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There are so many reasons, @steinerla, I had to do a thread.
1. It is illegal.
2. They bought bonds on the secondary market vs from the company directly, so it acted as a deal facto bailout for investors' debt positions, not direct solvency or liquidity for the issuing company.
1. It is illegal.
2. They bought bonds on the secondary market vs from the company directly, so it acted as a deal facto bailout for investors' debt positions, not direct solvency or liquidity for the issuing company.
3. It lowered bond yields, thus starving pensions and other fixed income investors of the opportunity to earn a fair yield on a fixed income investment.
4. The Fed picked winners and losers by which companies' bonds they chose to buy.
4. The Fed picked winners and losers by which companies' bonds they chose to buy.
5. It lowered the cost of capital for the largest of companies (like Apple, JP Morgan) further advantaging them against smaller competitors who were hurt the worst by lockdowns.
6. The taxpayer backstopped the first 10% of the Fed's losses.
6. The taxpayer backstopped the first 10% of the Fed's losses.
7. Companies like $AAPL did new debt issues after the Fed started buying, specifically to fund share buybacks. Those share buybacks are used to directly compensate senior management.
8. Bonds of non-US-based companies like Toyota, Nissan, and Carnival were bought.
8. Bonds of non-US-based companies like Toyota, Nissan, and Carnival were bought.
9. Bonds of companies who already received taxpayer bailouts were bought - $DAL, $CCL, $AAL, $UAL
10. The NY Fed is owned by approx 70 large banks. The Fed bought the bonds of many of its owners, and then pays its owners a dividend on the yield it is earning on those bonds.
10. The NY Fed is owned by approx 70 large banks. The Fed bought the bonds of many of its owners, and then pays its owners a dividend on the yield it is earning on those bonds.
11. No companies were forced to issue equity at ATH valuations before the Fed bought its bonds.
12. Finally, 20M people are out of work. Nearly same number are starving. 61% of restaurants and 42% of small business may close forever. Money should go there before corporate debt.
12. Finally, 20M people are out of work. Nearly same number are starving. 61% of restaurants and 42% of small business may close forever. Money should go there before corporate debt.
