> What I don't understand is, what are the consequences are?
The consequences of the 2008-2009 financial crisis were the defacto nationalization of large US banks as Systemically Important Financial Institutions (SIFIs). Basically in exchange for taking on more stringent regulation and capital controls, and the separation of prop trading and deposit banking through Dodd-Frank's Volcker Rule, large US banks were declared too big to fail and would be backstopped by the Fed going forward.
I think what you're seeing now is perhaps something similar for all large US corporations. The Fed is essentially declaring the S&P500 as TBTF by opening the trough to all of them. The Fed maybe doesn't want to do this (they are economists after all, and they know this isn't a good path to start heading down), but they're also the only governmental entity capable of direct action without political blowback in this crisis.
I think the market sees this as the Fed setting a floor for equity prices, and maybe it's right?
In the end, the music can only keep playing for so long while chairs are slowly removed from the room. The market can stay irrational for a long time, but it must eventually face reality. The Fed can print money so that companies have working capital (which they will hoard) but can't print a vaccine or your mortgage payment or the customers your neighbourhood restaurant needs.
The consequences of the 2008-2009 financial crisis were the defacto nationalization of large US banks as Systemically Important Financial Institutions (SIFIs). Basically in exchange for taking on more stringent regulation and capital controls, and the separation of prop trading and deposit banking through Dodd-Frank's Volcker Rule, large US banks were declared too big to fail and would be backstopped by the Fed going forward.
I think what you're seeing now is perhaps something similar for all large US corporations. The Fed is essentially declaring the S&P500 as TBTF by opening the trough to all of them. The Fed maybe doesn't want to do this (they are economists after all, and they know this isn't a good path to start heading down), but they're also the only governmental entity capable of direct action without political blowback in this crisis.
I think the market sees this as the Fed setting a floor for equity prices, and maybe it's right?
In the end, the music can only keep playing for so long while chairs are slowly removed from the room. The market can stay irrational for a long time, but it must eventually face reality. The Fed can print money so that companies have working capital (which they will hoard) but can't print a vaccine or your mortgage payment or the customers your neighbourhood restaurant needs.