TALKING POLITICS Adam Tooze/Shockwave
Apr 20, 2020
Adam Tooze, economic historian and professor known for writing on global crises, joins to map the unfolding shock. He discusses the scale of sudden unemployment, the Fed’s rapid market interventions, and the political fallout from bailouts. They also probe oil market collapse, shale bailouts, and the fraught talk of joint euro debt and corona bonds.
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Fed's Rapid Swing From Failure To Full Intervention
- The Fed initially failed to stabilise markets but then moved at unprecedented speed to backstop dollar and credit markets.
- In about three days the Fed achieved dollar-funding stabilisation that took a year in 2007–08, widening into corporate credit support.
Fed Actions Depended On Congressional Backing
- Fed corporate bond purchases required Treasury backing and congressional cooperation.
- The Exchange Equalization Fund plus Article 13[33] emergency powers were used, and passage of congressional relief made the Fed's corporate programs credible and extensible to high-yield debt.
High Yield Rescue Raises Political Risks
- Bailouts for corporate-credit markets create political risks domestically.
- Private equity and hedge-fund pay and involvement in junk bonds make these rescues politically explosive and could fuel democratic backlash.