Courtesy of Pam Martens
Fed Chairman Jerome Powell
The Fed’s advance men were all over the media today attempting to transform a sow’s ear into a silk purse (or, as they say on Wall Street, put lipstick on a pig). The Fed surprised the market today with the stunning announcement that it was going to start buying up junk bonds from the markets after they had been cratering for most of the month of March. That was the pig. The lipstick it applied was worded like this: “The Federal Reserve on Thursday took additional actions to provide up to $2.3 trillion in loans to support the economy. This funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.”
Households and small businesses don’t issue junk bonds. Neither do most state and local governments.
Fed Chairman Powell was highly anticipated to deliver remarks and take questions on a webcast sponsored by the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution this morning. (See the full webcast below.) Following Powell’s remarks, David Wessel, Director of the Hutchins Center, asked Powell the following:
David Wessel
Wessel: “Congress has allocated in the CARES Act $454 billion to backstop Fed emergency lending. If I did my arithmetic right, today you used $195 billion of that for the various programs you announced this morning. What are your priorities for the rest of that money. How do you think about how you’ll use it…”
…
