The Fed dramatically expanded its efforts to save the economy, even adding junk bonds to the list of assets it can buy.
The Fed provided details of some programs it had already announced, but added some new ones and some surprises. Fed Chairman Jerome Powell said, after the announcement, that the Fed was aiming its efforts at the part of the real economy that need the most help and that other programs could be added.
The Fed provided details on its Main Street business lending program, setting a target of $600 billion in loans of $1 million to $25 million for mid-sized businesses. It also said it would provide term finance to banks involved in the Payroll Protection Program, authorized by Congress to help small businesses.
Boockvar doesn't believe the Fed will buy stocks, though there has been plenty of market speculation recently that it could. The economy is already expected to be in a recession, after several weeks of state shutdowns, now impacting about 90% of the U.S. economy. Economists expect the current quarter to be the worst with estimates of a record 30% decline in GDP. The economy is expected to start to pick up in the third quarter, once the economy reopens.
As the Fed has acted, it has helped bring down spreads in some stressed parts of the credit markets. It has also added liquidity in a variety of asset classes, including commercial paper which was virtually frozen.
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