Illustration: Aïda Amer/Axios

Foremost among Fed chair Jay Powell's achievements during this crisis is that he has fixed a broken corporate bond market. Large businesses with access to capital markets are able to borrow what they need to cover their near-term losses. Impressively, he managed to do so without buying a single corporate bond, at least until this week.

Details: The Fed announced key measures to ensure well-functioning markets on March 23. The Secondary Market Corporate Credit Facility, in particular, unfroze the bond markets: It reassured investors that the Fed would ensure the liquidity they require when they lend money to corporations.

  • Seven weeks later, the SMCCF still hadn't bought a single bond; purchases only started on Tuesday. That was fine: The markets have priced in those purchases since March.
  • The intervening time allowed the Fed to draw up hundreds of pages of agreements detailing how the fund would be administered and managed.

The big picture: Capitalism works when it has the luxury of being able to anticipate the future. Corporate share prices rise when companies announce buybacks, not when they actually do them. Creditors lend new money to avoid a debtor filing for bankruptcy protection from them. Individuals work for two weeks in the knowledge that their work will eventually be remunerated on payday.

The bottom line: The Fed has proved adept at using market tools to fix the market. Millions of individuals and small businesses facing hunger, poverty and ruin, however, had no market access to begin with. Helping them is much harder for the Fed to do.

Go deeper

Dion Rabouin, author of Markets
Aug 19, 2020 - Economy & Business

Investors still don't believe the stock market's rally can last

Illustration: Aïda Amer/Axios

The S&P 500 closed at a new all-time high on Tuesday and has rallied by around 52% since hitting its low point on March 23 — the best run the index has ever had in such a short time.

The state of play: While the market has continued to rise for the past five months, most investors have been incredulous about the sustainability of gains.

Felix Salmon, author of Capital
Aug 19, 2020 - Economy & Business

The triumph of capital over labor

Illustration: Aïda Amer/Axios

Tuesday's stock market record proves the definitive triumph of capital over labor in the era of COVID-19.

Why it matters: The recession has caused the size of the American economic pie to shrink substantially. But the share of that pie going to capital rather than labor has continued to rise.

Ben Geman, author of Generate
1 hour ago - Energy & Environment

U.S. cities' lagging climate progress

Expand chart
Reproduced from a Brookings Institution report; Chart: Axios Visuals

A just-published Brookings Institution analysis of U.S. cities' pledges to cut carbon emissions reveals very mixed results.

Why it matters: The potential — and limits — of city and state initiatives have gotten more attention amid President Trump's scuttling of Obama-era national policies.

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