Headline:
Fed to Inject $1.5 Trillion in Bid to Prevent ‘Unusual Disruptions’ in Markets
Move designed to prevent ominous trading conditions stemming from the coronavirus outbreak
By Nick Timiraos and Julia-Ambra Verlaine
Wall Street Journal, Updated March 12, 2020 5:08 pm ET
[ Just in case the hyperlink doesn’t work or a paywall blocks display for reading, the full text of this article follows my comments.]
I don't know how the perverse priorities of USAmerican fascist capitalism could be more nakedly paraded.
Even as the deathgrip of the COVID-19 pandemic tightens throughout the world -- with its exponential contagion, morbidity, and mortality rates only just now starting to accelerate -- this is the depraved indifference and criminal rapacity the 1% implement to secure their power, wealth, rule, and control instead of providing domestic security, effective healthcare -- at no cost! -- and financial stability to the other 99% of us.
What will it take for the scales to fall from all our eyes? What manner of pandemic delusion and dissonance keeps us so enthralled and enslaved by this omnicidal ultra-elite uber-wealthy kakistocracy of evil incarnate?
I know the answers. I hate the truth and reality they hold. I've prayed I'm entirely mistaken and completely wrong. I'd gladly give my life to know our children and grandchildren are not facing a horrific future of desperate deprivation and mass extinction of life on an uninhabitable Earth.
With all my heart, soul, mind, strength, and spirit I yearn to embrace the idea proposed by Guy McPherson in his latest book, Only Love Remans: Dancing at the Edge of Extinction. As an active member, Guide, and (Philosophy) discussion group administrator with the Deep Adaptation Forum Professions Network, I strive to live by the love that binds the “4Rs” together (Resilience, Relinquishment, Restoration, Reconciliation). As a Christian, by faith I do find a glimmer of hope and a fragile conviction of love beyond all I can ask or imagine. But living that love in full always and all ways is too often beyond my ken. After all ….
Absolute evil is as close as the air on my skin. Death is as near as the very next breath. As soon as I pray for those who somehow move in and through this pervasion of pure evil with blind impunity and effete indifference, I envy them for the very ignorance, stupidity, and insanity I that buffers and shields them, immune to the very truths and realities I loathe and despise. When I watch the ultra-elite and uber-rich 1% so blithely exploit the other 99% of us to death and exterminate us to extinction, furious rage burns me to the marrow of my being, boiling my lifeblood in irate wrath, fueled the powerless and futility enslaving us all.
God damn the doom that cannot and will not be denied and the evil we embrace that unleashes it upon ourselves!
THE DISEASE ©2020 Dwayne Booth (aka MR FISH)
The full text of the WSJ article cited above ….
The Federal Reserve said it would make vast sums of short-term loans available on Wall Street and purchase Treasury securities in a coronavirus-related response aimed at preventing ominous trading conditions from creating a sharper economic contraction.
The Fed’s promise to intervene substantially in short-term money markets, together with a move that opens the door to a resumption of bond-buying stimulus known as quantitative easing, followed two days of trading in which market functioning appeared to have degraded.
That is a concern for the Fed because the Treasury market is the most liquid and actively traded bond market in the world, providing a backbone for everything from hedging trades to conducting monetary policy.
“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed, which conducts the central bank’s market operations, said in a Thursday statement.
The Fed made the changes for short-term funding markets following instructions from Chairman Jerome Powell, who consulted with members of the rate-setting Federal Open Market Committee.
RELATED READING
Statement from the Federal Reserve Bank of New YorkWall Street Plunge Stresses Banks, Treasury Markets (March 11)Federal Reserve Cuts Rates by Half Percentage Point to Combat Virus Fear (March 3)
“This is a full-blown crisis response operation, intended to make it abundantly clear that the Fed will not allow liquidity to dry up,” said Ian Shepherdson, chief U.S. economist at Pantheon Macroeconomics. “Now it’s up to Congress to fire the fiscal bazooka, the bigger and quicker the better.”
Calls for Fed action grew in the hours before Thursday’s announcement.
“Financial markets are not functioning well, and the liquidity situation is evolving into something that necessitates a broader and stronger response by the Federal Reserve,” said Brian Sack, who ran the New York Fed’s markets desk from 2009 to 2012 and is now the director of economics at hedge-fund manager D.E. Shaw group, ahead of Thursday’s announcement.
The cash injections don’t represent a full-on return to the type of long-term asset purchases, called quantitative easing, that the Fed deployed in successive campaigns during and after the 2008 financial crisis. That is because the Fed is only lending money for one to three months at a time.
A separate move by the Fed marked a much clearer step in that direction.
The central bank said that beginning Friday it would shift purchases of $60 billion in short-term Treasury bills, which have maturities of one year or less, toward a broader range of maturities that reflect overall issuance by the Treasury Department.
The Fed didn’t say how long those purchases will last, likely kicking that decision to next week’s two-day rate-setting meeting. Analysts on Wall Street are increasingly expecting the Fed to cut interest rates to zero. It last week approved an emergency half-point reduction in the benchmark federal-funds rate, to a range between 1% and 1.25%.
Asset managers and investors viewed Thursday’s intervention as a first step that quells short-term balance sheet issues that have become acute over the last week as companies tapped credit lines and drew down on revolving loans. But they say it isn’t the ultimate fix.
“The first point of action is the Fed needs to supply liquidity to the banks so they can meet credit drawdowns and relieve initial balance-sheet strain, but it doesn’t fix the fundamental problem of consumer spending,” said Keith DeCarlucci, chief investment officer and founder of hedge fund KEAL Capital.
“Flights are getting canceled and restaurants are emptying rapidly, which is not fixed by liquidity. Businesses need to be supported through fiscal measures in order to weather the collapse in turnover,” said Mr. DeCarlucci.
Some investors said the Fed’s actions wouldn’t be successful until markets had confidence that Washington was taking a more aggressive response to the public-health emergency.
“The U.S. policy response to the virus has been an utter shambles that is quickly getting even worse,” said Mark Bathgate, an investment strategist at Tweeddale Advisors in London. As an example, he cited the Trump administration’s early efforts to play down the virus before installing a ban on travel from most of Europe after the virus was already spreading in the U.S.
The Fed’s intervention didn’t address funding problems in mortgage-bond markets, where trading conditions were little improved after the announcement. On Wednesday, spreads between the rate on a 30-year fixed mortgage and the 10-year Treasury widened dramatically because of little demand at any price from buyers of mortgage securities, undoing a large drop in mortgage rates last week.
“Our market is now completely closed. There is no offer to buy any agency mortgage product of any type,” said Lou Barnes, a mortgage banker in Boulder, Colo.
The Fed has been buying $60 billion a month in bills since October, and it has also been reinvesting $20 billion a month in Treasury securities to replace maturing mortgage bonds.
Fed officials for months said that their purchases of Treasury bills didn’t represent a return to quantitative easing because they are purely technical and concentrated in short-term bonds, which officials believed provided much less stimulus.
Stock-market declines are normally accompanied by rising prices and falling yields in Treasury markets as investors switch from risky assets to safe ones. But on Wednesday, both sold off together in a sign that big banks were looking to raise cash and pulling back from their role as middlemen in financial markets.
The Fed took initial steps earlier this week to boost the volume of lending for overnight repurchase agreement operations, or repo. It had announced plans Wednesday to increase lending to more than $500 billion, from less than $200 billion, before announcing the additional expansion on Thursday.
The New York Fed conducted an additional $500 billion, three-month offering on Thursday and will offer $1 trillion in short-term funding Friday, split between a three-month and one-month offering. Until Thursday, all of the Fed’s recent repo offerings had maturities of two weeks or less.
The Fed said it would offer another $1 trillion on a weekly basis.
The total size of the overnight repo market is about $1.3 trillion and the Fed’s total asset portfolio stood at $4.2 trillion last week, “so the Fed has unloaded some real fire power to alleviate one source of strain,” said Jim Vogel, interest-rate strategist at FHN Financial.
Thursday’s offering for up to $500 billion in three-month loans resulted in financial institutions taking $78.4 billion, bringing total repo lending from the Fed to $361.5 billion.
A rout has deepened this week on Wall Street because investors are unsure how long or deep any economic downturn from the pandemic will last, forcing a broad rethink of their willingness to own riskier assets such as stocks and corporate bonds.
Until Wednesday, market selloffs had been sharp but orderly, said investors and analysts. That changed on Wednesday, when the decline in the price of U.S. Treasury securities, which until this week had consistently risen significantly on days when U.S. stocks were falling, offered a sign of potential stresses in market functioning.
The price declines sent yields higher and were fueled in part by banks selling government securities to reduce inventories and raise cash.
Another area of worry has been certain trades by hedge funds that have faced large losses in recent days as prices rise on the spread between a Treasury bond and the equivalent future, known as the “cash-future basis.” Analysts and portfolio managers scrutinize the basis because signs of stress there can foretell lending pullbacks.
Write to Nick Timiraos at nick.timiraos@wsj.com and Julia-Ambra Verlaine at Julia.Verlaine@wsj.com