|
|
The U.S. Federal Reserve soon will begin to sell the almost $14 billion in corporate bonds and exchange-traded funds it bought to prop up the economy during the economic crisis, the central bank has announced.
The sales will be made by the Fed’s Secondary Market Corporate Credit Facility (SMCCF), an emergency vehicle that bought about $5.1 billion in bonds issued by Visa, Walmart, Whirlpool, and other major U.S. businesses.
The facility also bought $8.56 billion in shares of exchange-traded funds that hold corporate debt.
The sales will be completed by the end of this year, the Fed said, and proceeds will revert to the U.S. Treasury, which funded the facility.
These holdings are separate from the $7.3 trillion the Fed holds in Treasury and mortgage-backed securities, which the Fed is still taking on at $120 billion a month to keep interest rates low until the economic recovery gains a more stable footing.
In April, Fed chair Jerome Powell said it is not time yet to even “start thinking about thinking about” ending that aspect of the Fed’s support programs.
When the Fed established the SMCCF, it also set up a Primary Market Corporate Credit Facility (PMCCF). The announcement of the SMCCF bolstered investors’ confidence in corporations’ ability to borrow so much that the PMCCF never had to make a purchase, the Wall Street Journal noted.
At its peak, the SMCCF owned $14.2 billion in assets, a sliver of the $750 billion the two facilities were authorized to spend.
The SMCCF stopped buying assets at the end of last year when then-Treasury Secretary Steven Mnuchin did not renew several Federal emergency lending programs.
“The SMCCF proved vital in restoring market functioning last year, supporting the availability of credit for large employers and bolstering employment” during the shutdown, the Fed said in its announcement of the sale, as quoted by the WSJ.
Now “shock and awe are no longer needed,” Nicholas Elfner, co-chief of research at Breckenridge Capital Advisors, told the Financial Times.
TRENDPOST: We note this article not only to report on the Fed’s latest maneuvers but also to illustrate that capitalism is dead and the entire system is to assist the Bigs and enrich the rich.
Buying shares of exchange-traded funds that hold corporate debt, and buying junk bonds and mortgage-backed securities? When we analyze the hundreds of billions in emergency aid that went to airlines and other businesses at the outbreak of the COVID war, it is evident that America is the Land of the Essentials… essentially, the richest of the richest.