Covid-19

Fed Bullard Warns Of Risks Of Financial Crisis Due To Rising Cases Of COVID-19

Summary

Fed’s Bullard Says a Prolonged Shutdown Risks Bankruptcies, Depression Description video: May.12 — Federal Reserve Bank of St. Louis President James Bullard says a prolonged economic lockdown risks triggering bankruptcies and a Depression-scale recession. Fed Bullard Warns Of Risks Of Financial Crisis […]

Fed’s Bullard Says a Prolonged Shutdown Risks Bankruptcies, Depression

Description video:
May.12 — Federal Reserve Bank of St. Louis President James Bullard says a prolonged economic lockdown risks triggering bankruptcies and a Depression-scale recession.

Fed Bullard Warns Of Risks Of Financial Crisis Due To Rising Cases Of COVID-19

St. Louis Federal Reserve Bank President James Bullard has warned that rising bankruptcies due to coronavirus outbreak could lead to financial crisis, Financial Times reports..

«Without more granular risk management from health policy, we could have had a wave of significant bankruptcies and (this) could have led to a financial crisis.», – said James Bullard in an interview with FT on Wednesday.

He warned about «twists and turns» in the development of the health crisis and said that «it may now be advisable to preserve our credit funds, even though the liquidity in the financial markets has improved significantly».

The number of new cases of COVID-19 in the United States rose by nearly 50,000 on Wednesday, according to Reuters, the largest one-day spike since the start of the pandemic. Rising cases across the country, including the densely populated states of California, Florida and Texas, threaten economic recovery.

Bullard said it was entirely possible that at some point in the future, the country could «turn for the worse», but added that according to the report this is not a baseline scenario.

Fed Bullard Warns Of Risks Of Financial Crisis Due To Rising Cases Of COVID-19

In March, the Federal Reserve took action to bolster the U.S. economy by cutting rates to near zero, buying up trillions of dollars in bonds and launching a series of emergency lending instruments to keep loans flowing to households and businesses..

The last of these programs was launched on Monday, and the Fed could use it to buy recently issued corporate bonds..

«With all of these programs, the idea is to make sure that the markets don’t stop completely, because that is what leads you to the financial crisis where traders don’t trade assets for any price.», – added Bullard.