding doubts that the U.S. will ever get its finances in order. Japan’s currency has been weakening against the dollar, which raised fears that Japanese authorities might sell Treasuries to push up the yen and thereby push up U.S. borrowing costs as well. Bessent has also noted that a deluge of corporate debt — particularly around the artificial intelligence industry — has created competition in long-term debt markets.

And Treasury is now taking on economic warfare with Iran by threatening the world with sanctions for doing business with the Middle Eastern nation. That conflict, too, has raised long-term borrowing costs in the U.S. by pushing up oil prices and feeding broader inflation.

On all of those fronts, Bessent has signaled that the U.S. is willing to take serious action. But Wall Street has begun calling his bluff.

“Treasury is intervening in too many theaters,” said Clocktower Group’s Chief Macro Strategist Eric Wallerstein, who advised Trump’s one-time top economist Stephen Miran at both the White House and the Federal Reserve. “It’s too much for any person or agency to handle, let alone one operating with a bit of a skeleton crew.”

Treasury’s preliminary actions to bolster the yen and to keep down long-term rates both initially rippled through markets with the desired effect, but ultimately that effect evaporated, daring Treasury to do more.

“Interventions of this type rarely have long-term effects unless they signal a deeper commitment to a shift in underlying policy,” former Treasury Secretary Janet Yellen told POLITICO.

Treasury announced last week that it would reabsorb a larger volume of its own bonds, during buyback operations it periodically conducts to retire older U.S. debt securities that are less likely to be actively traded. The move was somewhat unusual in that it came just a couple of weeks after the department had already put out its quarterly update for how it intended to approach borrowing. That created the perception that it was reacting to market conditions, though there was not the kind of market dysfunction that might call for immediate policy moves.

“You could certainly make the argument that they’ve now created a bigger problem than the one they were trying to solve by looking unprepared and panicky,” a former career Treasury official said in an interview.

On Monday morning, CNBC reported — citing two senior Treasury officials — that the department was considering using the cash in its bank account to conduct the buybacks, rather than merely replacing older long-term debt with new short-term borrowing.

Under this scenario, the Treasury would essentially give back some of the money it had already borrowed, using up some of the roughly $950 billion that sits in its deposit account at the Federal Reserve, from which the U.S. government makes all manner of outgoing payments.

The plan is somewhat reminiscent of interventions that the Fed has done during recessions to buy up U.S. government debt and drive down longer-term yields. But unlike the central bank, Treasury has a finite amount of money to play with.

“Mnuchin never did this kind of stuff,” said Mark Dow, a macro investor and former economist at the International Monetary Fund and Treasury, referring to Steven Mnuchin, who headed Treasury in Trump’s first term. For Bessent, the danger with his latest market interventions is that “you start to reveal that you don’t have the power that people thought you might have.”