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Mnuchin Says It’s “Highly Unlikely” Fed Will Ever Buy Stocks

April 28, 2020
Tyler Durden

Mnuchin Says It’s “Highly Unlikely” Fed Will Ever Buy Stocks

Treasury Secretary Steven Mnuchin said during an appearance on “Squawk Box” Tuesday morning that all businesses receiving $2 million or more from the federal ‘Paycheck Protection Program’ will be audited, while encouraging any major or public companies to return the money if they aren’t a true “small business”.

Mnuchin is doing damage control as it becomes increasingly clear that most of the hundreds of billions of dollars in public loans that could convert to grants public money intended to save the economy has instead gone to companies that don’t really need the money, companies like the LA Lakers.

He also insisted that while giving federal money to states to reimburse their coronavirus-related expenses was undoubtedly the “right thing to do,” the secretary said poorly managed states (like, say, Illinois) shouldn’t be rescued from the poor financial decisions they made before the crisis.

“This isn’t just going to be a federal bailout of the states,” Mnuchin said early Tuesday on CNBC. “States that had specifically large expenses because of the coronavirus, like New York and New Jersey, it was the right thing that the federal government gave them money.”

After defending the administration’s small business loan program, which has been plagued with issues from the very start, Mnuchin fielded a question on the Federal Reserve ahead of the central bank’s upcoming post-meeting press briefing. Asked by Andrew Ross Sorkin about the “raucous debate about whether the Federal Reserve should buy stocks”, the Treasury Secretary said he believes this is “highly unlikely”, though of course he refused to “specifically comment on what the Federal Reserve should or shouldn’t do.”

“I’m not going to specifically comment on what the Fed should or shouldn’t do in the future but I would say I think that’s highly unlikely,” he replied.

Watch the clip below:

The question and the answer caused ears to perk up across Wall Street, as many traders enjoyed a deep belly laugh.

How unlikely could it be, considering that it’s already happening…

We’ve been warning for years about the ‘Japanification’ of the Federal Reserve. But as questioning the Fed’s easing programs suddenly goes mainstream, a better question might have been ‘how much longer before the Fed’s policies look like this?’

While we suspect direct stock purchases will eventually become a reality, even as several top Fed officials have dismissed the possibility out of hand, the fact remains that the central bank has been actively influencing (some might say “manipulating”) financial markets for more than a decade.

As a reminder, we present this clip from Sept 2009 of Rep. Alan Grayson asking a simple question: “Has the Federal Reserve Ever Tried to Manipulate the Stock Market?”


Tyler Durden

Tue, 04/28/2020 – 10:20