ABSTRACT

Prioritizing Wall Street: The Fed's Corporate Bond Purchases During the Coronavirus Pandemic   [open pdf - 4MB]

From the Document: "On March 23, 2020, the Federal Reserve System (Fed) announced that, for the first time in its more than 100-year history, the Fed would directly purchase corporate debt as part of its response to the economic crisis caused by the coronavirus pandemic. The announcement sent bond markets surging, resulting in record-breaking issuances of corporate debt. In June 2020, the Fed began purchasing individual corporate bonds through its Secondary Market Corporate Credit Facility, a lending facility backed by CARES Act funds. Since June, the Fed has purchased corporate bonds issued by approximately 500 large companies. The Secondary Market Corporate Credit Facility lacks taxpayer and worker protections included in other programs funded by the CARES Act. In particular, the facility imposes no conditions requiring companies to save jobs or limit payments to executives or shareholders to become eligible issuers of bonds purchased by the Fed. Select Subcommittee on the Coronavirus Crisis staff analyzed the Fed's most recent disclosures about its corporate bond purchases and compared the transactions to public data on layoffs, dividend payouts, and legal violations. Staff found that the companies that issued bonds purchased by the Fed conducted substantial layoffs and paid billions in dividends to shareholders during the pandemic, raising concerns that the Fed's bond purchasing program may be exacerbating economic inequities and contributing to an economic recovery that benefits wealthy executives and investors but leaves behind American workers. Staff also found that the Fed bought bonds issued by companies who had been accused of illegal conduct, and that Fed bond purchases were disproportionately weighted towards oil, gas, and coal companies."

Publisher:
Date:
2020-09-23
Series:
Copyright:
Public Domain
Retrieved From:
U.S. House Select Subcommittee on the Coronavirus Crisis: https://coronavirus.house.gov/
Format:
pdf
Media Type:
application/pdf
URL:
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