Swapping low-coupon Treasuries to repair banks
The guest proposed that the US Treasury swap deeply discounted low-coupon bonds held by banks for current-coupon bonds to unlock bank capital and restore lending.
The argument
Banks are holding low-coupon bonds at amortized cost (hold-to-maturity) to avoid capital impairment, which locks up liquidity and reduces lending. A market-value swap for current-coupon bonds would liquefy these portfolios, boost bank earnings, and slightly reduce total outstanding US debt.