9 ms·

I guess the idea is to keep companies solvent so they'll still be there when the quarantine restrictions are lifted.

alexmingoia 6y ago
Why can’t they survive by issuing corporate bonds? And as far as I know this Fed policy isn’t to buy failing stock it’s to inject cash overall through treasury bonds, since the Fed isn’t allowed to buy stock.
- dredmorbius 6y ago
  Because: 1. Nobody would buy them. 2. Small biz doesn't have access to corporate paper markets, even in the best of times.
  - matthewdgreen 6y ago
    How does the current Fed strategy help small business right now? If anything, it seems like this strategy will leave larger companies in a position to soak up those small businesses' market share when this is all over.
    - Anon1096 6y ago
      The Fed is set to announce small business loans very soon. This is just part of a larger plan.
      - im3w1l 6y ago
        I'm really curious how startups are positioning themselves for the availability of such loans. Might the terms be so favorable that it drives out the VCs?
        thoughtstheseus 6y ago
        Unlikely. Even in these troubling times the fed likes to have assets backing loans. Maybe an SBA program could be competitive but not in the near term.
    - dredmorbius 6y ago
      Indirectly, by avoiding a liquidity crunch. Specific direct aid is called fiscal policy, and would have to be enacted by Congress (or possibly to a limited extent by the executive): reduced taxes, direct payments or credits, loan guarantees, government spending, other economic policy. The Fed's tools are monetary policy, and manipulate the overall money supply. That's a powerful, but limited, power.
  - icelancer 6y ago
    >> 1. Nobody would buy them. Sure they would. If you price it correctly. >> 2. Small biz doesn't have access to corporate paper markets, even in the best of times. Not true. I am a SMB owner and have secured a LOC for my business as well as refinancing of my house personally. It's out there. Just at prices you might not like. But then again, we aren't guaranteed good prices. Or at least, we shouldn't be.
- take_a_breath 6y ago
  If companies don’t have customers, as you noted in your prior comment, how will they secure debt financing at a reasonable rate?
  - OscarCunningham 6y ago
    Because the lenders know that they will be profitable after the virus has passed.
    - whatshisface 6y ago
      I'm not sure if I agree. Restaurants are low margin businesses to begin with and they might not be able to sustain a high interest loan even in the best of times.
- nemo44x 6y ago
  Have you looked at the credit market this month? It’s in shambles as yields are soaring. It’s not that higher yields is bad. But moving so quickly is dangerous. Bonds, etc are necessary to maintain supply lines, pay people, etc.
  - xiphias2 6y ago
    Where are yields soaring? Here it looks like they are going down: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i... It wouldn't surprise me if the 80 year bond bubble popped this year, but I don't see that happening yet.
    - thoughtstheseus 6y ago
      Corporate bonds.
    - nemo44x 6y ago
      The same reason mortgage rates are up even as treasuries are at an all time low. Who wants to loan money in this environment? Have you looked at BBB bonds? A lot of companies have been downgraded because the conditions have changed so dramatically, driving yields up as well.
      - xiphias2 6y ago
        I see, thanks! When do you think it will translate to treasury bonds crashing? I can't imagine them having 5 more years, but on the short term they can easily go to negative yields.
  - jrumbut 6y ago
    An environment of high yields should be the reward for people who made hay while the sun shined. If we're gonna have socialism, let's have socialism for the poor and capitalism for the rich and not the other way around.
- OscarCunningham 6y ago
  > Why can’t they survive by issuing corporate bonds? The purpose of the Fed policy is to make coporate bonds (and other lending/borrowing) more attractive.

Why can’t they survive by issuing corporate bonds? And as far as I know this Fed policy isn’t to buy failing stock it’s to inject cash overall through treasury bonds, since the Fed isn’t allowed to buy stock.

dredmorbius 6y ago
Because: 1. Nobody would buy them. 2. Small biz doesn't have access to corporate paper markets, even in the best of times.
- matthewdgreen 6y ago
  How does the current Fed strategy help small business right now? If anything, it seems like this strategy will leave larger companies in a position to soak up those small businesses' market share when this is all over.
  - Anon1096 6y ago
    The Fed is set to announce small business loans very soon. This is just part of a larger plan.
    - im3w1l 6y ago
      I'm really curious how startups are positioning themselves for the availability of such loans. Might the terms be so favorable that it drives out the VCs?
      - thoughtstheseus 6y ago
        Unlikely. Even in these troubling times the fed likes to have assets backing loans. Maybe an SBA program could be competitive but not in the near term.
  - dredmorbius 6y ago
    Indirectly, by avoiding a liquidity crunch. Specific direct aid is called fiscal policy, and would have to be enacted by Congress (or possibly to a limited extent by the executive): reduced taxes, direct payments or credits, loan guarantees, government spending, other economic policy. The Fed's tools are monetary policy, and manipulate the overall money supply. That's a powerful, but limited, power.
- icelancer 6y ago
  >> 1. Nobody would buy them. Sure they would. If you price it correctly. >> 2. Small biz doesn't have access to corporate paper markets, even in the best of times. Not true. I am a SMB owner and have secured a LOC for my business as well as refinancing of my house personally. It's out there. Just at prices you might not like. But then again, we aren't guaranteed good prices. Or at least, we shouldn't be.
take_a_breath 6y ago
If companies don’t have customers, as you noted in your prior comment, how will they secure debt financing at a reasonable rate?
- OscarCunningham 6y ago
  Because the lenders know that they will be profitable after the virus has passed.
  - whatshisface 6y ago
    I'm not sure if I agree. Restaurants are low margin businesses to begin with and they might not be able to sustain a high interest loan even in the best of times.
nemo44x 6y ago
Have you looked at the credit market this month? It’s in shambles as yields are soaring. It’s not that higher yields is bad. But moving so quickly is dangerous. Bonds, etc are necessary to maintain supply lines, pay people, etc.
- xiphias2 6y ago
  Where are yields soaring? Here it looks like they are going down: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i... It wouldn't surprise me if the 80 year bond bubble popped this year, but I don't see that happening yet.
  - thoughtstheseus 6y ago
    Corporate bonds.
  - nemo44x 6y ago
    The same reason mortgage rates are up even as treasuries are at an all time low. Who wants to loan money in this environment? Have you looked at BBB bonds? A lot of companies have been downgraded because the conditions have changed so dramatically, driving yields up as well.
    - xiphias2 6y ago
      I see, thanks! When do you think it will translate to treasury bonds crashing? I can't imagine them having 5 more years, but on the short term they can easily go to negative yields.
- jrumbut 6y ago
  An environment of high yields should be the reward for people who made hay while the sun shined. If we're gonna have socialism, let's have socialism for the poor and capitalism for the rich and not the other way around.
OscarCunningham 6y ago
> Why can’t they survive by issuing corporate bonds? The purpose of the Fed policy is to make coporate bonds (and other lending/borrowing) more attractive.