Gundlach: Fed’s Corporate Bond Buying Program is Illegal; Fed Says Program Isn’t Operational

“The Fed has, effectively, become a hedge fund in drag as a central bank.”

by Pam Martens and Russ Martens
Wall Street on Parade

When the Fed published its weekly H.4.1 data last Thursday, there was no mention of its two, highly controversial, corporate bond buying programs: the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF). We sent an email to the New York Fed to find out if the two programs are operational and if they will be consolidated on the Fed’s balance sheet. A spokesman for the New York Fed replied that “the PMCCF and SMCCF are not yet operational. And, as we note on the websites for each, additional information will be published before the facilities are launched.”

That strikes us as strange. Last fall, the Fed launched a highly questionable repo loan program in as little as 24 hours and flooded Wall Street with hundreds of billions of dollars over the next few weeks. The two corporate bond buying programs were announced more than a month ago. What’s holding up their rollout? Is the Fed getting pushback that it’s not allowed to make direct purchases of corporate bonds, including those with junk ratings?

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