Arthur Hayes: How Trump Would Control the Fed and Impact BTC

Source: Arthur Hayes, BitMEX Founder; Translated by Jinse Finance

Buffalo Bill Bessent’s plan aims to reindustrialize America and attempt to prevent “Pax Americana” from devolving from a quasi-empire into merely a strong power—this is nothing new. The emergencies of WWII allowed the Treasury to take over the Fed from 1942 to 1951. Part of Bessent’s work was to reshape the yield curve, that is, yield curve control. How did the yield curve of that era compare to now?

The Fed capped short-term Treasury yields at 0.675% and 10- to 25-year Treasury yields at 2.5%. Clearly, today’s yield curve reflects higher short- and long-term rates. However, the key difference is that the yield curve in the past was much steeper than it is now. Before I discuss the advantages of the 1951 yield curve for various sectors of the U.S. economy, let’s first understand how the Fed can use its existing tools to exercise this kind of yield curve control (YCC).

By lowering the interest on banking reserves (IORB) and the rate at which banks borrow from the discount window (DW), the Fed can manipulate Treasury bill yields and keep short-term yields within its desired range. The Fed uses the System Open Market Account (SOMA) to print money (e.g., create bank reserves) and buy bonds from banks to ensure yields do not exceed agreed caps. This expands the Fed’s balance sheet. The current Fed toolbox can perfectly implement a 1951-style yield curve. This article will consider how Trump and “Buffalo” Bessent might politically achieve this level of market manipulation.

Before we discuss the political and bureaucratic rules managing the Fed, I want to talk about the benefits of a 1951-shaped yield curve for different sectors of the economy.

The essence of the “Buffalo Bessent” plan is to transfer credit creation and thus economic growth from the Fed and non-bank financial entities like private equity firms to small and medium-sized bank lenders (which I’ll call regional banks). He recently published an op-ed in the Wall Street Journal, fiercely criticizing the Fed and, in populist language, framing it as putting the “real economy (Main Street)” above “Wall Street.” Don’t get too hung up on the fact that entering his economic “Valhalla” (Note: Valhalla, a term from Norse mythology, where Odin receives the souls of fallen warriors) requires using the Fed’s undemocratic money-printing tool. Bessent is a two-faced Treasury insider; he criticized “bad girl” Yellen’s policies before taking office, but loyally implemented them after being crowned—proving the point.

For regional banks to create credit and profit, they need a steep yield curve. As shown in the chart below, while rates were generally lower during 1942-1951, the yield curve was much steeper, making lending to small and medium businesses safer and more profitable. SMEs are the lifeblood of the U.S. economy. Firms with fewer than 500 full-time employees account for about 46% of employment. However, when the Fed is the main issuer of credit, these SMEs cannot get loans, because the printed money flows to large corporations that can access institutional debt capital markets. Furthermore, the yield curve is too flat or even inverted; thus, it’s too risky for regional banks to lend to such businesses. My previous articles (see Jinse Finance’s earlier translation “If Trump’s ‘America First’ Plan Succeeds, BTC Will Reach $1 Million”) discussed this. I call Bessent’s monetary policy “QE for the poor.”

Now banks will lend to real industries—those that produce needed weapons, preparing for another glorious century of bombings in Baghdad/Tehran/Gaza/Caracas (yes, regime change in Venezuela will be attempted in 2028), bombs filling brown or Muslim population centers, and American troops bringing democracy… assuming any residents are still breathing: (.

This solves the industrial problem. To appease the American public, who demand an ever-expanding welfare state in exchange for their loyalty, the government must raise funds at more affordable prices. By capping long-term bond yields, Bessent can issue unlimited amounts of junk Treasuries, which the Fed dutifully buys with printed dollars. Interest expenses plummet, and the federal deficit shrinks.

Ultimately, the dollar’s value relative to other worthless fiat currencies and gold will collapse. This allows U.S. industry to export competitively priced goods to Europe first, then to the Global South, competing with China, Japan, and Germany.

Conceptually, Bessent’s desire to control the Fed and implement YCC is easy to understand, but the current Fed is not cooperating. Therefore, Trump must install loyalists at the Fed who will follow “Buffalo Bessent’s” will, or else suffer the “hose” again (referring to police using firehoses to disperse crowds, meaning humiliation or attack). Fed governor Lisa Cook is set to experience a “hose” moment in 2025. If you don’t know what that means, look at the tactics used by the establishment during civil rights protests in the 1960s.

The Fed has two committees that control the policies needed for Bessent’s plan to succeed. The Board of Governors (FBOG) controls the IORB, and thus the DW lending rate. The Federal Open Market Committee (FOMC) controls SOMA. How do the voting members of these two committees interact? How are these voting members chosen? How can Trump legally and quickly seize control of both committees? Speed is crucial, as there’s just over a year until the 2026 midterms, and Trump’s Red Team Republicans will face fierce competition. If the Red Team loses control of the Senate and Trump hasn’t secured a majority on both committees by November 2026, Blue Team Democrats won’t confirm any of his future appointments. This article will answer those questions. I must remind everyone that when digging deep into the realm of pure politics, the risk of error is much higher. Humans always do strange and unpredictable things. My goal is to point out a highly probable path forward, and my portfolio will likely just need to hold bitcoin, shitcoins, physical gold, and gold miners for the long term.

Federal Reserve Board 101

Understanding the bureaucratic decision-making process of the institution in charge of printing money is an essential part of my investment framework. On my journey to explore the mechanisms of the world’s dirty fiat monetary system, I’ve learned much about how treasuries and central banks operate. As complex adaptive systems full of human decision-makers, these bureaucracies must follow “rules” to achieve any goal. Some rules constrain the unelected bureaucrats (the Fed) responsible for U.S. monetary policy. Therefore, I must answer several questions to predict how this policy will bend to the will of Trump and “Buffalo Bessent.”

1. Who (specifically, which committees) votes on which parts of monetary policy?

2. How many votes does a motion need to pass?

3. Who selects the different members of these boards?

4. When do board members change?

First, Trump must secure four seats to gain a majority on the seven-member Federal Reserve Board of Governors (FBOG). Then, he can use that majority to secure seven voting seats on the twelve-member Federal Open Market Committee (FOMC), thus achieving a majority there. I’ll explain what monetary policy each body can make, how members are selected, and how Trump could gain control by the end of the first half of 2026.

Let’s dive into the makeup of the FBOG.

Understanding the Federal Reserve Board of Governors (FBOG)

The FBOG has seven members, appointed by the President and confirmed by the Senate. The current board members are:

The Board of Governors (FBOG) controls two very important things. First, the Board sets the IORB. Second, the Board votes to approve nominated Federal Reserve regional bank presidents, who rotate into FOMC voting seats.

To effectively manipulate short-term rates, the Fed must set the IORB within the range established by the FOMC’s federal funds rate. Thus, when the Fed is internally aligned, the FBOG and FOMC can work together, with the IORB within that range. But what if the FBOG supports Trump and considers the FOMC’s policy too tight? What can the FBOG do to force the FOMC to lower the fed funds rate?

The FBOG can set the IORB rate far below the fed funds rate. This creates an arbitrage opportunity for Fed member banks. These banks can post collateral and borrow at the now-lowered DW rate, then lend at the SOFR rate. The Fed loses because it’s essentially printing money and handing it to the arbitraging banks. To avoid being gamed by Jamie Dimon and the like, the FOMC must cut the fed funds rate to match the IORB rate, even if they don’t want to, because most voting board members are suffering from TDS.

If Trump has a four-seat majority on the FBOG, he can force the FOMC to quickly cut rates to his desired level. How many current board members are loyal to Trump?

With Jerome Powell’s Fed chair term ending in May 2026, some board members are vying to replace him. To show loyalty to Trump, they publicly speak about what Fed policy should be, and in some cases dissent at FOMC meetings. At the July 2025 meeting, the two dissenters were Bowman and Waller. Trump is halfway there.

Surprisingly, Adriana Kugler suddenly resigned from the board this summer, and the Senate confirmed Trump’s pick, Stephen Miran. Rumor has it Kugler’s husband traded securities during the Fed’s blackout period; for those unfamiliar with politics, this could be called insider trading, and if the DOJ investigates, he’s going to jail. Kugler resigned before facing harsh criticism from the Trump administration. With Kugler out and Miran in, Trump’s camp now has three appointees—just one more needed.

Like everyone else, Fed governors abuse their power. They engage in insider trading (see above), while Board member Cook is accused of lying on her mortgage application. FHFA director Bill Pulte accuses Cook of mortgage fraud and wants her to resign. But she stands firm, refusing to step down. Pulte has referred her case to the DOJ, where head Pam Bondi is reviewing whether to take the case to a grand jury for bank fraud. Grand juries almost always indict. The DOJ can easily secure an indictment, so I can only imagine the DOJ’s hesitation is to use the threat of a formal indictment as leverage to force Cook’s resignation. I don’t know if she’s guilty; whether you believe she is depends on your mainstream media consumption. Allegedly, Bessent also committed violations on some bank financial applications. In America, everyone is a criminal, you know! Guilty or not, with a nearly 100% DOJ conviction rate, Cook is toast if she doesn’t resign. I suspect her stubbornness is just a negotiating tactic for a cushy academic or government job in a future Trump administration. Anyway, by early 2026, she’s not making it to the Supreme Court.

With four votes, Trump can quickly cap Treasury yields by instructing the FBOG to ditch the IORB. Next, the FBOG can liberate regional banks from absurd regulations and let them lend to small businesses in the real economy, as Bessent wishes. The FBOG can do this because it handles commercial bank regulation (or lack thereof). The final piece is controlling the money supply, which allows him to use SOMA to fix long-term yields lower. To do that, Trump needs to control the FOMC.

So, how can control of the FBOG translate to a seven-vote majority on the FOMC?

Federal Reserve Regional Bank Presidents

There are twelve regional Fed banks. In America’s more agrarian era, different regions needed different rates depending on the types of goods and services supplied throughout the year—hence twelve regional banks. Each regional bank nominates a president, who must be approved by at least four FBOG votes to join the FOMC. Of the twelve regional bank presidents, only five have voting power on the FOMC, with the New York Fed president having permanent voting rights. Thus, each year, four different regional bank presidents vote on the FOMC. In years ending in 1 or 5, all regional bank presidents face re-election by their district boards. Each district board’s B and C class directors (four out of six people) elect a president by simple majority. Next February, all presidents will be up for re-election. Other than New York, the relevant voting districts are:

● Cleveland

● Minneapolis

● Dallas

● Philadelphia

Notice the professional backgrounds of these board members? Most are financiers or industrialists. If money is more plentiful and cheaper, their net worth will soar. These people, too, are human, and when left unrestrained, always act in their own self-interest. I don’t know their politics, but I believe that even if they suffer from TDS, the cure—higher asset prices making themselves and their cronies rich—will alleviate their pain. That said, if it’s well known that the Board of Governors will only approve a FOMC-voting president who supports looser monetary policy, then regional bank boards will act in line with Trump’s and their own interests.

If a regional board does not nominate a dovish candidate for a FOMC seat, the Board of Governors will reject them. Remember, Trump now has four of seven votes.

Trump only needs three of the four newly elected presidents to be loyalists. That way, he gets a seven-vote FOMC majority and, most importantly, controls SOMA—the Fed’s money printer. Then, Trump’s people at the FOMC will print money to buy up all the junk debt that even “Bessent” can’t find buyers for. Ladies and gentlemen, this is the 2026 “Treasury-Fed Accord.” Money printing and YCC, perfected. Remember: in this dirty fiat financial system, an offsuit 4-7 preflop beats pocket Aces.

But I know you’re all eager for my bullish article on bitcoin’s future price, assuming my money-printing forecast comes true. See below.

Bull Math

For those doubting whether Trump truly wants to print money to “revive” the dream of Pax Americana, here’s a brief historical review of what drives elite politicians to push for radical change. U.S. elite politicians always do whatever it takes, no matter how unpopular, to preserve the fruits of empire for the ruling class. The relationship between descendants of former African slaves and European immigrants is a perfect example, dominating American political and social discourse. During America’s bloodiest civil war, President Lincoln, by emancipating slaves, devastated the Confederacy’s economy. After the Union victory, they abandoned the newly freed people in the former Confederate states to suffer under Jim Crow segregation, and the ruling elite didn’t reconsider granting full voting and civil rights to former slaves until 1965. Rising literacy rates among former slaves and the spread of communism’s message of economic and civic equality for all attracted the Black underclass. The problem was, the elite needed those poor Blacks to fight “Charlie” (the Viet Cong) on the Indochina front, work in northern factories producing exports, do domestic work for wealthy families, or labor on southern farms—but definitely not march in televised Washington D.C. protests demanding equal rights. U.S. propaganda also needed to sell non-aligned countries on the superiority of American capitalism over Soviet communism. The Declaration of Independence may state “all men are created equal,” but having police dogs snarl at little girls walking to newly desegregated schools isn’t a good look. So, Southern Democrat Lyndon Johnson (America’s 36th president, who proposed the “Great Society” legislative agenda, advancing civil rights, Medicare, Medicaid, etc.) became the civil rights champion of a group of people only a few generations removed from picking cotton, to the chagrin of many in his class. Today, to wage war against a more unified, prosperous, militarily powerful Eurasia (Russia, India, and Iran), credit allocation must change fundamentally. Thus, I confidently declare: when it comes to money printing, these white folks aren’t joking.

Trump and Bessent see their mission as restoring America’s global dominance. This requires rebuilding a solid manufacturing base to produce real goods—not “services.” China reached a similar conclusion in response to Trump’s 2018 trade war. China crushed the animal spirits of financiers and big tech CEOs and reoriented its economy. China’s best and brightest no longer build shoddy apartments or bike-sharing apps, but conquer green energy, rare earths, military drones, ballistic missiles, AI, and more. After nearly a decade, China can now produce on its own all the real goods a nation-state needs to maintain sovereignty in the 21st century—without U.S. help.

The point is: don’t doubt that Trump’s team will do whatever it takes to print the money needed for America’s transformation. That said, let me indulge in a little back-of-the-envelope math on how much credit the Fed and the banking system will create by 2028.

Between now and 2028, the U.S. Treasury must issue new debt to repay maturing old debt and cover the government deficit. I used Bloomberg’s function to estimate the total Treasuries maturing between now and 2028. Then, I assumed annual federal deficits would reach $2 trillion by 2028. Thus, I estimate U.S. Treasury issuance will total $15.32 trillion.

During the pandemic, the Fed bought about 40% of outstanding Treasuries using SOMA, expanding its balance sheet. I believe the Fed will buy at least 50% of outstanding Treasuries now, since fewer foreign central banks will buy, knowing Trump will flood the market with new debt.

Estimating bank credit growth is not easy. The most reliable method is to use the pandemic period as a reference. During that time, Trump implemented “QE for the poor.” Bank credit grew by $2.523 trillion, as shown in the Fed’s weekly report of other bank deposits and liabilities. Trump has about three years to juice the market, equivalent to $7.569 trillion in bank loans.

That brings total credit growth from the Fed and banks to $15.229 trillion. The trickiest part of this model is guessing how much bitcoin rises for every dollar of credit created. Again, I refer to the pandemic period. The slope of bitcoin’s percentage gains per dollar of credit growth was about 0.19. Ladies and gentlemen, this points to a 2028 bitcoin price target of $3.4 million!

Do I think bitcoin will hit $3.4 million by 2028? No, but I do believe the number will be significantly higher than its current trading price of around $115,000. My goal is to bet on the right direction and be sure I’m backing the fastest horse—assuming Trump really does print trillions to achieve his policy goals. That’s what this model does.