Fed’s ‘Infinite Cash’ Put to the Test in a World of Leverage
Some companies’ debt burdens are too heavy to withstand the economic shock from the coronavirus outbreak.
Neel Kashkari reiterates the Fed will do whatever it takes.
Photographer: D Dipasupil/Getty Images
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Sunday night on CBS’s “60 Minutes” that “there is an infinite amount of cash in the Federal Reserve. We will do whatever we need to do to make sure there’s enough cash in the banking system.”
Roughly 12 hours later, the central bank backed up those words with its most aggressive action yet to combat the coronavirus-induced credit crunch. In a statement Monday morning, it announced open-ended purchases of U.S. Treasuries and agency mortgage-backed securities. The Fed will buy “in the amounts needed to support the smooth functioning of markets for Treasury securities and agency MBS.” Just a week ago, it had suggested caps of $500 billion of Treasuries and $200 billion of agency MBS. Large numbers, to be sure, but not quite a “whatever it takes” promise.