The Fed has been supporting markets. Now it must find ways to boost growth

IT SEEMS AS if there is nobody to whom the Federal Reserve will not lend. Since the covid-19 pandemic wrought havoc on financial markets in March, America’s central bank has promised to buy up to $750bn in corporate bonds and $500bn in state- and local-government debt. It has stood behind the market for commercial paper, behind money-market funds and behind foreign central banks in need of dollars (see article). On June 15th lenders were invited to register for its “Main Street Lending Programme”, which will purchase loans to small- and medium-sized businesses. The same day it announced that it would buy corporate bonds not only through exchange-traded funds, but directly, too. Such uninhibited use of its balance-sheet brings to mind the words of Walter Bagehot, the primogenitor of modern central banking, whose advice for times of stress was to lend “to merchants, to minor bankers, to ‘this man and that man,’ whenever the security is good”.