The Federal Reserve manages both the money supply and unemployment, generally against GDP growth targets.

Real estate --- residential, commercial, and industrial --- is among the largest asset classes in the financial system, and it acts as collateral and backing of loans and other financial instruments. Those in turn affect banks and their own ability to generate loans, themselves much of the total money supply.

When market value of these assets falls dramatically, it has ramifications across the financial system. The 2007--2008 global financial crisis was the result of a prior crash in real estate valuations. Japan's Lost Decade (1991--2001) was the result of its own real estate-inflated asset bubble collapse. (https://en.wikipedia.org/wiki/Lost_Decade_(Japan)). Money available for business investment (already constraind) will further contract.

Additionally, for many people, lacking a defined benefit pension, real estate is a major component of household asset portfolios.

Whilst real estate asset inflation is highly problematic, and is not a contributor to economic growth, sudden collapse is tremendously disruptive. And very much a concern of the Fed.

Of course, special interest intervention may be another factor in decisionmaking, though there's ample reason for interest without any such.

Propping up assets isn’t in their mandate though.

Traditionally the Fed has bought and sold Treasury bonds on open market transactions.

Beginning with the 2008 GFC, this was expanded to buying "distressed assets" (https://blogs.wsj.com/economics/2008/11/10/fed-takes-step-in...). This was, and remains, controversial (as noted in the WSJ link), and poorly understood (I'm still not certain I grasp it well, let alone fully, myself).

My understanding is that the Fed's goal isn't profit, but of buying money into, or selling assets, and hence money out of existence. The Fed's asset-buying targets are better thought of as liquidity-injection targets (where liquidity is money created by the Fed to be injected into the economy). The Fed stabilises asset prices as a buyer of last resort, incidentally to its primary goal of both ensuring sufficient money in the economy and in creating greater ceertainty in asset values which allows banks to function.

The Fed can always buy assets or lend money, as it has the sole power (save the US Treasury) to create money without restriction. And in practice, it makes profit on these transactions (which is contributed to the US Treasury).

The distortionary effects on risk and incentives ... remains fuzzy to me.

This is largely my own conceptualisation, it seems generally to agree with other explanations, and smells strongly of MMT.

I may be badly mistaken, however.

I'm glad you made sure not to let that uncertainty leak through in your original comment.

Their mandate requires a stable financial system with solvent institutions and sufficient liquidity moving through the system.

By definition, solvency and liquidity at the country level depend on major asset classes maintaining some amount of value.

That baseline changes based on regulations of what can or cannot be used as collateral for different measures, what ratios institutions have to maintain, etc, but there is a floor of some sort at which point the financial system implodes and the economy collapses.

Given their powers and mandate, preventing economic collapse is of the utmost importance.

The problem with this is that no amount of efforts by CBs can cure solvency risk, and attempts to do so only exacerbate moral hazards and make those collateral valuations even more fragile since the fundamentals underlying the collateral valuations, like cashflows and trust between counterparties, will continue to decline.

If you shovel money into investors' mouths, they will eat it until they explode.

The central component of the American Dream is that, once you're rich, the government will do everything in its power to make sure you remain rich.

The best government money can buy.

Please describe that mechanism for me.

Wall Street bailouts, letting corporations exfiltrate revenue to off shore tax havens, defunding the IRS, oddly specific tax loopholes, tax cuts on the wealthy, letting lobbyists write the laws. That's just from thinking about it for ten seconds.

It's known as "the Fed put". Whenever rich people have taken on too much risk the fed has been printing money to keep asset prices high so no one gets hurt. Im sure you know that the Fed is even directly buying corporate bonds now. This is paid for by main street through the inflation tax.

Nothing wrong with your question, the thing you're missing is that many of the commercial buildings are not owned outright. What is happening is similar to what happened in 2008 with residential housing, all be it the reasons for the occurrence are very different.

Probably the worst consequence from a failed commercial real estate market will be the collapse of the economy that services and depends on these spaces. Restaurants, trasport, maintenance workers and so on will inevitably fail. This will lead to loan defaults, bankruptcies and eventually this trickles down to every citizen in the community if not the country.

For a historical view of this type of collapse, look into any resource based boom to bust city or town. The sad part is those that can leave, get out long before the SHTF and it's only the middle class to poor left holding the bag. Then when the Fed steps up with a bailout the parasitic rich start showing up again to ride the recovery, lining their pockets once again.

Because the worst case scenario looks a lot like the '08 crash. These developers are highly leveraged, because property values were skyrocketing in major cities. It was a "you can't lose" situation. And now major banks are stuck holding the loans again, and these guys simply won't be able to make their payments.

The Fed does a lot of macroeconomic modeling and forecasting, so their analysts being interested in the effects of the pandemic on particular sectors of the economy doesn't sound particularly unusual (I have no insight in the the particular circumstances referenced in the parent comment of course).

After 2008 the Fed and various gov agencies are constantly on the hunt for "systemic risks" to the economy. They only really care if the failure of one section of the economy could spill over into others. Commercial real estate definitely could pose a systemic threat. I remember they were looking into bitcoin briefly at the height of the bubble but something like that is way to small of a market to rise to the level systemic risk and warrant fed attention

Because after 2008 the fed became one of the largest landowners in the country and by proxy have a vested interest in propping it up.

The Fed as in the Federal Reserve you mean? Do you have a source? I think you may be confusing things.

The US Federal Reseve holds about 30% of all US mortgages:

https://www.bloomberg.com/news/articles/2020-09-01/fed-s-mor...

Though I'd dispute that the Fed cares particularly about their valuation. The Fed's dual mandates are inflation and unemployment, not balance sheet returns.

They purchased I believe a third of the mortgages.

Owning a mortgage (on the lender side) doesn't mean you own the land.

Some of the largest investors in commercial real estate are private equity and other investment funds that invest on behalf of the largest pension funds in the US. A commercial real estate blood bath could also result in a blood bath for the elderly and those who will retire in the near future. But also it could set off a chain reaction.