The U.S. Federal Reserve, as aptly noted by Pam and Russ Martens, “has just become a brand new national legislative body. It will, without any oversight in Congress, decide what corporation and business to save and which to let fail.”
They note that “Wall Street’s mega banks and trading houses will, once again have trillions of dollars of toxic securities removed from their balance sheets, including plunging stock through the Fed’s Primary Dealer Credit Facility.”
Moreover, the Fed announced on Monday it has removed any limit to the amount of treasury bonds it will buy to flood the economy with money during and after the coronavirus crisis.
As we have noted, the Fed secretly pumped in over $29 trillion to the Wall Street Gang during the Great Recession, and it will again, behind the scenes, inject more money into banks, hedge funds, and trading houses as the “Greatest Depression” accelerates.
The Fed also said it will buy select corporate bonds for the first time in its history and soon will initiate what it calls a “Main Street Business Lending Program” to support small businesses.
Last week, the Fed took another extraordinary step to intervene.
After propping up the repo market since September, the U.S. Federal Reserve now will add the $1.1-trillion commercial paper market to its list of dependents.
Commercial paper is a promissory note, usually for no more than nine months, which a business uses to fund day-to-day operations such as payroll.
The Fed can’t lend directly to businesses. Instead, it’s opening its Commercial Paper Funding Facility, through which the Federal Reserve Bank will purchase 90-day debt from companies with high credit ratings.
As investment markets have been roiled, many investors in commercial paper have sought to sell their holdings and retreat to safer harbors at a time when corporations are seeking to borrow even more to keep operating as the economy plummets.
To create the facility, the Fed had to invoke “unusual and exigent circumstances” and get permission from U.S. Treasury Secretary Steve Mnuchin, which he granted on 17 March and for which Congress has no oversight.
TREND FORECAST: The “Greatest Depression” has begun.
We forecast that despite central banks monetary policies and governments fiscal policies to interject trillions into equity markets and economies, their measure will temporarily reverse the downward market trend but not generate sustainable economic growth.
The bear market will see the Dow lose as much as 40 percent from its recent highs. Prices will fall further when corporations release their first-quarter earnings reports next month.
