The US Federal Reserve is taking unprecedented steps to soften the coronavirus consequences and prevent a full-on economic depression. Curiously enough, the Fed’s stimulus programs are aimed at the local and the global economy as well. The regulator provides unlimited support to financial markets. According to experts, the financial watchdogs have unleashed such large-scale stimulus measures for the first time in the entire history of the Federal Reserve. Notably, the Fed has started buying corporate junk bonds. The Fed has never ever launched the program that would involve the purchase of corporate debt. Initially, the central bank was planning to buy the debt of reliable borrowers. However, against the background of the COVID-19 disastrous consequences for the economy, the high-yield bonds were also included in the program. As the Fed cannot act as a lender directly, it opened Special-Purpose Vehicle (SPV) subsidiary company to buy up junk bonds and provide financing. Nevertheless, every coin has two sides. Therefore, even these rescuing measures are not flawless. By taking such steps, the Federal Reserve may put an end to the free market system. Yet, desperate times call for desperate measures. In light of a devastating economic slowdown, maybe such drastic measures is a proper remedy for the economic depression.
