Letters to the Editor of Barron’s

And, yes, changing that probably will result in the stock market making a pretty big correction. But to think that rising earnings will cause so many highflying stocks to return to valuations of normalcy is a fool’s belief. I don’t think that the government should use the market as a measure of how well it is doing. Rather, it should focus on how well the economy and the people are doing. The two are not always the same. And not reducing our national debt is going to lead to a calamity that will make this pandemic look like a picnic.

Christopher Galik, On Barrons.com

Financial Triangle

To the Editor:
Henry Kaufman, as quoted by Randall W. Forsyth in “Where Wall Street’s ‘Dr. Doom’ Sees Danger Now” (Up & Down Wall Street, March 12), is so right that we have a “dangerous dependency on the Fed” and that “the central bank and the Treasury are ‘joined at the hip.’ ” Of course, a core mandate of every central bank is to finance, as needed, the government of which it is a part, although you won’t find this in the Federal Reserve’s public-relations materials. The close link of the Fed and the Treasury goes back to the Fed’s 1913 chartering act, which originally made the secretary of the Treasury automatically the chairman of the Federal Reserve Board.

But now, the joining at the hip is even tighter than Kaufman suggests, because it includes the mortgage market, too. With its $2.1 trillion and growing mortgage portfolio, the Fed owns about 20% of all residential mortgages. It buys mortgage securities with the guarantee of Fannie Mae and Freddie Mac; but with virtually no capital of their own, the value of Fannie and Freddie’s guarantees is completely dependent on the Treasury. Moreover, the Treasury is their principal owner.

Thus, the real joining at the hip is not only the Fed and the Treasury, but also the Fed and the Treasury and Fannie/Freddie—a gigantic government financial triangle.

Alex J. Pollock, Lake Forest, Ill.

SPACulative Excess?

To the Editor:
In his 1841 classic, Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay described the South Sea Bubble in 1720 Britain (“The Booming IPO Market Shows No Signs of Slowing,” March 12). Among the most egregious “bubble companies” listed was one for “carrying on an undertaking of great advantage, but nobody to know what it is.” Essentially, it was a special purpose acquisition company, or SPAC, prototype. With total market valuation reaching 190% of gross domestic product, it might be prudent to have an exit plan ready.

Albert Nyberg, Vista, Calif.

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