SINGAPORE (Apr 17): Federal Reserve Chair Jerome Powell and his colleagues had a hard decision to make as the coronavirus epidemic worsened in February and March. If they stuck to the standard policy of buying only highly rated bonds, they would likely be accused of favouring Wall Street over Main Street — the traditional rap on the Fed. If they got creative, they could help more sectors of the economy but they would almost certainly be accused of overreaching, picking winners and losers, rescuing the unworthy, and risking losses that would ultimately be borne by taxpayers.

They decided to get creative. More creative, in fact, than any Fed leaders since the birth of the central bank in 1913. They not only relaunched the special lending programs built for the 2008–09 financial crisis, but they invented entirely new ones to rescue both big and small businesses. Powell’s immediate predecessor, Janet Yellen, called the actions “rapid and enormous.” Ben Bernanke, who set the previous record for Fed activism, commended Powell while calling some of the newest measures “important and difficult.”

The Fed’s fire hose of lending hasn’t prevented a recession, but it’s protecting the financial system from seizing up. Fear was so rampant in the financial markets in early March that even some normally in-demand Treasury securities — such as certain slightly older issues of 10-year government notes — fell out of favour.

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