Fed’s Wall Street Bailout Barrels On with No Main Street Aid Seen
May 15, 2020 (EIRNS)—The Federal Reserve Bank’s balance sheet published May 14 showed its asset book now at just a hair under $7 trillion, at $6.983 trillion; having been at $4.3 billion just two months ago. The rate of “quantitative easing” bailout of Wall Street, the City of London, Frankfurt and Tokyo banks, at $1.3 trillion/month, dwarfs any bailout by a central bank before. The report also showed that the Fed added another $90 billion in QE purchases of securities this week: $41 billion in Treasuries; $25 billion of mortgage-backed securities; and $23 billion in its “facilities” such as Primary Dealer, Money Market Mutual Fund and Payroll Protection Program Facilities.
The Federal Reserve’s global bank bailout role is central: Its “swap lines” to foreign central banks, which essentially are extended-term loans, had risen to just under $450 billion as of the Fed’s May 14 report (which covers the period to May 13). The largest swap lines by far have gone to the Bank of Japan ($220 billion) and the European Central Bank ($143.7 billion). These two and the 17 other recipient central banks use the dollar swap lines for the same purpose as the Fed: to buy up securities of all kinds and grade, exchange-traded funds, etc. which must be settled with dollars.
But on “Main Street,” the Fed still has not bought a single municipal bond—which, if it did as it has announced, could assist in building new municipal hospitals or other infrastructure, for example—nor a single corporate bond through its “Main Street Lending Facility”.
There is a problem with the Treasury and Fed’s planning even of the Payroll Protection loans. These have been made by private banks taking applications and making loans, the Small Business Administration acting a regulator, the Treasury guaranteeing the loans, and the Fed buying the loans. The slow pace and relatively small volume of loans has maximized small business unemployment. In Germany, or Canada, etc. government development banks have made the loans directly, quickly and in relatively larger volume, resulting in less unemployment. National credit institutions have many advantages.