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Why BlackRock Has a Role in the Fed Bond-Buying Spree

fed building
Photographer: Andrew Harrer/Bloomberg
Updated on

As part of its whatever-it-takes effort to reduce the economic pain from the coronavirus pandemic, the U.S. Federal Reserve enlisted BlackRock Inc. to direct three of its bond-buying programs. It’s not the first time the government has partnered with the asset-management behemoth, which under the arrangement could buy some of its own funds on behalf of the central bank.

The Fed’s stimulus plan extends aid to U.S. companies and local governments borrowing money as an increasing number of American businesses screech to a halt. It vowed to buy unlimited amounts of Treasury bonds and mortgage-backed securities, to keep borrowing costs cheap. The central bank reached even further, offering direct support for companies, pushing into territory typically reserved for federal government spending, or fiscal policy. The Fed’s plans include buying newly issued corporate bonds, existing investment-grade bonds and exchange-traded funds that are based on highly rated debt. The expansive measures follow its decision to lower interest rates to near-zero levels, an emergency step that encourages investment and spending.