The Fed continues to struggle to keep the economy afloat
The Fed has announced an aggressive plan to protect the U.S. economy, one even more aggressive than during the 2008 recession.
The Federal Reserve continues to use its arsenal of tools to prevent the U.S. economy from collapsing because of the coronavirus pandemic. In addition to the announcement a few days ago that they would lower interest rates to near zero, yesterday they announced another set of programs that would bring in an estimated $300 billion in funding.
Among these measures and those already adopted, the Federal Reserve would be implementing an aggressive program to relieve the economy even more than the one it implemented during the 2008 crisis, according to the New York Times.
The most surprising of the Fed's announcements is its determination to buy as many debt bonds as necessary to calm the market, including high-risk investment bonds.
The $300 billion the Fed will use for this purpose will be concentrated in the following three programs: the Primary Market Corporate Credit Facility will create a mechanism that will buy bonds and extend loans, as well as provide bridge loans for four years. The second program will buy debt already acquired, especially by large employers, the third will be the Term Asset-Backed Securities Loan Facility, a program created initially in the 2008 crisis and which provides loans to small businesses and households.
It is possible that the Treasury Department will support the Fed's efforts, giving it additional resources of up to $425 billion, but this will depend on what the Senate agrees.
Analysts say we are heading into a recession at an accelerating pace as the weaknesses of the economy feed on each other and we have a huge disruption in both the productive chains and the service sector at the moment. This break with the mechanisms of the economy produces an enormous level of anxiety in both consumers and investors and reducing it will be key not only to prevent the market from continuing to fall, as it has done so far, but also to facilitate its recovery in the medium and long term.