Cramer on Fed's balance sheet wind-down: I think they're doing it wrong

  • CNBC's Jim Cramer says the Federal Reserve should be selling its U.S. Treasury holdings in its massive wind-down plan.
  • The move would be "remarkable" for key market sectors like the banks, the "Mad Money" host says.

CNBC's Jim Cramer has some ideas for the Federal Reserve's plan to "unwind" recession-era debt from its $4.5 trillion portfolio.

"I think the Fed's doing it wrong," the "Mad Money" host said on Monday. "I think that they should be selling their Treasurys. Get out of that game. Give us a little more inflection. They have historically refused to do that."

In a May 2017 meeting, the central bank announced a plan to stop reinvesting the proceeds it received from maturing debt into more bonds, instead deciding to set limits on how much it will allow to roll off each month without reinvesting.

But if Fed officials instead decided to sell the bank's U.S. Treasury holdings, it could spur more stimulus for key sectors like the financials, Cramer said on "Closing Bell."

"I think [Fed Chair] Jay Powell's a very smart guy and he's going to figure out, 'Maybe we should just sell these Treasurys,'" Cramer said. "It would be remarkable what it would do for the banks, what it would do for the liquidity of the system, and it would make it so that we were no longer in this manipulated world. It would be a true market with true price discovery."

The Fed's balance-sheet wind-down has raised questions about the central bank's broader plans for the post-2008 recovery as its short-term interest rate hikes add up.

President Donald Trump has expressed concern about the Fed's rate hikes, telling CNBC earlier in July that he is "not thrilled" about its trajectory so far.

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