4 ms·
The fed can help with liquidity (i.e. ensuring that whoever needs to fund itself has liquidity by flooding the capital markets with cash). It cannot help with s
by cm2187 7y ago
The fed can help with liquidity (i.e. ensuring that whoever needs to fund itself has liquidity by flooding the capital markets with cash). It cannot help with solvency though (if you can't afford your debt because your revenues collapsed, no private lender is going to lend to you, even if they have the capacity to fund the loan). The interest expense is low, but when your debt becomes due, it is the end of the game.
- Groxx 7y agoIgnoring (increasingly common) bailouts, basically, yeah.
- 0x8BADF00D 7y agoEven if the Fed nationalized every US company, the interest rate would skyrocket in the corporate debt market. It actually makes things worse. No creditor will want to touch those bonds, hence the interest rate naturally increases to entice would be creditors.