Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp...
by JumpCrisscross on Thursday June 04, 2020 @05:04PM
(#23421772)
> why the fed is buying ETFs instead of buying corporate paper
They’re supporting lending. Not lending per se. The term of art is transmission mechanism, if you want to read on this further.
Buying through ETFs lets the Fed support loan and bond prices, which encourages lending. Put another way, a dollar lent to a corporate produced $1 of lending. A dollar spent boosting prices can support more than $1 in lending.
ETFs are simply an efficient way to do this. (Equity markets are more efficient than the corporate bond markets. ETFs offer equity-like execution for bond-like risk.)
They’re supporting lending. Not lending per se. The term of art is transmission mechanism, if you want to read on this further.
Buying through ETFs lets the Fed support loan and bond prices, which encourages lending. Put another way, a dollar lent to a corporate produced $1 of lending. A dollar spent boosting prices can support more than $1 in lending.
ETFs are simply an efficient way to do this. (Equity markets are more efficient than the corporate bond markets. ETFs offer equity-like execution for bond-like risk.)