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  • Writer's pictureJohn Shelburne

Orange Mocha Frappuccino!

Hopefully you get a little chuckle........

Published on 3/26/20

Draghi - "You know what could really help you sort thru these terrible credit markets"

Powell - "What?"

Draghi and Lagarde in unison "A corporate bond buying program!" Cue the music Wham - Wake Me Up Before You Go-Go I know that very little humor exists in times of pandemics and financial turmoil but I love pondering about humorous one liners or pranks between the central bankers during tense moments.

Imagine Bernanke in 2008 walking up to a frantic Timothy Geithner and going full Carl Spackler from Caddy Shack -

So I jump ship Timmy in Hong Kong and make my way over to Tibet, and I get on as a looper at a course over in the Himalayas. A looper, you know, a caddy, a looper, a jock. So, I tell them I'm the head of the Fed, and who do you think they give me? The Dalai Lama, himself. Twelfth son of the Lama. The flowing robes, the grace, bald... striking. So, I'm on the first tee with him. I give him the driver. He hauls off and whacks one - big hitter, the Lama - long, into a ten-thousand foot crevasse, right at the base of this glacier. Do you know what the Lama says to me Timmy? Gunga galunga... gunga, gunga-galunga.

I doubt Jerome Powell enjoyed an Orange Mocha Frappuccino while he established the Primary Market Corporate Credit Facility (PMCCF) and the Secondary market Corporate Credit Facility (SMCCF). However, I hope that Powell had discussions with Mario Draghi or Christine Lagarde about the implementation of a central bank program for corporate debt. Why Draghi or Lagarde? Because the ECB implemented a similar program in June of 2016 In an attempt to push up inflation to the 2% area and boost growth, the ECB started buying corporate bonds thru the Corporate Sector Purchase Program. The eligibility criteria for the program is laid out very clear in the following link:

My initial thoughts fell between "this is Europe and I will never understand anything" and "this is absolutely nuts".

I will never forget one meeting in London in August of 2016. I had the privilege to give the upcoming product roadmap for 12 of our bank customers. Everyone in the room was winging about Brexit and I silenced them by saying Brexit wasn't the biggest event of the summer. It was the ECB buying corporate bonds. You have one GIGANTIC buyer in the market and it will distort everything. Also what about defaults? Who is on the other side of the table? Dangerous territory in my opinion.

The PMCCF, SMCCF and CSPP all have similar criteria but the ECB has done a phenomenal job with transparency of their holdings. I usually look at the following site for holdings :

And get holdings from the following links on this page:

The national central banks have the country specific holdings on their site as well:

National Bank of Belgium

Banco de España

Banque de France

Banca d’Italia

Suomen Pankki/Finlands Bank For me the Fed is the gold standard and I expect that they will have a fantastic resource for viewing the holdings for the PMCCF and the SMCCF. A great resource is the NY Fed Markets Data Dashboard -

Fed Agency Mortgage Operations It is also interesting to note that the ECB has a network of Central Banks all over Europe that work with local banks that have local knowledge of credits. It would be a good move by the Fed to use the other reserve banks for corporate and municipal purchases.



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