- Federal Reserve has taken unprecedented action to save economy in light of the coronavirus pandemic-caused shuttered economy
- Fed has injected $6T into economy via credit and lending programs and rate cuts
Wearing Superman’s red cape and travelling faster than a speeding bullet, the Federal Reserve has offered our COVID-19-shuttered financial and business system unprecedented lifelines to the tune of more than $6T of liquidity. Take a look at the Fed’s action in this 6-week timeline:
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- March 3 – an emergency -0.5 percentage point interest rate cut
- March 15 – another -1 percentage point rate cut that put the Fed’s benchmark for short-term lending to near zero
- March 15 – with its second rate cut, Fed lowered rate for banks to borrow at discount window by -1.5 percentage points and cut reserve requirement ratio for banks to zero
- March 17 – Fed announced it would begin buying commercial paper, or the short-term unsecured debt businesses need for operational cash
- March 18 – another facility providing credit to keep money markets functioning
- March 19 – new operation focusing on currency swaps for other institutions needing dollar-dominated assets
- March 20 – operation to buy municipal debt headed up by Boston Fed
- March 23 – expansion of asset purchases from $700B to unlimited “sky’s the limit” amount depending upon market and economic support needs
- March 23 – announcement of $300B credit program for businesses and consumers – expanded Term Asset-Banked Loan Facility for businesses and consumers via SBA and expanded money market facility that includes municipal debt and certificates of deposit
- April 6 – announcement to provide support to Treasury’s Payment Protection Program designed to incentivize businesses to not lay off employees dring COVID-19 pandemic
- April 8 – modification of asset restriction on Wells Fargo to allow this 3rd-largest bank to participate in business lending programs
- April 9 – $2.3T lending program that extend credit to banks that issue PPP loans and purchase up to $600B in loans via Main Street Program for medium-sized firms AND to buy corporate bonds from corporations that have been downgraded and bonds from state and municipal governments.
Jerome Powell, the chair of the Federal Reserve, is focused on keeping this coronavirus-caused economic downturn as short as possible. He has said, “Our main focus is on the near term. My guess is that behavior will change. It won’t change quickly. People will start to go back to the movies, to theaters. They’ll start to travel and they’ll gain confidence that it’s OK to do so. That process…will certainly be gradual and tentative.”
Thanks to CNBC.