The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 17

How independent is the independent Fed? Fed officials and Treasury officials regularly cooperate to smooth the financing and refinancing activities of the federal government as it borrows the vast sums required to cover current deficits and refund the huge national debt.
(a) Don't people who work cooperatively usually come to see their problems in similar or at least compatible ways? Isn't the Fed more likely to conclude that a particular monetary policy is the best policy if it also happens to ease the financing problems of the Treasury?
(b) The Treasury would like to keep down the costs of its borrowing and refunding. How could the Fed help achieve this laudable objective?
(c) If the Fed tries to provide enough reserves to the banking system to make sure that borrowing costs don't rise during large Treasury borrowing operations, what must it do? Why might a succession of such cooperative moves by the Fed eventually cause interest rates and Treasury borrowing costs to rise steeply?