Late to the party here, but let’s discuss some of the massive lending facilities the Federal Reserve announced last week. Focus on upport for corporate capital markets, for “Main Street” bank lending to businesses, and for securitizations https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm

The capital markets facilities supporting primary and secondary market corporate credit could pump out up to $750 billion in bond purchases and are the most fun if you’re looking to keep the Wall Street party going https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a5.pdf

There are basically no strings attached to any of this money. Use the proceeds for leveraged buyouts, share buybacks, or just to keep paying multi-million dollar bonuses to your executives while laying off workers at the same time – the sky’s the limit! Use your imagination!

It’s also fun to think about what could end up on the public balance sheet under this program. Bonds from Carnival Cruise Lines? They qualify! Funds backed by junk bonds purchased during the biggest high yield bubble ever? No problem! https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a2.pdf

The Main Street bank loan programs have a few more limitations, but a lot less than Congress said. Congress said keep 90% of your workforce. The Fed says make a good faith attestation that you’ll use funds to “make a reasonable effort” to retain workers and you’re golden.

Congressionally recommended restrictions on outsourcing, offshoring, and union busting have vanished entirely from this “Main Street” assistance. Maybe they meant “Main Street” in Mumbai? https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a7.pdf

There are some executive comp restrictions but not many – go ahead and pay your top guys $3 million plus half of their 2019 salary over that. If you made $13 million in 2019, you can make $8 million on Federal Reserve life support during the worst crisis in memory. Nice!

The securitization program will give low cost support to some of the junkiest areas of the securitized bond markets, including subprime auto lending and securitizations of leveraged (subprime) business loans, although there are some underwriting limitations

A cherry on top is that Section 13(3)(D) of the Federal Reserve Act, governing disclosures under these programs, permits the Fed to keep the specific recipients of these loans and the terms of their credit confidential. Can hardly believe they would try that, but we’ll see…