Tracking the Fed's Response to the Coronavirus Crisis: Not Just the Same Ol', Same Ol'

• Published in: Dollars & sense (Somerville, Mass.) Mass.), 2020-05 (348), p.21
• Main Authors: Uğurlu, Esra, Epstein, Gerald
• Format: Magazinearticle
• Language: English
• Subjects: Cattle; Coronaviruses; COVID-19; Economic crisis; Federal Reserve monetary policy; Interest rates; Pandemics
• ISSN: 0012-5245

The Federal Reserve (The Fed) has taken an extraordinary number of actions since March 2020 to cushion the economic impacts of the COVID-19 pandemic. It has deployed both conventional tools, such as interest rate cuts, as well as more "unconventional" ones, such as purchasing the bonds of big corporations^ to mitigate the impacts of the crisis. Throughout, the Fed has been directed by a sort of "dual mandate": provide liquicity to businesses and state and local governments to help keep them afloat; and to bailout the megabanks and financial system to prevent it from making the crisis even worse. In general, the Fed can provide liquidity to markets in a number of ways such as purchasing government securities, lending to depository institutions through the sc-called "discount window" or siezing up special lending "facilities" (as they are called in Fed Speak). In fart, so far, the Fed has spent much more money and time on these bailouts than on trying to help "Main Street." This is to be expected: old habits die hard. In addition, in order to supply liquidity to Main Street, the Fed is choosing to use its well-worn channels of buying assets and lending money through banks and other financial institutions that big margins and allocate funds to wealthy or well-connected clients.