Lead Story: The Federal government may not be doing a damn thing to get a much-needed fiscal stimulus package done – but the Federal Reserve certainly is holding up its end of the bargain. Over the weekend, a large mortgage fund got hit with margin calls and had to liquidate $1.25 billion of securities, sending the mortgage backed securities or MBS market into a tailspin. At the same time, the Senate was debating a ton of unrelated pet projects that certain folks were holding the long-awaited stimulus package hostage to.
Enter the often-maligned Federal Reserve, who, to their credit has been way out in front of this crisis in a way that our elected officials could only dream of. The Fed announced extensive new measures to support the economy. Perhaps the most interesting of which – at least to me – was the pledge to back up the truck and buy as much agency mortgage backed securities as needed in order to stabilize the increasingly crazy market. Not a shred of ambiguity here:
The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. The FOMC had previously announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. In addition, the FOMC will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.
Our elected officials are a dysfunctional mess right now and economic activity is in free fall as I write this, but at least our central bank is stepping up to try and avoid a depression, which is nice.
No End in Sight: In a statement that would make even the looniest conspiratorial corners of the web blush in more innocent times, a regional Federal Reserve Bank president suggested that the unemployment rate could hit 30% in the 2nd quarter and GDP could drop 50%.
The Abyss: Independent restaurants were bracing for a slowdown before coronvirus hit. Instead, they hit a wall and face an uncertain future. (h/t Steve Sims)
Pulling the Plug? SoftBank is looking increasingly likely to walk away from at least a portion of its WeWork bailout.
Hammering Away: Homebuilders are still proceeding with units already under construction but the coronavirus outbreak and a weakening economy are likely to delay future phases and projects, further exacerbating the housing shortage whenever this crisis ends.
Forbearance: Fannie Mae and Freddie Mac are instructing servicers of loans that they guarantee to offer 12-month moratoriums on mortgage payments if borrowers suffer a hardship.
Triage: Private equity firms are going to have to start circling the wagons around the over-leveraged portfolio companies that they want to save – and letting the rest go.
Some Signs of Optimism: A Nobel laureate and Stanford biophysicist who correctly predicted the peak of the coronavirus outbreak in China is seeing signs of slowing growth in other countries – and is predicting that we will recover substantially quicker than many currently believe.
On the Brink: It is looking increasingly inevitable that the 2020 Summer Olympic games will be postponed at the very least.
Chart of the Day
This chart just broke my brain.
Source: The Daily Shot
Blockage: Shredded t-shirts being used in place of toilet paper are backing up the sewers in at least one California city because apparently people are stupid enough to not know that you are supposed to use a sock.
Unconventional: A county commissioner recommended blow drying your face to combat coronavirus because Florida.
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