By Matthew Gaude & Shawn McGuire
The Federal Reserve announced early Monday morning its next moves as it tries to salvage the U.S. economy. In the announcement, the Fed made it clear that it is not holding back and is willing to do whatever it takes to help the American people and their businesses.
Its latest move is to open new lending facilities to prevent a liquidity crunch from turning into a solvency crisis. The first is the Term Asset-Backed Securities Lending Facility, which was also used in 2008 to support consumer and business credit markets. It will lend money to investors to purchase securities backed by credit card loans and other consumer debt.
The next two lending facilities will take the Fed into uncharted territory, supporting lending for large companies. One will offer bridge loans for up to four years in the investment-grade corporate debt market in order to address the lack of new financing. It will limit the payment of dividends and stock buybacks for firms that defer the interest on their loans.
The other lending facility will attempt to unclog the market for existing corporate debt. It will enable the Fed to purchase bonds that have already been issued by highly rated companies and some exchange-traded funds.
In total, the three lending facilities are designed to support $300 billion in new financing. The Fed is also expanding two other lending facilities that were announced last week. In addition, it announced plans to roll out a Main Street Business Lending Program to support lending to small and midsize businesses. They did not provide any details about it.
The Fed also announced on Monday that its Treasury and mortgage security purchase program that it approved last week has no caps. It anticipates buying $375 billion in Treasury securities and $250 billion in mortgage securities this week alone. The other strategy that was implemented last week was cutting rates to near zero.
In turbulent times like these, it’s hard to remember that our country has always recovered in the past, and we will also recover from this. We know it’s concerning, but please know you’re not alone. We at Live Oak Wealth Management are here to answer your questions and discuss your concerns. Reach out to us today at 770-552-5968 or [email protected].
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
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