The Doom-Loop Redux: The Corporate Bond-Purchase Program and the Political Economy of the Fed’s Pandemic Response

Abstract

The Fed’s recent corporate-bond buying program is approached from a political economy perspective, placing it in the context of its interventions during the 2008 crisis, and the broader swathe of facilities launched in response to the COVID-19 pandemic. The response in 2008 can be understood in terms of the doom-loop arising from the structural power exercised by finance and the implication of the Fed in the political compulsions of helping preserve this structural power while reinforcing the speculative tendencies of finance. These interventions set the stage for significant changes in the financial landscape as asset-management funds rose in importance and the US corporate sector became more deeply implicated channels of market-based finance dominated by these asset-management funds. The recent interventions of the Fed, understood in the context of the systemic risks arising from these trends, reflect the resurgence and reinforcement of the doom-loop. JEL Classification: E58, G23, G3