Nancy Pelosi Blames The President For People Dying

March 30, 2020

Corruption in the Time of Coronavirus

March 29, 2020

On March 23, the Fed announced its largest-ever intervention in the financial markets. Bazooka is too timid a word to describe it. More like a neutron bomb. Our central bank, supposed defender of the currency and the stability of markets, can now purchase an unlimited amount of US Treasury and agency mortgage-backed securities (now running at the unheard-of rate of $625 billion per week). That’s on top of $1 trillion per week in repurchase operations. As amazing as it sounds, that’s not where the real action lies.

As part of Congress’s CARES act (ha, nice try!), the Treasury will create (or resuscitate) a series of special-purpose vehicles (SPVs) to buy all manner of financial assets, backed by $425 billion in collateral conveniently supplied by the US taxpayer via the Exchange Stabilization Fund. The Fed will lend to SPVs against this collateral which, when leveraged, could fund $4-5 trillion in asset purchases.

That includes municipal bonds, non-agency mortgages, corporate bonds, commercial paper, and every variety of asset-backed security. The only things the government can’t (transparently, yet) buy are publicly-traded stocks and high-yield bonds.

You may ask, is this legal? Not exactly.

The Fed’s charter prohibits it from buying securities that lack an explicit government guarantee. Hence the convenience of murky SPVs, to which the Fed is printing lending the majority of the funds. Jim Bianco spells out a slew of new acronyms: CPFF (Commercial Paper Funding Facility); PMCCF (Primary Market Corporate Credit Facility); TALF (Term Asset-Backed Securities Loan Facility); SMCCF (Secondary Market Corporate Credit Facility) and a bone to small business in the form of the MSBLP (Main Street Business Lending Program).

These SPVs involve the Fed in nearly every major US financial market. That’s not all: by providing low/no cost financing to large corporations, asset managers, distressed debt vultures ventures, and private equiteers, our Federal Reserve has fast-tracked the hoovering up consolidation of American business into the hands of the few, the wealthy and the powerful.

In case you were wondering who gets to make these all-important “investment” decisions: it’s Treasury Secretary Mnuchin, the one who bought troubled mortgage originator IndyMac in a 2008 fire sale, then supervised the illegitimate foreclosure of thousands of California homeowners.

Mnuchin won’t have to do all the heavy lifting however, his old friends at Goldman Sachs are happy to help out, just as they did in 2008. And the Fed tapped asset-management giant BlackRock to direct three of its bond-buying programs, which can purchase some of its own funds on behalf of the central bank. No conflict of interest there!

Democrats in Congress made a big show of their supposed oversight of these programs; in reality, there is none. The final draft removed most of the SPV reporting requirements. Even the Sunshine Law that governs the release of Fed minutes has been waived for the duration of these programs.

Secretary Mnuchin is permitted to dispense with the already-feeble limits on CEO compensation (they can get only two times what they earned in 2019!) as well as the suggested restrictions on stock buybacks and dividend payouts by bailed-out companies. Last but not least: these firms are not required to share any upside from the rescue (in the form of an equity stake) with the US government. Heads: company CEOs and investment banks win. Tails: the taxpayer loses…..

https://wolfstreet.com/2020/03/29/corruption-in-the-time-of-coronavirus-fed-treasury-corporate/