The US government has absorbed the Federal Reserve. The Fed independence debate is MOOT.

  • Should market conditions deteriorate, the Federal Reserve could venture into the stock market, several market analysts and economists said.
  • Such a move likely would come in the form of a big ETF that tracks major market indexes.
  • Congressional approval would be needed to take such a step.
  • The Fed already has launched a historically aggressive use of its various powers.

 

The Federal Reserve has unleashed what’s frequently been called a bazooka in its efforts to calm markets. Its next step could be to go nuclear.

Should conditions on Wall Street deteriorate significantly, the central bank could go where it’s never gone before: to passively intervene in the stock market for the first time ever, according to market analysts and economists.

The Fed already has unloaded an unprecedented level of ammunition against the tumult brought on by the coronavirus, so doing more would take it even further into uncharted waters.

However, interviews with a variety of market pros over the past week showed that the idea of the Fed venturing into the stock market seems anything but far-fetched. The Fed would need congressional permission to extend its operations, but it already has received wide latitude from the Treasury Department through emergency provisions in the Federal Reserve Act.