Congress is effectively using the Fed as an off-balance sheet means to get out more economic relief. The Fed, in turn, is using off-balance sheet SPVs to do the same. Imagine Congress just funded relief directly instead of relying on two layers of off-balance sheet activity. 1/n

Moreover, this chain of off-balance sheet activity has limitations that make it relatively inefficient. Specifically, the Fed is designed to work through loss-free lending and solvent counter parties. Treasury is helping on former by providing $454 billion equity to the Fed 2/n

But why not avoid this convoluted maze and have Congress provide more relief funds directly to states, municipalities and business? Answer seems to be (1) it can’t politically and (2) wants to hide the costs of such relief by using off balance sheet channels. 3/n

But there is no free lunch using the off-balance sheet approach. There is only so much inflation-free fiscal space no matter how it is sliced up. 4/n

To be clear, this is not to say the Fed shouldn’t be back stopping financial markets in the crisis. That is part of their responsibility as guardians of financial stability. The issue is the Fed doing Congress’ job with regards to helping states, municipalities, & businesses. End