Investor Michael Burry warned that recent Federal Reserve plans signal deeper structural fragility in the U.S. financial system, raising the risk of de facto nationalization of the bond market. He pointed to the Fed’s discussion of reserve purchases under asset management frameworks as a sign that banks are increasingly dependent on central bank support.
Burry highlighted how U.S. bank reserves have ballooned from about $45 billion in 2007 to more than $3 trillion today. In his view, this surge reflects weakness rather than strength, showing that the system requires constant liquidity backstops to function normally.
He cautioned that such dependence could force the Fed into permanently expanding its balance sheet. Over time, this dynamic could effectively place the $40 trillion U.S. debt market under central bank control, reshaping price discovery, yields, and risk across global fixed-income markets.
