By Nick Timiraos and Jon Hilsenrath April 27, 2020 11:06 am ET The Federal Reserve is redefining central banking.
It would make its role in the economy far greater than during the Great Depression or World War II, according to Wall Street Journal calculations. The portfolio had reached $6.57 trillion by April 22. “This should be considered a very freakish Black Swan event, not anything that would be revisited under ordinary circumstances,” says Sen. Pat Toomey , who criticized the Fed after the last crisis for enabling large federal budget deficits. Last month, he helped advance the $2.2 trillion economic-rescue legislation in Congress that puts the Fed at the center of the government’s economic-rescue efforts.
Mr. Powell defines the government’s task from a different moral perspective. “People are undertaking these sacrifices for the common good,” he said in his speech. “We need to make them whole to the extent we have the ability.” The Fed will lend as much as 10 times the amount Congress appropriated, with the Treasury taking the first losses on loans that go bad. The Treasury has so far committed around 40% of those funds to some of nine different programs, leaving room to expand them or deploy others.
“The Fed is not naturally suited to do this,” says Douglas Holtz-Eakin, a Republican former director of the Congressional Budget Office, “but the Treasury is using the Fed as its arm because the Fed is better at setting up these facilities and getting the money out.” Bigger federal borrowing needs will make it costly for the Treasury should interest rates eventually rise. “If the economy recovers and inflation is a problem, that will be the test,” says former Fed Chairwoman Janet Yellen. That isn’t a problem now. If it ever is, she says, “I think the Fed is going to win out on that.”
In a letter to Mr. Powell this month, Rep. Maxine Waters , chairwoman of the House Financial Services Committee, said the program would have excluded 35 cities most heavily populated by African-Americans. “This approach risks exacerbating racial disparities in the federal government’s response,” she wrote.
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Weimar Jerome Powell was chosen to do this.
Trump had doubled the deficit before the pandemic and one wonders what the financial state of the country will be with many more trillions being spent. This from the party that tortured President Obama over every $ after Bush flat-lined the economy. COVID19
Treasury now controls the Fed. This will end in catastrophe, but not right away..in a few years. We never recovered from Fed printing in 2008...Fed still has $4 trillion on its books. Interest rates are going negative . This isn't healthy
Math is important.
With large scale purchases of US Treasury Securities , the Federal Reserve is stretching the boundaries for what a central bank will do to finance soaring Federal debt.
senatemajldr and LindseyGrahamSC How will POTUS handle the pending financial meltdown. Daily press briefings? Look for change in your sofa advice? You are cooking your own goose everyday he stays in power.
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