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Could the Largest U.S. Bank Trigger a Recession?

America's central bank, the Federal Reserve, can inject cash into the financial sector to prevent breakdowns during emergencies. One way it does so is through the large-scale purchase of bonds. The central bank has racked up nearly $9 trillion in bonds to calm investors during past crises. The Fed is saying it will soon dial back this program. The pace at which the Fed tightens monetary policy may create substantial market headwinds. Members of the Federal Reserve are debating how quickly to reduce the central bank’s portfolio of bonds, without starting a recession. Heading into the second quarter of 2022, the balance of Federal Reserve’s assets is almost $9 trillion. The majority of these assets are securitized holdings of government debt and mortgages. Most were purchased to calm investors during the subprime mortgage crisis in 2008 and 2020′s pandemic. “What’s happened is the balance sheet has become more of a tool of policy.” Roger Ferguson, former vice chairman of