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Authored by Andrew Moran via The Epoch Times,

The Federal Reserve, established more than a century ago, is the United States’ third experiment with central banking.

For much of its existence, the institution maintained a low public profile.

Only after the 2008 global financial crisis did the Fed begin communicating more openly, introducing post-meeting press conferences and allowing monetary policymakers to engage more frequently with the media.

Greater transparency, however, has brought greater scrutiny.

Public sentiment toward the Fed and its leadership has fluctuated over the years. Today, YouGov polling suggests the central bank is viewed favorably by 44 percent of Americans and unfavorably by 18 percent.

If the Fed pursues a series of reforms, it will have “another great 100 years,” said Kevin Warsh, who was nominated by President Donald Trump to serve as the institution’s next chair.

Comparable to past central banks, Warsh said, the current Federal Reserve System is beginning to lose the consent of the governed.

“You can think about the Jacksonians of prior times say that the central bank seems like they’re trying to focus and they’re all preoccupied with those special interests on the East Coast, and they’ve lost track of what’s happening to us in the center of the country,” Warsh said in a July 2025 interview with the Hoover Institution’s Peter Robinson.

“It’s a version of what worries me today.”

What happened in the past, and why is it relevant to today’s central bank?

The First Bank of the United States

In the aftermath of the American Revolution, the United States faced a series of immense economic disruptions, forcing the nation’s architects to rebuild the economy.

The objective was to lower inflation, restore the value of the nation’s currency, repay war debt, and revive the economy.

Alexander Hamilton, the first secretary of the Treasury under the new Constitution, proposed establishing a national bank modeled on the Bank of England. Hamilton stated that a U.S. version would perform various duties, including issuing paper money, serving as the government’s fiscal agent, and protecting public funds.

Not everyone shared Hamilton’s ebullience over a central bank.

Thomas Jefferson, for example, feared that such an institution would not serve the nation’s best interests. Additionally, Jefferson and other critics argued that the Constitution did not grant the government the authority to create these entities.

Nevertheless, Congress enacted legislation to establish the Bank of the United States. President George Washington then signed the bill in February 1791.

Two of America’s founding fathers: Thomas Jefferson (L) and Alexander Hamilton. The White House

While bank officials did not conduct monetary policy as modern central banks do, they did influence the supply of money and credit, as well as interest rates.

The entity managed the money supply by controlling when to redeem or retain state‑bank notes. If it sought to tighten credit, it would require payment in gold or silver, thereby draining state banks’ reserves and limiting their ability to issue new notes. If it wanted to expand credit, it simply held on to those notes, boosting state‑bank reserves and enabling them to lend more.

By 1811, the national bank’s charter expired.

While there had been discussions of allowing it to continue maintaining operations, Congress—both chambers—voted against renewing its mandate by a single vote.

Its closure came shortly before the War of 1812, which fueled inflation and weakened the currency.

Second Bank of the United States

Lawmakers believed another central bank was critical at a time of fiscal, inflationary, and trade pressures.

Congress used a similar 20-year model to produce the Second Bank of the United States, headed by Nicholas Biddle. The second incarnation had a federal charter, was privately owned, and was tasked with regulating state banks (with gold and silver for note redemption).

President James Madison, who opposed the first central bank on constitutional grounds, supported the new institution out of financial necessity.

Its creation stabilized credit and brought down inflation. However, by the 1830s, the bank faced strong opposition, particularly from President Andrew Jackson.

Labeled the Bank War, Jackson engaged in a years-long initiative to dissolve the central bank.

Jackson claimed the national bank was a tool for the wealthy eastern elite and a threat to self-government.

“The Jacksonians described themselves as conscious hard-money men who supported the rigid discipline of the gold standard, yet they opposed the newly powerful national Bank because it restrained the expansion of credit and, thus, thwarted robust economic expansion,” author William Greider wrote in “Secrets of the Temple.”

In 1832, Jackson vetoed legislation to recharter the bank four years early, delivering a fiery message that historians say was one of the most important vetoes in the nation’s history.

“It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government,” Jackson wrote.

“There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me, there seems to be a wide and unnecessary departure from these just principles.”

The charter expired in 1836, leading to the panic of 1837.

An economic crisis unfolded, leading to bank failures, business bankruptcies, rising unemployment, and contracting credit. While the collapse of the central bank is often considered a leading cause, the British also urged London banks to reduce credit to American merchants, causing a sharp drop in global trade.

As the smoke cleared and dust settled, it was not until the 1840s that the United States embarked on a historic economic recovery, now known as the Free Banking Era.

Banking was decentralized, and finance was largely unregulated. Despite an erratic financial system, the U.S. economy grew rapidly: agricultural production accelerated, railroads were built, and the country expanded westward. Additionally, deflation was paramount throughout most of the economic expansion.

The Federal Reserve System

The panic of 1907 led to the creation of the Federal Reserve System.

Following years of heavy borrowing, speculative commodities investments (mainly copper), and enormous stock market gains, a financial crisis was brewing. The event nearly brought down the U.S. banking system.

J.P. Morgan, a financier, intervened and emulated the actions of modern central banks. He met with the nation’s top bankers, facilitated emergency loans to financial institutions, and backed stockbrokers. The damage had been done as the United States fell into a year-long recession, marked by high unemployment and widespread bank failures.

The Federal Reserve Board of Governors seal in Washington on Oct. 29, 2025. Madalina Kilroy/The Epoch Times

Washington realized that it could not rely on private bailouts to prevent sharp downturns.

Sen. Nelson Aldrich (R-R.I.) is widely regarded as one of the chief architects of the modern Federal Reserve System.

In 1910, Aldrich hosted the famous Jekyll Island meetings, a gathering of U.S. officials and bankers, to discuss the blueprint of a new central bank.

While the initial draft laid the foundation for the institution, the official Federal Reserve Act was drafted by President Woodrow Wilson, Rep. Carter Glass (D-Va.), and H. Parker Willis, an economist on the House Banking Committee.

The new system was a public-private hybrid, with the federal government firmly in charge, and bankers running the regional reserve banks.

“It was Wilson’s great compromise,” wrote Greider, “creating a hybrid institution that mixed private and public control, an approach without precedent at the time.”

The legislation triggered a contentious political debate over the extent of its independence from the Treasury and the degree of authority delegated to policymakers over currency issuance.

Days before Christmas, the bill cleared both chambers and was signed into law by Wilson on Dec. 23.

“Wilson’s conviction that he had struck the right moderate balance seemed confirmed, however, by the reactions to his legislation,” Greider noted.

“It was attacked by both extremes—the ‘radicals’ from the Populist states and the bankers in Wall Street and elsewhere.”

Since its inception in 1913, the modern Federal Reserve has undergone numerous changes and has gained greater power.

The New Deal, for instance, allowed the Fed to become the lender of last resort as Washington learned the central bank could not prevent bank failures.

In 1951, the Treasury-Fed Accord restored central bank independence after the Federal Reserve had been forced to keep interest rates artificially low throughout the Second World War.

Congress then enacted the Federal Reserve Reform Act in 1977, establishing the dual mandate of promoting maximum employment and maintaining price stability.

2026 and Beyond

Over the past 50 years, the Fed has undergone modest changes, including the issuance of forward guidance and the disclosure of emergency lending facilities.

But while each new regime has nibbled around the edges, Warsh has suggested he could effect substantial reforms at the central bank.

“Until there’s regime change at the Fed and new people running the Fed, a new operating framework, they’re stuck with their old mistakes,” Warsh told Fox Business Network in October 2025.

“Bygones aren’t just bygones.”

After what must have been quite the prep session with lawyers, billionaire Les Wexner – who gave Jeffrey Epstein “about a billion dollars” in cash and assets – testified to the House Oversight Committee on Wednesday that he was “conned” by Epstein, and denied any wrongdoing.

In a prepared statement, the 88-year-old former L Brands (which owned Victoria’s Secret) CEO said: 

Let me state from the start: I was naïve, foolish, and gullible to put any trust in Jeffrey Epstein. He was a con man. And while I was conned, I have done nothing wrong and have nothing to hide. I completely and irrevocably cut ties with Epstein nearly twenty years ago when I learned that he was an abuser, a crook, and a liar.

…

And, let me be crystal clear: I never witnessed nor had any knowledge of Epstein’s criminal activity. I was never a participant nor coconspirator in any of Epstein’s illegal activities. To my enormous embarrassment and regret, like many others, I was duped by a world-class con man. I cannot undo that part of my personal history even as I regret ever having met him.

350 attorneys charging $2000/hour drafted this. https://t.co/eT6TSa4PID

— zerohedge (@zerohedge) February 18, 2026

Yet many aren’t buying it – including the FBI in 2019, which listed Wexner as a potential co-conspirator. 

Meanwhile Epstein wrote to Wexner in a draft email: “You and I had ‘gang stuff’ for over 15 years,” adding “I owe a great debt to you, as frankly you owe to me” and that he had “no intention of divulging any confidence of ours.”

Also strange:

Epstein’s note: “never ever did anything without informing Les [Wexner]”, “would never give him up”. Dershowitz: “don’t take deal”. Made around the time of victims’ discovery requests. Recall that Wexner began funding Epstein in ‘91, same year he founded pro-Israel “Mega Group”. https://t.co/ESzEQbck81 pic.twitter.com/wDF1Eit3Cl

— Good Pyre (@GoodPyre) February 6, 2026

After launching a business relationship in the 1980s, Wexner and Epstein formed ‘a financial and personal bond that baffled longtime associates,’ according to the New York Times. 

“I think we both possess the skill of seeing patterns,” Wexner told Vanity Fair in 2003. “But Jeffrey sees patterns in politics and financial markets, and I see patterns in lifestyle and fashion trends.” 

Wexner would go on to open doors for Epstein – who managed “many aspects of his financial life.” 

By 1995, Epstein was a director of the Wexner Foundation and Wexner Heritage Foundation and president of Wexner’s N.A. Property Inc., which developed the Ohio town of New Albany, where Wexner lives. Epstein also was involved in Wexner’s superyacht, “Limitless,” attending meetings at the London studios of the firm that designed the vessel. –Bloomberg

Meanwhile, Epstein allegedly ran a ‘casting couch’ operation for aspiring Victoria’s Secret models out of his Manhattan townhome whereby he would promise young girls jobs with the fashion company. 

Epstein “relied on …[the] modeling business to source underage girls for sex,” according to investigative reporter Conchita Sarnoff’s new book “Trafficking.” 

According to an account by Italian model Elisabetta Tai, Epstein tried to take advantage of the 21-year-old aspiring Victoria’s Secret model in 2004 after she was promised that a meeting with a ‘very important’ man could land her a gig with the apparel company. 

Accuser Holds Wexner Responsible

In late 2019, a woman who says Jeffrey Epstein and his ‘madam’ Gislaine Maxwell sexually assaulted her holds Victoria’s Secret billionaire Leslie Wexner “responsible for what happened to me,” because she was staying on a property monitored by Wexner and his wife, and guarded by their security team, according to the Washington Post. 

Maria Farmer, now in her mid-50s, spoke with the Post in a series of interviews, telling the paper that she never met Leslie, and only spoke with Abigail via phone while at the property in New Albany, Ohio. 

In the summer of 1996, Farmer stayed at the country house that Wexner had deeded to Epstein four years earlier. While staying staying there, she was discouraged from going outside by Wexner’s security, and that she was forced to jog inside the 10,600 square-foot house. 

“Where I stayed that summer, in that house and working in that garage, all of it was within view of the Wexner house,” said Farmer. 

The house, although owned by Epstein at the time, was “effectively the guesthouse” for the main Wexner estate, and it was guarded only by Wexner personnel, according to a security officer involved with Wexner family security at the time, who spoke on the condition of anonymity because he did not want to discuss clients publicly. The two homes are a half-mile apart. The grounds were monitored closely by guard dogs and their armed minders, this officer said. It was surrounded by Wexner’s land, according to property records.

“Anybody that was going to be coming on property had to be announced and allowed in by the Wexners,” added the officer. “Nobody had carte blanche to go in and off the property.”

…

Farmer, then 26, had just been invited to create two large-scale paintings for the upcoming film “As Good As It Gets,” starring Jack Nicholson. Epstein offered Farmer an unexpected location to do the work in the summer of 1996: an expansive country home in New Albany, Ohio, located amid 336 acres of land owned by Wexner and guarded in part by sheriff’s deputies employed by the longtime chief executive of Victoria’s Secret and The Limited.

It was there, Farmer said in an affidavit she submitted as part of an Epstein-related lawsuit, that she was molested by Epstein and his associate Ghislaine Maxwell. –Washington Post

“They asked me to come into a bedroom with them and then proceeded to sexually assault me against my will,” said Farmer in her affidavit. 

In the affidavit, she says she “pleaded with” the security staff but was held against her wishes for 12 hours while waiting for her father to arrive. In the interview, she elaborated.

The morning of the day after the alleged assault, she said, Farmer spoke with Maxwell and Epstein. She told them she wanted to leave and hung up. Soon after, a Wexner security guard appeared at the house. “He said, ‘You aren’t leaving,’ ” Farmer recalled, “ ‘You’re not going anywhere.’ ” –Washington Post

Farmer’s mother, father, sister and a friend have all separately stated that they recall a similar account from Maria in 1996. 

As the Post notes, “While Farmer’s allegations against Epstein have been widely documented, her experience in New Albany and the questions it raises about the Wexner family’s relationship with Epstein have been little explored.” 

Stay tuned for updates…

The data center investment macro story centers on hyperscalers such as Microsoft, Alphabet, Meta, and Amazon Web Services, whose massive cloud computing services are becoming the backbone for AI workloads, including ChatGPT and others. However, as we’ve previously noted, the data center buildout has run into supply-chain snarls, including memory chip shortages, power-grid constraints, and even a shortage of turbine blades for natural-gas generators.

The data center boom powering the AI revolution is certaintly impressive to watch unfold, but it won’t be a straight line from here as the US attempts to hold the number one spot in the global AI race. Challenges are mounting, and the latest coverage on this comes from a conversation Goldman analyst Brian Singer had with Mark Monroe, a former principal engineer in Microsoft’s Datacenter Advanced Development Group, who warned that data center buildouts face three major headwinds.

Here’s a recap of the conversation between Singer and Monroe, which focused on three key constraints: power, water, and labor.

1. Energy: Power remains the most critical near-term constraint for data center deployment, while flexible load management and Behind-the-Meter solutions could help close the power gap. While cloud and AI inference workloads generally require proximity to end-users — creating power shortages in these congested markets — AI training workloads are location-agnostic and migrating to remote areas with available power. Grid conditioning or flexible load management for data centers during peak electricity consumption could unlock significant capacity. A Duke University study suggested that 76 GW of new load (10% of US aggregate peak demand) could be integrated if data centers accepted average annual load curtailment of 0.25% (99.75% up time) and 98 GW added for curtailment of 0.5% (99.5% up time). While this could potentially unlock ~100 GW of capacity, Mr. Monroe notes that adoption: (a) is hindered by the industry’s inherent risk aversion of cycling IT equipment off and on; and (b) may require stronger financial or regulatory incentives.

Behind-the-Meter power is a costly and likely temporary bridge to initial grid gaps. While a single digit percentage of data centers in the pipeline have BTM requests, Mr. Monroe highlighted this can still be significant for power demand given these are typically larger data centers. Primarily deploying natural gas simple cycle generators, onsite power solutions cost 5x-20x more than grid power. However, Mr. Monroe highlighted that deploying BTM solutions to push forward data center startups can be an economically viable choice given the immense profitability of large scale AI data centers. According to Mr. Monroe, data centers deploying BTM power ultimately aim to connect to the grid eventually over three years, while either relocating to other data centers, integrating and selling power back into the grid, or retiring BTM assets.

2. Water: Community, regulatory and chip advancement pressures likely to shift the industry towards more water-efficient cooling technologies coming at significant energy costs. The industry is seeing a shift from the traditional water-intensive evaporative approaches towards more waterless designs, especially among hyperscalers, as community, regulatory and technological pressure mounts. According to Mr. Monroe, the shift towards closed-loop and waterless cooling systems is likely to raise Power Usage Effectiveness (PUE) from best-in-class levels of 1.08 to 1.35-1.40, representing a 35%-40% energy overhead versus 8% in evaporative systems. Although innovations such as direct-to-chip liquid cooling and higher-temperature water cooling could enable more efficient heat transfer in more geographic locations, co-location data centers are likely to remain committed to chiller-based designs given their diverse customer base and need to commit to cooling architecture early in construction. Regardless of any diminishing share of overall data center cooling solutions, according to Mr. Monroe the demand for chillers is expected to continue to see a material increase over the next decade, driven by overall growth in data center capacity.

3. Labor: Skilled labor shortage could become the next gating factor for data center deployment. Data centers are differentiated from generic industrial buildings by the specialized electrical and mechanical systems required, making electricians and pipefitters critical to the continued data center build out. According to Mr. Monroe, the skilled labor shortage represents the next major constraint after power. Industry organizations, in collaboration with technical universities and colleges, are actively developing training programs to address this gap, while attempting to reach students as early as middle school to make skilled trades more attractive career paths. We estimate the US will require >500,000 net new workers across manufacturing, construction, ops & maintenance, and transmission and distribution to deploy all the power to meet demand by 2030.

Related coverage:

• Goldman Warns DRAM Shortage Not The Only Bottleneck In AI Data Center Buildouts

• Goldman: Local Resistance Against Data Centers “Are Not Slowing Development”

• Behind The $500 Billion Data Center Boom: Here’s Who Makes All The Key Components

Looking ahead, the key question is whether the U.S. can sustain a largely uninterrupted surge in data center capex, given how much these buildouts are now embedded in both the macro narrative and tech valuations. The investment thesis assumes that continued buildout translates into measurable productivity gains and, in turn, a multi-year uplift in growth. Overall, the execution risk boils down to critical inputs and infrastructure, including core components, grid access, and related supply chain bottlenecks, which could slow buildouts and stymie overly optimistic expectations.

To bypass these ground-based constraints, that’s why the narrative of data centers in space has emerged.

Professional subscribers can see the full note on our new Marketdesk.ai portal​​​​.

LIS Technologies (LIST) initiated its first engagement with the Nuclear Regulatory Commission (NRC) in preparation for starting up the company’s laser uranium enrichment technology facilities. 

LIST submitted a Standard Practice Procedures Plan for the company’s smaller-scale demonstration facility in Oak Ridge, Tennessee. This is part of a process for obtaining approval from the NRC to start handling classified information related to nuclear technology.

It’s a relatively minor step, but important in the context of finally engaging the regulator. The company is currently pursuing novel uranium enrichment technology that could dramatically reduce operating costs through improved efficiencies.

Laser enrichment technology is considered the third generation of uranium enrichment methods. The first was gaseous diffusion, which was only used back in the day of the Manhattan Project. Due to its extreme power consumption, newer technology was developed for the second generation – gas centrifuge. Centrifuges are still in use across the world today. For third generation technology, laser enrichment is currently under development by multiple companies including LIST, ASPI, Hexium, and GLE.

We recently detailed some of the major announcements from LIST regarding their newly announced $1.4 billion facility in Tennessee, as well as some of their recent funding rounds and ongoing coordination with Nano Nuclear.  They are working towards creating a vertically-integrated fuel chain and reactor developer. 

With the company now initiating the formalities of pursuing an NRC license for handling nuclear material and technology, “show me the money” will certainly start coming to the front of investors’ minds. With the recent funding round only yielding about $17 million, the company will likely pursue more significant private placement events or potentially an IPO/SPAC.

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

The price movement in the broad S&P 500 index is relatively calm. Yet the market’s undercurrent, as measured by sharply diverging returns across stock sectors and factors, is anything but calm. The current market picture we paint is well embodied by a quote from Jules Verne in 20,000 Leagues Under the Sea.

“The sea was perfectly calm; scarcely a ripple disturbed its surface. But beneath this tranquil exterior, powerful currents were flowing with irresistible force.”

Given this divergence between the calm market surface and the volatility of its underlying stocks’ returns, let’s get a better grip on the market’s undercurrent and decipher what it may be trying to tell us.

A Calm Market

The graph below shows that the S&P 500’s upward trend has recently flattened into a tight range with minimal volatility. Such consolidation is common after a sharp upward price trend, as the market experienced since early April. 

The next graph shows the average true range (ATR) for the index. ATR is a measure of realized volatility. As we define it, ATR is the percentage difference between the highest and lowest intraday prices over a rolling 20-day period. The current ATR is only about 3%, near the bottom of the range since 2015. It is also less than half the ten-year average.

Both charts point to a relatively calm market with limited volatility. It’s worth noting that implied volatility (expected volatility) on the S&P 500 is around 20. While not low, it doesn’t suggest that investors expect significant volatility in the weeks ahead.

The Markets Undercurrent

While the broad S&P 500 market index is relatively calm, its undercurrent is anything but tranquil. Significant rotation trades, characterized by heavy trading activity in and out of various sectors and factors, have led to large daily divergences in the performance of certain sectors and stock factors.

We use the dispersion of returns to quantify the market’s fierce undercurrent. For this article, we take the 20-day percentage price changes for sector and factor groups and then calculate the standard deviation of those changes. The more divergent the returns, the higher the standard deviation.

The first graph below shows that the current standard deviation of returns across all sectors is at its second-highest level since early 2023.

The following graph uses factors such as growth and value, market cap, and momentum. It also shows that returns among various factors are highly dispersed.

Next, we share a graph, courtesy of Nomura, that delves deeper into the recent dispersion. It compares the average move for all S&P 500 stocks over the last 20 days to that of the S&P 500 index.  As the graph shows, the relative volatility of individual stock returns versus the market is now at levels last seen during the financial crisis and the dotcom crash.  

Cross-Sector Correlation

To further quantify the market’s strong undercurrent, we examine the correlation of returns among the S&P 500 sectors.  The first table shows the correlation between the weekly returns thus far this year. The second table is for 2025.

In 2026, the average correlation among all sectors is a mere 0.066, compared to the statistically significant 0.517 in 2025. Moreover, the standard deviation of the correlations is much greater this year than last year. This, as with the graphs above, further indicates that the various sectors are currently showing a large divergence in weekly returns compared to last year.

We also ran the average correlation from 2019 through 2025, including the tumultuous pandemic sell-off and sharp recovery, and arrived at an average correlation of .68 and a standard deviation of .175.

Our Takeaway

The market’s surface may look calm, but beneath it, passive investors are actively shifting between narratives, valuations, and risk exposures. This reflects changing sentiment among investors about economic growth, inflation, monetary and fiscal policy, and the current political leadership.

Historically, periods of elevated sector dispersion tend to occur during market transitions rather than steadily trending bull or bear markets. However, high dispersion after a long bullish trend is not automatically bearish. It may just represent the market searching for its next regime rather than distress.

Furthermore, as we shared, high sector and factor dispersion is occurring alongside low cross-sector correlations. Typically, correlations between stocks are high during periods of crisis. As the old saying goes, “correlations go to one during a crisis.”

Therefore, if correlations begin to rise and the market heads lower, the recent bout of high dispersion may not be a lasting shift in investor preferences but an omen of a downward trend. 

Summary

Periods of high return dispersion are an opportunity for investors. As return performance gaps widen and valuation spreads develop, the ability to quantify the current rotation regime and anticipate the next one can deliver outperformance relative to the broader index.

While the calm market undercurrent is fierce, it is in and of itself not of great concern. But, as we noted earlier, if we start to see returns among sectors and factors become more aligned, especially downwardly, our concern will heighten.

Since the last FOMC meeting (where they held rates with two dovish dissents) on Jan 28th, Bitcoin has been the biggest underperformer (along with gold) while bonds and the dollar have rallied with stocks lagging…

Source: Bloomberg

March is ‘off the table’ for a rate-cut now (following last week’s payrolls beat) but overall 2026 rate-cut expectations are dovishly higher since the last FOMC meeting…

Source: Bloomberg

With macro data confirming Powell’s positive narrative (for now)

Source: Bloomberg

With Growth surprising to the upside and inflation drifting lower…

Source: Bloomberg

Today’s Minutes could be more interesting than recent months since The Fed displayed a hawkish tone with Powell talking up a “clear improvement” in the US outlook during the press conference, and said the job market shows signs of steadying.

So here’s what The Fed wanted you to know about the last FOMC Meeting:

A very divided Fed sees more rate-cuts (or hikes) possible and embraces lower inflation (and fears higher inflation)…

Almost all supported maintaining 3.50-3.75%, while a couple preferred a 25bps cut, citing restrictive policy and labor market risks; “some” judged rates should be held steady for some time.

(h/t Newsquawk)

Policy outlook & rate guidance

• Almost all supported maintaining 3.50-3.75%, while a couple preferred a 25 basis point cut, citing restrictive policy and labor market risks.

• Several said further rate cuts would likely be appropriate if inflation declines as expected.

• Some judged rates should be held steady for some time pending clearer disinflation evidence.

• Some said it would likely be appropriate to hold the policy rate steady for some time while assessing incoming data.

• A number judged further easing may not be warranted until clear evidence shows disinflation is firmly back on track.

• Several favored two-sided guidance, noting upward adjustments could be appropriate if inflation remains above target.

• Vast majority saw downside employment risks as moderated, while inflation persistence risks remained; some judged risks more balanced.

• Several warned further easing amid elevated inflation could signal reduced commitment to 2% goal.

• A few cautioned overly restrictive policy could significantly weaken labor conditions.

Neutral rate & financial conditions

• Those favoring no change said, after 75 basis points of cuts last year, policy was within estimates of neutral.

• Most expected growth support from favorable financial conditions, fiscal policy, or regulatory changes.

Inflation views

• Inflation had eased markedly from 2022 highs but remained somewhat elevated relative to 2%.

• Elevated readings largely reflected core goods boosted by tariffs; some noted continued disinflation in core services, especially housing.

• Most cautioned progress toward 2% may be slower and uneven; risk of persistent above-target inflation seen as meaningful.

• Some cited business contacts planning price increases this year due to cost pressures, including tariffs.

• Several said sustained demand pressures could keep inflation elevated.

• Several expected ongoing housing services moderation to exert downward pressure on inflation.

• Several anticipated higher productivity growth would help restrain inflation.

• A few reported firms automating to offset costs, reducing need to raise prices or cut margins.

• Most longer-term inflation expectations remained consistent with 2%; several noted near-term expectations had declined from spring peaks.

Labor market & growth

• Most said unemployment, layoffs and vacancies suggested stabilization after gradual cooling.

• Almost all observed layoffs remained low but hiring was also subdued.

• Several said contacts remained cautious on hiring amid outlook and AI uncertainty.

• Some cited lower net immigration as contributing to weak job gains.

• Vast majority judged stabilization signs and diminished downside labor risks.

• Most nonetheless said downside labor risks remained, including sharp unemployment increases in a low-hiring environment.

• Some pointed to soft survey measures and part-time for economic reasons as signs of lingering weakness.

• Activity seen expanding at solid pace; consumer spending resilient, supported by household wealth.

• Several cited disparity between strong higher-income and soft lower-income consumer spending.

• Several noted robust business investment, particularly in technology; several judged productivity gains would support growth.

FOMC Minutes explicitly state high valuations, Mag 7 concentration, off-balance sheet funding, K-shaped economy and hedge funds piling into basis trades: 

• In their discussion of financial stability, several participants commented on high asset valuations and historically low credit spreads.

• Some participants discussed potential vulnerabilities associated with recent developments in the AI sector, including elevated equity market valuations, high concentration of market values and activities in a small number of firms, and increased debt financing.

• A few participants commented that the financing of the AI-related infrastructure buildout in opaque private markets warranted monitoring.

• Several participants highlighted vulnerabilities associated with the private credit sector and its provision of credit to riskier borrowers, including risks related to interconnections with other types of nonbank financial institutions, such as insurance companies, and banks’ exposure to this sector.

• Several participants commented on risks associated with hedge funds, including their growing footprint in Treasury and equity markets, rising leverage, and continued expansion of relative value trades that could make the Treasury market more vulnerable to shocks.

• A couple of participants commented that although consumer credit quality remained solid in the aggregate, there were signs of weakness in the financial positions of low- and medium-income households.

• A few participants noted the need to monitor potential spillovers from volatility in global bond markets and foreign exchange.

Finally, The Fed commented on the yen “rate check” on behalf of the BOJ

“In the days leading up to the meeting, the dollar had depreciated markedly after reports that the Desk had made requests for indicative quotes, known as “rate checks,” on the dollar–yen exchange rate.

The manager noted that the Desk had requested those quotes solely on behalf of the U.S. Treasury in the Federal Reserve Bank of New York’s role as the fiscal agent for the U.S.“

Read the full FOMC Minutes below:

In a move that has sent shockwaves through the mining industry, the Trump administration has blocked what would have been the largest copper, gold, silver, and molybdenum extraction site in the United States, after the DOJ filed a 143-page brief late Tuesday defending the Biden Environmental Protection Agency’s (EPA) 2023 veto of the controversial Pebble Mine project in Alaska’s Bristol Bay region.

If built, the Pebble mine would produce 6.4 billion lb. of copper, 7.4 million oz of gold, and 300 lb. of molybdenum – along with 37 million ounces of silver and 200,000 kg of rhenium over 20 years, according to a 2023 economic study cited by mining.com.

The DOJ argues that the EPA correctly found that discharges from the mining operation would cause unacceptable adverse affects on salmon fisheries. 

“This precedent will be used by future Democratic administrations to reverse all of the progress this administration has made with its pro-energy, pro-mining, pro-development agenda,” said Northern Dynasty president and CEO Ron Thiessen, calling the move “surprising.” 

As a result, the stock (NAK) is down as much as 45% in Wednesday trade.

History: 

2001: Northern Dynasty Minerals Ltd. acquires mining claims for the Pebble deposit, a large low-grade copper-gold-molybdenum ore body in the Bristol Bay watershed. PLP (Pebble Limited Partnership), a subsidiary, begins data collection for large-scale mining.

2010: The Obama EPA announces that it would be conducting a scientific assessment under the Clean Water Act to evaluate large-scale mining impacts on Bristol Bay’s water quality and salmon resources.

2014: BLOCKED! The EPA issues a Proposed Determination under Section 404(c) to restrict discharges in Pebble area waters due to risks to salmon habitat. 

2017: during the first Trump administration, the EPA reversed course – proposing a withdrawal of the 2014 determination, which was finalized in 2019 (the withdrawal). 

2022: The Biden EPA hits back, reversing the reversal – essentially putting the project on ice again. 

January 2023: The Biden EPA issues a final veto determination to kill the project.

July 2023: Alaska files a motion with the US Supreme Court to challenge the Biden EPA.

March 2024: Northern Dynasty files a separate complaint challenging the EPA. 

June 2024: Iliamna Natives Ltd. et al. (Alaska Native Corporations) file a complaint challenging the EPA. 

November 12, 2024: US District Court for Alaska consolidates the three cases

February 17, 2026: Trump DOJ files opposition brief defending the Biden EPA’s final determination. 

The longer version: 

The story starts in 2001, when Vancouver-based Northern Dynasty Minerals Ltd. acquired mining claims for the Pebble deposit, a massive low-grade ore body estimated to hold billions of pounds of critical metals essential for green energy transitions and national security. Early exploration revealed its potential to become North America’s largest mine, but its location in the headwaters of Bristol Bay – home to diverse salmon populations and vital aquatic habitats – quickly raised red flags.

By 2010, the EPA launched a scientific assessment under Clean Water Act (CWA) Sections 104(a)-(b) to evaluate the risks of large-scale mining on the region’s water quality and fisheries, setting the stage for over a decade of scrutiny.

The environmental concerns crystallized in January 2014 with the release of the Bristol Bay Watershed Assessment (BBA), a comprehensive study highlighting potential negative impacts from mining discharges, including habitat loss for salmon. This led to a July 2014 Proposed Determination under CWA Section 404(c) to restrict waste disposal in the area. However, pushback was swift: In November 2014, a U.S. District Court in Alaska issued a preliminary injunction halting the process amid lawsuits from Pebble Limited Partnership (PLP). 

In 2017, Trump’s first term ushered in what investors in NAK thought was going to be a slam dunk. By July 2017, the EPA proposed withdrawing its 2014 determination – which was finalized in August 2019, clearing a path forward.

Progress accelerated in 2020. PLP revised its “2020 Mine Plan” in June, outlining a 20-year operation to extract 1.3 billion tons of ore, but acknowledging significant environmental costs: the loss of 8.5 miles of salmon-bearing streams, 91 miles of supporting streams, and over 2,000 acres of wetlands.

The Corps’ Final EIS in July detailed these impacts, yet the permit was denied in November 2020 for failing to comply with 404(b)(1) Guidelines and public interest standards. PLP appealed in January 2021.

Ping Pong Intensifies

The tide turned again in October 2021, when a court vacated the Trump EPA’s 2019 withdrawal, reviving the veto process. By January 2022, the Biden EPA announced a new 404(c) review, leading to a January 2023 Final Determination: a prohibition on discharges at the mine site in the South Fork Koktuli (SFK) and North Fork Koktuli (NFK) watersheds, and restrictions elsewhere in SFK, NFK, and Upper Talarik Creek (UTC) to protect salmon fishery areas.

Litigation intensified post-veto. Alaska sought Supreme Court intervention in July 2023 (denied January 2024), while Northern Dynasty filed its challenge in March 2024 (Case No. 3:24-cv-00059). The State of Alaska followed in April 2024 (No. 3:24-cv-00084), and Iliamna Natives Ltd. et al. in June 2024 (No. 3:24-cv-00132). The Corps denied PLP’s permit without prejudice on April 15, 2024, citing the EPA’s action. The EPA lodged its administrative record in August 2024, and the cases were consolidated on November 12, 2024.

Plaintiffs submitted summary judgment briefs on October 3, 2025, leading to the DOJ’s recent filing backing the Biden EPA and sticking a fork in the eye of NAK longs. 

 

The week’s lone coupon auction, was also one of the ugliest 20Y auctions since its inception in May 2020.

Moments ago, the Treasury sold $16 billion in 20Y paper in an especially disappointing auction: here are the details.

The auction stopped at a high yield of 4.664%, down from 4.846% in January and the lowest since October. It tailed the When Issued 4.644% by a whopping 2bps, the biggest tail since November 2024.

Going down the list, the Cid to Cover tumbled to 2.36 from 2.86 (one of the highest on record), the lowest btc since (also) November 2024. 

The internals were also dismal, as foreign buyers fled. Indirects took down just 55.167%, down from 64.715% in January and the second lowest on record (only Feb 2021 was worse).

And with Directs awarded 27.2%, down from 29.1% in January but above the recent average of 26.9%, Dealers were left with 17.6%, the highest since December 2024.

Overall, this was an extremely ugly auction, and one which dragged both 10Y and 30Y yields to session highs after the break.