Sarah Bloom Raskin, a former Federal Reserve governor and former deputy secretary of the Treasury, writes:

The bailout clock is ticking. In September, Oracle invoked “force majeure” to delay paying debt on a data center, which led to a drop in the corporation’s stock price. This month, OpenAI significantly cut its revenue projections; CoreWeave, a heavily leveraged data-center company, saw its share price plunge; and investors began racing to buy credit-default swaps to protect their portfolios. These are all signs of declining investor confidence. The risk that the heavily debt-fueled and interconnected AI sector could crash—taking the broader economy with it—is high and rising.

When the next crash happens, originating from whatever sector, the president will control a bailout apparatus with essentially limitless authority. Ever since the 2008 global financial crisis, the Federal Reserve and U.S. Treasury have claimed, with almost no resistance, more power to deal with each successive financial emergency. These bailouts were rationalized on the basis that they were in the public interest and at least theoretically subject to congressional oversight. But if the crash happens on Donald Trump’s watch, his administration would likely sidestep Congress entirely. A Trump bailout would proceed on whatever terms please the president and his allies, who would use it as a bonanza to enrich their favored companies and CEOs, even if they were the ones who caused the crisis to begin with.

The billionaires—and the trillionaire—in Trump’s inner circle have already usurped decision making about which federal agencies to decimate, which federal workers to fire, which scientific research to defund, and which industries to deem necessary for national security. They could also usurp the bailout apparatus, making it spin into action even before a crisis arrives. When they start feeling financially wobbly, they might go to Treasury Secretary Scott Bessent, Federal Reserve Chairman Kevin Warsh, or, most likely, Trump himself and request an emergency declaration to justify a bailout. They would know that the current Supreme Court majority would be unlikely to block an emergency declaration by the executive branch and central bank.

The bailout authority is a loaded gun. Once triggered, it would bring downsides that have become familiar since 2008: public deficits and debt that devour GDP, zombie companies that taxpayers are forced to carry, an expansion of wealth inequality, and a dramatic shift of losses from perpetrators to the public. In Trump’s hands, it would also feature a new and more frightening dynamic: the creation of a standing money printer that can be turned on for the president’s allies and turned off for his enemies, enabling state-supported favoritism and plunder on a staggering scale. [Continue reading…]