Who Gets the Money?

In less than a month, a staggering $1.7 trillion has been added to the Federal Reserve’s balance sheet. The U.S. is mulling its next round of aid after a $2 trillion rescue package. Investment banks have been picked to help deliver that aid to some of the biggest companies in stress, the airlines. And it’s time to assess: How much of these actions are working?

• Small Business Lending Programs: JPMorgan and Wells Fargo are among banks that struggled to get lending kicked off on the first day of the federal relief program for smaller, distressed firms. We’ve written plenty about this assistance being hard to disperse. And as delays continue, there’s a concern brewing that big corporations are getting bailed out while the everyday American is left behind and unemployment jumps. Even many high-profile investment bankers who are working with much larger clients say: Smaller businesses can’t survive and that’s a huge risk to the economy.
• The Fed’s Facility: Some bond markets have been re-opening, with a record week for global issuance. Even beleaguered cruise operator Carnival was able to raise money, but it came at a steep cost: 11.5% interest in one of the highest coupons ever offered by an investment grade firm. My colleague Jon Ferro makes the point that many investors are just following the Fed in its bond buying -- but Mohamed El-Erian sees real risks to that strategy as debt quickly gets downgraded to junk.
• Liquidity Issues: My colleagues point out that the short-term funding market is still struggling, and for five-straight sessions, financial institutions didn’t issue any long-term commercial paper. Meanwhile, the Fed is looking to let Wall Street banks take on more leverage to make it easier for them to expand their balance sheets.

I spoke this week to Goldman’s Sharmin Mossavar-Rahmani, the CIO of private wealth, who explained that while the long-term repercussions of the Fed’s actions are hard to know, the actions were needed. And ever the optimist, here’s her Bloomberg Television interview.

Others are not so optimistic, and preparing for an utter overhaul of how we live every day. It’s early days yet. Your opinions are welcome.

More on Wall Street

• Washington ties can be helpful on Wall Street. Here’s a bit on how Eric Cantor and Bob Steel helped their firms land key roles in the Treasury’s relief plans. And in addition to BlackRock, Pimco was also hired by the Fed.
• We saw Xerox step back from their hostile HP bid this week, and one investment banker sees many more transactions unraveling. “Most transactions that are not in contract are either going to be renegotiated or shelved,” said Marc Cooper, the CEO of PJ Solomon, expecting lawsuits ahead. Find the full interview here.
• Tony Tutrone, the head of a nearly $90 billion alternatives business at Neuberger Berman, says investors won’t look kindly to private equity companies making capital calls to build war chests. Here’s his full Bloomberg Television interview.
• Here’s a thorough read-through on how leverage in America swelled outside of the largest investment banks.
• My colleagues also broke the news that Goldman’s David Solomon ignored tradition and agreed to buy two private jets. They report that CEO has earned his share of doubters in the firm as it tries to win Main Street.

More to come. Tips welcome at [email protected].