Andrew T. Levin, a Dartmouth College economics professor and former Federal Reserve advisor, is advocating for a differentiated approach to quantitative tightening rather than a uniform strategy. The Fed’s balance sheet swelled past $8 trillion at its peak, including approximately $4.6 trillion in Treasuries and agency mortgage-backed securities purchased after 2020. The Fed holds roughly 30% of all outstanding Treasury notes and bonds, and over 40% of agency mortgage-backed securities. Levin argues that gradual unwinding reduces cumulative market losses compared to active sales, while rapid normalization can trigger yield spikes and balance sheet losses that outweigh short-term benefits. Projections suggest the Fed’s balance sheet normalization process could continue through around 2025.
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