'This is what a kleptocracy looks like': Billionaire investor Chamath Palihapitiya blasted the Fed for buying foreign companies' bonds
- Billionaire investor Chamath Palihapitiya slammed the Federal Reserve for purchasing foreign companies' bonds in a tweet this week.
- "Does @federalreserve actually believe buying foreign company bonds with US taxpayer dollars helps America?" the Social Capital boss and Virgin Galactic chairman asked.
- The central bank's emergency facility bought debt issued by Japan's Toyota and UK oil giant BP this month, and it tracks an index that gives the most weight to Toyota, and German carmakers Volskwagen and Daimler.
- "This is what a kleptocracy looks like," Palihapitiya said, arguing the purchases drive up markets and distract from the pandemic's economic impacts.
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Billionaire investor Chamath Palihapitiya blasted the Federal Reserve for buying foreign companies' bonds in a tweet this week.
The Social Capital boss, Virgin Galactic chairman, and part-owner of the NBA's Golden State Warriors questioned how supporting non-US businesses helps Americans struggling during the coronavirus pandemic.
"Does @federalreserve actually believe buying foreign company bonds with US taxpayer dollars helps America?" he asked, referring to a Zero Hedge story about the trend.
"All it does is move the markets higher and distracts us from what's actually happening to Main St jobs and earning power," Palihapitiya continued. "This is what a kleptocracy looks like."
The investor weighed in after the Fed disclosed details about its secondary market corporate credit facility (SMCCF), which it launched to stave off a credit crunch during the COVID-19 crisis.
The facility has bought debt issued by more than 85 companies as of June 16, including the US divisions of Japanese automaker Toyota and British energy giant BP.
The New York Fed also laid out the broad market index that the facility will track. Bonds issued by Toyota and German automakers Volkswagen and Daimler were the most heavily weighted, each making up more than 1.7% of the index. BMW, Hyundai, Bayer, Unilever, Reliance, and other foreign companies also made the list.
Notably, several of those names employ thousands of Americans, and are large enough that their bonds would feature in many market indexes.
The SMCFF, managed by asset manager BlackRock and partly funded by the US Treasury, could spend up to $250 billion on existing corporate bonds. It has spent nearly $430 million on individual bonds and $6.8 billion on exchange-traded funds as of June 16.
The facility has already been criticized for buying bonds issued by Berkshire Hathaway, given it's run by one of the world's wealthiest men and boasted $137 billion in cash at last count.
"Warren Buffett doesn't need a backstop from the Fed," Danielle DiMartino Booth, the head of market-research firm Quill Intelligence, told CNN. "This is really embarrassing."