Liquidity Problems and Rescue Packages
Now that the $2 trillion rescue bill has been passed, we believe it will come with unintended consequences. Part of the bill includes the federal government getting ownership in companies and the Federal Reserve buying corporate bonds for the first time ever. 2008 had similar unintended consequences when bank trading desks were eliminated, which created a drop in liquidity in the bond markets. The government being involved in owning and lending to publicly traded companies is a slippery slope.