Reading The Economist this morning:
Then, on March 18th, the Fed announced it would start buying short-dated commercial paper, to provide direct support for big companies.
There is no reason for the Federal Reserve to help the bigs but not littles.
For that matter, there is no reason for the Fed not to create new money and distribute to individuals:
Still, an often muddled (even politically hidden) truth is that, when called upon, the same [money-printing] computer that works for large banks is there for Main Street as well. But the Federal Reserve needs specific instructions before typing up dollars for the rest of us.
Those instructions come in the form of legislation: When a bill becomes a law, the government is, in essence, telling the Fed how many dollars it is ordering up to cover health care expenses, child care costs or replace lost wages, and so on. And — this is crucial — all spending, whether or not it is offset by tax increases, is covered by the Federal Reserve. –Stephanie Kelton
For the record, I disagree with the claim that the Federal Reserve must wait for legislation before it sends money to Main Street. Technically, that’s true, but I’m pretty sure that during the financial crisis the Fed took all kinds of actions that hadn’t been specifically legislated.
If the Fed were to decide to “use the computer to mark up the size of [individual] accounts,” who would say no?
I can imagine someone asking a court for an injunction against the Fed. I guess I can also imagine a court issuing such an injunction.
But asking a court for an injunction against saving ordinary people and small businesses from financial ruin would be massively unpopular, and courts are influenced by public opinion.
If you’re going to save the bigs, save the littles, too.
Catherine & Katharine 