US stock markets enjoyed another Tuesday rebound with the announcement of even more monetary stimulus from the Fed and the hope of government fiscal stimulus and bailouts. In his podcast, Peter Schiff said this should make it crystal clear that the government and central bank are rigging the markets.
There is talk of “helicopter” cash and tax breaks, along with bailouts for the airline industry and small businesses. The proposed stimulus package reportedly totals over $1.2 trillion.
Meanwhile, the Federal Reserve announced additional monetary stimulus measures.
The Fed said it will begin to hold two daily repo operations instead of one. The New York Fed began running repo operations to stabilize overnight lending markets back in September, long before the coronavirus outbreak.
The central bank has also relaunched the so-called Commercial Paper Funding Facility (CPFF), a 2008 financial crisis program that allows companies to take out unsecured, short-term loans. In practice, the Federal Reserve will buy commercial paper directly from companies. The loans will have to be paid back within a year. The US Treasury will provide $10 billion of credit protection to the central bank’s commercial paper operation.
To go along with the CPFF, the Fed announced a Primary Dealer Credit Facility offering overnight and term funding with maturities up to 90 days.
In simplest terms, it will allow over-leveraged companies to go into even deeper debt and those loans will be backed by the federal government. Peter called it a bank bailout 2.0.
Loaning money to banks and accepting corporate and muni bonds, plus equities as collateral, so the banks don’t have to sell those assets at huge losses, is a bailout. In 2008, I warned the next bank bailout would be even more expensive.”
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