Fed Goes All In as Investors Wait on Congress

The Fed also said it would establish a Main Street Business Lending Program to support lending to eligible small- and medium-size businesses, complementing efforts by the Small Business Administration.

"The Fed has attempted to fill the void created by paralyzed fiscal policy," wrote Jefferies economists Thomas Simons and Ward McCarthy. "These steps are quite significant, but still do not address all of the issues that need to be addressed. The political leaders still need to get a game plan going here or the masses will suffer."

"The Fed is afraid of a liquidity crisis," said economist and money manager Gary Shilling. "But unless it buys all corporate bonds or munis in sight I don't think it will make a lot of difference. This is not a financial crisis. The fiscal crisis is significant."

David Kelly, chief global strategist at J.P. Morgan Asset Management, said that "the Fed is being very aggressive in responding to liquidity issues caused by the sudden economic downturn. However, the real need is for grants rather than loans and so the really important policy moves in helping the economy weather this storm will need to come from Congress rather than the Fed."

On Capitol Hill, Democrats and Republicans were still in a standoff on a roughly $2 trillion stimulus package in mid-afternoon to address the fiscal situation. The biggest sticking point: the rules governing approximately $500 billion in loans to businesses. Democrats want to ensure that those funds are not used for stock buybacks or executive bonuses. Republicans are opposing those changes.

Two procedural votes to proceed on the current bill failed. Complicating the vote is the absence of five Republican senators who have contracted COVID-19 or are self-quarantining because they have been exposed to the virus.

While that standoff continues, House Speaker Nancy Pelosi said House Democrats will introduce their own version of a stimulus package as an alternative. It's expected to include additional unemployment benefits for workers and restrictions on the funds that companies receive, banning stock buybacks, increased executive pay and firing of workers.

— Check out What to Make of Fed's 'QE Infinity' on ThinkAdvisor.