Fed opens unlimited 'quantitative easing' to stabilize US economy

Fed's Bullard Coronavirus shutdown not a recession but an investment in survival

Fed's Bullard Coronavirus shutdown not a recession but an investment in survival

The Fed will support "the flow of credit to employers, consumers and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing".

In a series of actions the Fed agreed to historical measures that would see it for the first time back the purchases of corporate bonds and direct loans to companies, expand its asset holding by as much as needed to stabilize financial markets, and roll out "soon" a program to get credit to small and medium-sized business.

The U.S. Federal Reserve said Monday it will expand its purchases of government-backed and other bonds to an unlimited amount as part of its latest batch of measures to support the world's largest economy hit by the coronavirus pandemic.

In coming days, the Fed said, it will launch a program directly aimed at Main Street - to support loans to small businesses. Unlike previous rounds of quantitative easing, this one will impose no monthly cap on the amount of assets the Fed will buy.

"While great uncertainty remains, it has become clear that our economy will face severe disruptions", the Fed said in a news release. "Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate", the Fed said in a statement.

One of the programs, the Term Asset-Backed Securities Loan Facility (TALF), will help backstop recent student loans, vehicle loans and credit card debt as well as small business loans.

Centre tells states to take legal action against lockdown violators & enforce it
Several states, including Maharashtra, Kerala and Uttarakhand, have also imposed a partial or complete lockdown. I request the state governments to get the rules and laws followed", the Prime Minister added.

James Bullard, president of the St. Louis branch of the US Federal Reserve Bank, predicted the USA unemployment rate might hit 30% in the second quarter of this year, Bloomberg News reports.

Finally, the Federal Reserve expanded the scopes of the Money Market Mutual Fund Liquidity Facility (MMLF) and the Commercial Paper Funding Facility (CPFF) to include additional assets.

Because the Fed does not have the authority to take on corporate bonds onto its balance sheet, it worked with the U.S. Treasury to open special objective vehicles (SPVs) that then purchase assets through the PMCCF, SMCCF, and previously announced Commercial Paper Funding Facility (CPFF) programs.

It will be backed by US$30 billion from the Treasury's Exchange Stabilization Fund.

It will lend to investors who want to purchase securities backed by consumer debt, including auto and credit card loans.

Furthermore, the spot markets opened in the negative territory despite the Fed's announcement.

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