Famed investor Warren Buffett said Saturday that the Federal Reserve should thank you for propping the economy through the depths of the COVID-19 pandemic.
At Berkshire Hathaway’s annual general meeting, the virtual and Streamed live exclusively from Yahoo FinanceBuffett applauded the Federal Reserve and its chairman, Jerome Powell, for providing targeted support to the US corporate bond markets last spring.
“The economy fell off a cliff in March ”Buffett said.” It has been resurrected in extremely effective ways by Federal Reserve action and later financially by Congress. “
Buffett added that the Fed’s actions helped companies prepare for the impact, as the initial spread of COVID caused companies to raise funds.
Berkshire Hathaway was among the many companies that turned to debt issuance when the stock market declined in late February and early March last year. Issued a 10-year bond for $ 500 million on March 4, 2020.
The appetite for corporate debt waned shortly thereafter, causing the Fed to do something weeks later multiple liquidity facilities that would take on commercial paper and investment-grade medium-term debt.
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By entering the debt market as its own counterparty (through separate vehicles with holdings from the US Treasury Department), the central bank hoped not only to stop the markets but also to give private actors the confidence to provide their own liquidity.
“[The Fed] took a market where Berkshire couldn’t sell bonds the day before and turned it into a market where Carnival Cruise Lines had record corporate bond issues a day or two later, “Buffett said. “Companies are losing money, companies have been closed. It was the most dramatic step you can imagine. “
The Fed had been Buy individual corporate bonds and corporate bond ETFs by December 31, 2020 to accumulate billions in debt as part of its efforts to build confidence in corporate finance markets.
These purchases included Over $ 40 million debt issued by Berkshire Hathaway for its insurance, finance and energy businesses.
Buffett applauded Powell for his “promptness and determination” to halt the corporate debt market, adding that his persistence in getting more tax aid also helped the federal government’s relief efforts.
Buffett similarly said at the Berkshire Hathaway meeting last year that “every one of those who issued bonds in late March and April  should send a thank you letter to the Fed. “
The Omaha Oracle added that the Fed and the government supported economic recovery, estimating that 85% of the US economy is now “in super high gear.”
Brian Cheung is a reporter covering the Fed, the economy, and the banking of Yahoo Finance. You can follow him on Twitter @bcheungz.