There’s very little in Jay Powell’s biography or tenure as Federal Reserve chairman to indicate a bent for improvisation or breaking the rules—or, quite frankly, for getting anything right. Well, Powell wants everyone to know that the years of humiliation haven’t broken his heretofore undetected ability to do the first two. As for the third, well, we’ll see.

“We crossed a lot of red lines that had not been crossed before,” Powell said Friday during an online event hosted by Princeton University’s Griswold Center for Economic Policy Studies. “I’m very confident that this is the situation where you do that and then you figure it out….”

Who knew he and his erstwhile patron and antagonist had so much in common?

The Fed chair responded to questions about one of its most complex and riskiest programs intended to support the economy -- the Main Street facility -- which has been slow to launch. Powell said the central bank is “days away” from getting it up and running.

Speaking of risky bailout programs….

Of the Fed’s $1.3 billion in ETF holdings as of May 19, around 17% were in funds that invest primarily in junk debt…. The Fed owned $100 million in iShares iBoxx High Yield Corporate Bond ETF, which as of Thursday included small holdings of bonds issued by rental car company Hertz Global Holdings Inc., which filed for bankruptcy protection on May 22. It also included small holdings of retailers J.C. Penney Co. and Neiman Marcus Group Inc. and oil-shale driller Whiting Petroleum Corp., all of which filed for bankruptcy in recent weeks.

Unfortunately, the terms of the Secondary Market Corporate Credit Facility currently do not allow the Fed to get in on this apparently can’t-miss opportunity.

The U.S. Global Jets ETF held around $33 million in assets in early March, according to FactSet, but now holds about $950 million. The fund has had net inflows for 62 consecutive trading days, according to FactSet, despite its price falling sharply during that period…. “It is certainly the type of investment you make knowing that the consensus is against you, at least it was at the time we were buying in,” said Keith DeGreen, CEO of Scottsdale, Ariz.-based DeGreen Capital Management LLC.

Powell Says Fed Crossed Red Lines When Virus Demanded Action [Bloomberg]
Federal Reserve Discloses Holdings of $1.3 Billion in Exchange-Traded Funds [WSJ]
This ETF Booms as Investors Bet on Airlines [WSJ]

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