Tuesday, March 24, 2020

Federal Reserve Announces ‘Unlimited’ Responses

NEW YORK––The Federal Reserve is making it absolutely clear it will do whatever it can to stave off a depression in the United States as a result of the spreading coronavirus pandemic.
Federal Reserve5
The central bank has announced numerous moves aimed at maintaining employment and ensuring liquidity and credit in the markets. On Monday, it announced unlimited bond-buying, three new credit facilities and an upcoming Main Street lending program.
Altogether, the Fed said the new programs will provide up to $300 billion in new financing to an economy economist, including those in credit unions, expect to shrink in the second and even third quarters.  
The latest moves include the Fed pledging to buy bonds "in the amounts needed" to support markets, and indicating there would be no limit to its efforts.  The Fed has also invoked emergency powers to create a special entity that will buy corporate bonds.
The moves come as the stock market has seen declines that have erased all gains since 2016.
The Major Moves
As compiled by CNN, major moves announced by the Fed include:
  • QE Infinity: Open-ended quantitative easing.
  • Commercial Mortgage-Backed Securities purchases
  • Two lending facilities to large companies: Primary Market Corporate Credit Facility(PMCCF) for new bond and loan issuance, and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for existing corporate bonds
  • Corporate bonds and even bond ETFs could be purchased by the Fed. Many have raised concerns over the extremely high level of debt many corporations are carrying
  • A return of the crisis-era Term Asset-Backed Securities Loan Facility (TALF) to support the flow of credit to consumers and businesses
  • An expanded money market mutual fund liquidity facility to include a wider range of municipal bonds
  • An expanded commercial paper credit facility
New on Main Street
The Fed said it also plans to launch a Main Street Business Lending Program to support small- and medium-sized businesses. 
At the same time, the Fed was announcing its newest moves, Goldman Sachs warned second-quarter GDP could collapse by a record 24%, while unemployment claims could spike eightfold to 2.25 million this week.
White House economic adviser Kevin Hassett even went as far as to say the United States could face a repeat of the Great Depression.

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