Thread by @RealBankReform

The @federalreserve has done a damn good job of bailing out the investor class on #WallStreet during the #COVID19 pandemic: big banks, big investors, and big corporations are all doing great. And the evidence is in the data THREAD 1/8

The Fed is buying corporate bonds and it is paying ABOVE PAR for those securities. In fact in the latest data dump (today), it’s buying on average bonds at a price of 107, or 7% more than they are actually worth at face value 2/8 federalreserve.gov/reports-to-con…

For some perspective, imagine that you took out a loan for $100,000 and the creditor handed you $107,000 and said, “Hey, keep it, I have plenty.” That’s how well corporate America and its bankers are doing thanks to the Fed. 3/8

As @apark_ is wont to comment, this does not look like a market that is crying out for assistance; in fact, there are plenty that want the Fed to go away. There’s even chatter on social media by traders who say, in effect: the Fed just buys, and doesn't care about price. 4/8

It gets worse. The Fed only buys from existing investors, not companies themselves. So various pension, hedge, and other big funds are making good money here. 5/8

So are #WallStreet’s largest banks, because the Fed only buys from these “primary dealers,” who harvest the bid/ask spread between what the existing investors want and what the Fed buys 6/8

Since the Fed is so open to buying, no matter the cost, they are spreading wealth among the various players in this chain, and also to @blackrock, the massive asset manager running the purchases for the Fed 7/8

What one investment strategist said of the stock market is equally true for the bond market - BUT NOT for ordinary folk: Fed chair Jay Powell “has become Santa Claus, the Tooth Fairy and a leprechaun with a pot of gold, all wrapped into one.” 8/END washingtonpost.com/business/2020/…