The Federal Reserve started a new week by once again stepping in to shore up the lending market at a time battered investor confidence has wiped out three years of stock market gains.
In yet another historic move, The Fed announced Monday it has started a wide-ranging bond-buying program for all kinds of debt related to housing, student loans, credit cards, government-backed loans to small businesses, as well as corporate bonds and U.S Treasuries. Unlike other measures – the Fed has not put a dollar cap on this one.
The announcement sparked a wave of stock market volatility with a pre-market rally fizzling at the open after the Senate’s inability this weekend to agree on a $1 trilion-plus economic stimulus package. The Federal Reserve has essentially become the buyer of last resort – offering to gobble up various types of debt in exchange for cash because in its words "it has become clear that our economy will face severe disruptions" citing the coronavirus pandemic.
Fed Chairman Jerome Powell has acted quickly to try to prevent the economy from nosediving into a deep recession. The Fed has already slashed interest rates to near zero and taken other steps to provide funding to financial institutions that may face a cash-crunch as the virus outbreak takes its toll on the U.S. economy.