In an effort to prevent the U.S. economy from spiraling into a depression, the Federal Reserve launched an unprecedented effort Monday to keep money flowing to companies, small businesses, households and even cities, who are facing an economic crisis that threatens to surpass the Great Recession.
With restaurants, airlines, hotels, auto manufacturers, and so many other parts of the economy in a standstill at once, there’s a massive need for short-term loans to help businesses survive until people can go out again. But just as this demand for loans is growing, investors are showing little appetite to buy up all this debt, preferring instead to hold on to cash.
The Fed is attempting to resolve this by buying unlimited amounts of U.S. Treasurys and mortgage-backed securities, an extraordinary backstop for lending markets that goes much further than what the central bank did in the 2008-09 crisis. Back then, the Fed injected nearly $4 trillion into the financial system over several years. Analysts say the Fed’s effort now could dwarf that in a matter of weeks, a testament to how much pain the coronavirus is causing the economy. Continue reading.