Bank Deals Blog: Fed / Banking News

With last week’s passage of the massive coronavirus relief package (the CARES Act) and with the Federal Reserve continuing to use all of its tools, a long recession should hopefully be avoided. However, with the nationwide lockdown scheduled to last at least through April, a recession still appears likely. Goldman Sachs just released a forecast in which unemployment will peak around 15% later this year and GDP falls by 34% in the second quarter. As is described in this CNBC article, that “would be by far the worst period...

The coronavirus (COVID-19) pandemic is already resulting in mass unemployment, and those with loans, mortgages and credit card debt will be the ones most in need of help from banks. Savers may not be worried about making loan payments, but there are other potential problems they may face as the pandemic continues. In addition to offering help on the loan and credit side, many banks and credit unions are offering help on the deposit side. This post provides a listing of the banks and credit unions that have announced specific...

The Coronavirus Aid, Relief, and Economic Security (CARES) Act that unanimously passed the Senate has a few little-known provisions that will likely be of interest to savers. The well-known provisions have been discussed at length by the media. These include the $1,200 tax rebates to most individuals, expanded unemployment benefits, billions of dollars for state and local governments and hospitals, and billions of dollars in loans for small and large businesses. The total cost of this package is close to $2 trillion. The bill is expected to pass the House...

The Federal Reserve has been especially active in the last week. With rates now at the zero bound, the Fed is using other tools to maintain financial stability as the economy is hit by the effects of the coronavirus pandemic. Yesterday, the Fed announced unlimited QE in which the Fed will buy as many assets as necessary to keep the markets running. In addition to Treasuries and mortgage-backed securities, the assets include corporate bonds. The Fed also announced new emergency lending programs to support both businesses and consumers.

The Federal Reserve (Fed) has been busy in helping the financial system maintain stability in this coronavirus pandemic. Today, the Fed has already published three press releases announcing various actions. That included more monetary action by the FOMC. Now that the Fed has reached the zero bound on rates, the effort is now on Quantitative Easing (QE) in which the Fed buys assets to support the markets. In this FOMC statement released today, the Fed essentially announced unlimited QE:

I still see no signs that the Fed is considering negative rates....

It was apparent last Sunday when the Fed held an emergency FOMC meeting and announced drastic policy actions, the COVID-19 (coronavirus) pandemic has the potential of seriously impacting the financial system. Also, as we learned from the 2008 financial crisis, when the financial system is under stress, bank failures rise dramatically. Thus, it’s reasonable that savers would be concerned about the safety of their deposits. To help ease those concerns, the FDIC published this March 18th press release for bank customers, and the NCUA published a similar March 19th press...

The Fed’s emergency meeting last Sunday in which it cut the federal funds target rate by 100 bps has returned us to the zero bound, the same condition that existed for seven years from 2008 to 2015. The Fed also restarted Quantitative Easing (QE) in which it will be buying $500 billion of Treasuries and $200 billion of mortgage backed securities. Several other actions were also announced in the FOMC statement. As economist Tim Duy said in his FedWatch blog post, the Fed “came out with the big guns.”

On Monday, stocks had their worst one-day sell-off since 2008, and Treasury yields reached record lows. With stimulus promises from the U.S. and foreign governments to combat the coronavirus outbreak, stocks and Treasury yields have rebounded today, but they remain volatile. With so much uncertainty with the virus, it’s likely that we have several more weeks of this type of market volatility.

After last week’s emergency Fed rate cut, we are only one percentage point (100 bps) above the zero bound. It will only take two more 50 bp rate...

The Fed’s pause policy is officially over. The Fed held an emergency meeting this morning and has issued a press release that announced a 50 bp rate cut. According to the press release:

All FOMC voting members voted for this policy action. The markets were expecting a 50 bp rate cut after last week, but it appeared the Fed might wait until its scheduled March meeting two weeks from today. This Fed action comes after the G7 finance ministers and central bank governors completed a conference call this morning. The markets...

The fears of the coronavirus outbreak and its impact on the economy are creating pressure for another Fed rate cut. That talk picked up yesterday after the large decline in the stock market and Treasury yields. It’s still too early to know how much of an impact the virus will have on the U.S. economy. A few economists think the Fed will move slowly to change course if conditions warrant. One in this camp is Tim Duy. In his Tuesday FedWatch blog post, he described how he thinks the Fed...