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Stefani Reynolds/Getty Images

The Federal Reserve said Wednesday it will begin selling the corporate bonds and ETFs it purchased last year to shore up market liquidity.

Why it matters: The enormity of the Fed's emergency response after the onset of the pandemic was without precedent. The liquidity it injected into the market supported asset prices and encouraged lending — and probably helped avert a drawn-out recession.

  • But critics say the Fed's support has gone on too long, and is now contributing to asset bubbles.

What's new: The Fed said Wednesday afternoon it will wind down a portfolio dubbed the Secondary Market Corporate Credit Facility (SMCCF), which held $13.7 billion in bonds and ETFs as of last week.

Context: The SMCCF is small compared to an almost $8 trillion Fed balance sheet, and shows some urgency by the Fed Board to wind down emergency facilities if possible, Bloomberg reports.

What they're saying: SMCCF portfolio sales will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning, the Fed says.

  • A Federal Reserve spokesperson told Bloomberg the portfolio wind down "is not a signal about monetary policy."

Go deeper

AOC, Tlaib and Pressley urge Biden to replace Fed chair Powell

Jerome Powell, chair of the U.S. Federal Reserve. Photo: Al Drago/Bloomberg via Getty Images

Reps. Alexandria Ocasio-Cortez (D-N.Y.), Rashida Tlaib (D-Mich.) and Ayanna Pressley (D-Mass.) are calling on President Biden to replace Federal Reserve Chair Jerome Powell with someone more focused on "eliminating climate risk and advancing racial and economic justice," according to a joint statement reported by Politico.

Driving the news: Powell's term will end in early 2022, though some economists have said Biden will likely reappoint him.

Mike Allen, author of AM
5 mins ago - Politics & Policy

America's youth turn left

Expand chart
Reproduced from John Della Volpe (Data: Exit polls, Roper Center for Public Opinion Research). Chart: Axios Visuals

Gen Xers have always been a swing voting group, but their kids — Gen Z, sometimes called Zoomers — overwhelmingly back Democrats.

What they're saying: "Generational replacement will not be kind to Trump’s Republican Party," John Della Volpe, polling director at the Harvard Kennedy School Institute of Politics, and CEO of SocialSphere, told me.

Mike Allen, author of AM
12 mins ago - Economy & Business

Charted: GOP surged as Biden slumped

Expand chart
Reproduced from Gallup. (Independents were asked their party leaning.) Chart: Axios Visuals

Gallup polling found a huge shift in party preference over the course of 2021, from a 9-point Democratic advantage in the first quarter to a 5-point Republican edge in the fourth quarter.

Why it matters: It's the biggest swing in one calendar year for Gallup's 30 years of tracking.