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Startups Lose in a Low-Rate World, and the Fed Is Blaming Itself

  • Fed research shows entrenched companies benefit from low rates
  • This week’s eco roundup also looks at European central banks
The Marriner S. Eccles Federal Reserve building stands in Washington, D.C.
The Marriner S. Eccles Federal Reserve building stands in Washington, D.C.

Photographer: Andrew Harrer/Bloomberg

As startups become increasingly rare and industries grow more concentrated, the U.S. central bank is pointing a finger -- at itself.

Low interest rates may be driving big companies to buy up ideas, researchers at the Federal Reserve Bank of Philadelphia argue in a new paper. Bigger firms are more leveraged, the authors find, which is probably because they operate in more business lines and enjoy relatively stable levels of employment and sales. Diversification boosts creditworthiness, leaving large firms better placed to borrow against future cash flow when they get hold of new ideas.