credit fed Markets

Buy America! Fed Launches Primary Corporate Credit Facility

If you were already offended by the Fed's purported "transgressions", you can pretend to be even angrier now.

If the buying of credit ETFs and corporate bonds through the Fed's secondary market facility offended your sensibilities, I suppose you can feign even greater levels of incredulity on Monday. To kick off the holiday-shortened week, the Fed said the primary market corporate facility is now operational. These would be direct purchases from eligible issuers who meet the conditions for the program. For anyone who needs a refresher on that, here are the boxes you need to check if you want to sell to the Fed: The issuer is a business that is created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States. The issuer was rated at least BBB-/Baa3 as of March 22, 2020, by a major nationally recognized statistical rating organization (“NRSRO”). If rated by multiple major NRSROs, the issuer must be rated at least BBB-/Baa3 by two or more NRSROs as of March 22, 2020. An issuer that was rated at least BBB-/Baa3 as of March 22, 2020, but was subsequently downgraded, must be rated at least BB-/Ba3 as of the date on which the Facility makes a purchase. If rated by multipl
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6 comments on “Buy America! Fed Launches Primary Corporate Credit Facility

  1. thinking this is the backstop for Small Caps…probably why they’re outperforming today.

  2. Good news is, we can stop pretending like socialism is a four letter word now right? Oh wait, I guess that’s not good news after all.

  3. For me the fact that other central banks are doing this kind of thing is a neutral factor, at best. Just because others are doing something, it’s not necessarily a good thing. And I think the Fed forcing people into higher risk assets is obviously a bad thing. Won’t the Fed’s distortions of natural market signals inevitably distort capital allocations away from more productive uses? I get that it “works” in the short run to goose the markets and temporarily stave off bad outcomes, but what are the long-term effects on our economic efficiency?

  4. Leaving aside any discussion of moral hazard, this effectively makes individual “carbon based” US citizens second class compared to corporate citizens. The fact that in the US today a corporate entity can rely on the Fed to purchase or refinance its debt while no entity will back stop a person’s student or credit card debt tells you everything you need to know about where “capitalism” stands today as a system.

    • The Oligarchs are who the government bails out when things get tough. Citizens United led us down this path where corporate citizens are the only citizens the government cares about.

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