Billionaire Stan Druckenmiller isn’t letting up on his criticism of US Treasury Secretary Janet Yellen. Druckenmiller says Yellen committed an epic mistake by failing to meaningfully term out America’s debt when rates were ultra-low — a missed opportunity he’s characterized as “the biggest blunder in the history of the Treasury.”
On top of some obvious partisan overtones, that characterization seems to treat the world’s largest budget like a hedge fund. It’s also wildly unfair.
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Here’s Druckenmiller in his own words (from a recently on-stage interview with fellow billionaire Paul Tudor Jones):
...when rates were practically zero, every Tom, Dick and Harry — and Mary — in the United States refinanced their mortgage, they extended. Corporations extended. Unfortunately, we had one entity that did not, and that was US Treasury. And Janet Yellen — I guess because political myopia, whatever — was issuing 2 years at 15 basis points when she could have issued 10 years at 70 basis points or 30 years at 180 basis points. I literally think if you go back to Alexander Hamilton it was the biggest blunder in the history of the Treasury, and I have no idea why she has not been called out on this. She has no right to still be in that job after that.
Let’s start with the facts. Yellen never had a chance to issue 10-year notes at 70 basis points; that was Treasury Secretary Steven Mnuchin during the end of the Trump administration. Druckenmiller — the family office operator who, for context, has long supported Republican candidates for president — should surely know that. His decision to gloss over the detail suggests there’s more than an ounce of partisan spin behind his analysis.
Nevertheless, let’s take the broader point at face value. In Yellen’s first year on the job, 10-year yields did average around 1.48%, an amazing bargain when compared with the 4.62% 10-year yields (or 5.39% 1-month yields) that prevail at the time of writing. So why weren’t Yellen and Mnuchin — who has a trader’s mentality much like Druckenmiller — more opportunistic? Why didn’t Treasury behave more like a hedge fund or like those 14 million mortgagors who refinanced in the seven quarters between the start of the Covid-19 pandemic and the end of 2021?
Read the full article here by Jonathan Levin of Bloomberg News, Advisor Perspectives
