PRIORITIZING WALL STREET:

THE FED'S CORPORATE BOND

PURCHASES DURING THE

CORONAVIRUS PANDEMIC

SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS

STAFF ANALYSIS

SEPTEMBER 23, 2020

COVIDOVERSIGHT

COVIDOVERSIGHT

CORONAVIRUS.HOUSE.GOV
On March 23, 2020, the Federal Reserve System (Fed) announced that, for the first time 

in its more than 100-year history, the Fed would directly purchase corporate debt as part of its 

response to the economic crisis caused by the coronavirus pandemic.i

 The announcement sent 

bond markets surging, resulting in record-breaking issuances of corporate debt. In June 2020, 

the Fed began purchasing individual corporate bonds through its Secondary Market Corporate 

Credit Facility, a lending facility backed by CARES Act funds.ii Since June, the Fed has 

purchased corporate bonds issued by approximately 500 large companies. 

The Secondary Market Corporate Credit Facility lacks taxpayer and worker protections 

included in other programs funded by the CARES Act. In particular, the facility imposes no 

conditions requiring companies to save jobs or limit payments to executives or shareholders to 

become eligible issuers of bonds purchased by the Fed. 

Select Subcommittee on the Coronavirus Crisis staff analyzed the Fed’s most recent 

disclosures about its corporate bond purchases and compared the transactions to public data on 

layoffs, dividend payouts, and legal violations. Staff found that the companies that issued bonds 

purchased by the Fed conducted substantial layoffs and paid billions in dividends to shareholders 

during the pandemic, raising concerns that the Fed’s bond purchasing program may be 

exacerbating economic inequities and contributing to an economic recovery that benefits wealthy 

executives and investors but leaves behind American workers. Staff also found that the Fed 

bought bonds issued by companies who had been accused of illegal conduct, and that Fed bond 

purchases were disproportionately weighted towards oil, gas, and coal companies. 

Fed Chair Jerome Powell testified in June that “the intended beneficiaries of all of our 

programs are workers.”iii In May, he justified purchasing corporate bonds that had been 

downgraded to junk status since the start of the coronavirus crisis by stating that, because of the 

Fed’s intervention, “those companies have been able to go out and finance themselves. They’ve 

been able to avoid big layoffs. That is the point of all this.”iv However, the Select 

Subcommittee’s analysis indicates that many large layoffs have occurred among the companies 

whose bonds were purchased by the Fed, suggesting that the primary beneficiaries of the 

program have been corporate executives and investors, not workers. 

Select Subcommittee staff found that the Fed bought corporate bonds issued by: 

 Companies that laid off a total of more than one million workers since March 2020;

 383 companies that paid dividends to their shareholders during the pandemic;

 227 companies accused of illegal conduct since 2017; and

 A disproportionate number of fossil fuel companies, which accounted for 10% of the

Fed’s bond purchases but employ just 2% of workers at larger companies.

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I. COMPANIES THAT FURLOUGHED OR LAID OFF A TOTAL OF MORE 

THAN ONE MILLION WORKERS SINCE MARCH 2020 

Of the approximately 500 companies that issued bonds purchased by the Fed, roughly 

140 conducted furloughs or layoffs during the coronavirus crisis, affecting approximately 

1,001,000 workers.v

 Examples include: 

 Boeing turned down a CARES Act loan, which would have imposed job retention 

requirements, limitations on executive pay, and restrictions on payouts to shareholders. 

Instead, it issued a massive corporate bond offering following the Fed’s announcement of 

its corporate credit facilities, thanking the Fed for its intervention in the market.vi Boeing 

then laid off more than ten percent of its workforce, totaling about 16,000 employees.vii 

 Raytheon announced this month that it will lay off 15,000 employees, an increase from 

the 8,500 layoffs the company planned in July.viii These layoffs reflect the company’s 

plan to cut costs by $2 billion in 2020.ix Raytheon’s job cuts were announced after the 

Fed started buying the company’s bonds in June. 

 Schlumberger Ltd., the world’s largest oil-field services company, cut about 21,000 

jobs in July, approximately one-fifth of its workforce, after the Fed started purchasing its 

bonds.x

 

II. 383 COMPANIES THAT PAID DIVIDENDS TO THEIR SHAREHOLDERS 

DURING THE PANDEMIC 

The Fed has purchased bonds issued by 383 companies that have paid out dividends to 

their shareholders since April 1, 2020.xi 95 of these companies issued dividends while also 

conducting layoffs, prioritizing their shareholders over their workers in the midst of the 

pandemic. For example: 

 Food service company Sysco Corp. laid off about a third of its workforce just one month 

before paying a dividend to its shareholders.xii 

 Caterpillar announced a $500 million distribution to shareholders on April 8, about two 

weeks after indicating that operations at some plants would stop, furloughing workers.xiii 

 Stanley Black & Decker announced a $106 million dividend to shareholders two weeks 

after it announced that it was planning significant furloughs and layoffs.xiv

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III. 227 COMPANIES ACCUSED OF VIOLATING THE LAW SINCE 2017

Almost half of the companies whose bonds were purchased by the Fed have been accused

of illegal conduct since 2017, including violations of workplace safety and environmental 

standards, as well as allegations of defrauding the government.xv These violations resulted in 

$19.75 billion in penalties for these companies over just the last three years. For example: 

 Marathon Petroleum, the 33rd worst air polluter in the nation,xvi has repeatedly violated

environmental laws, including violating state emissions limits near Detroit fifteen times,

releasing 35,800 gallons of diesel into a river in Indiana, and spending $334 million to

settle a dispute over refinery pollution.xvii

 Tyson Foods, a multinational food processing company, has been cited by the

Department of Labor for at least thirty-five workplace safety or health violations since

2017 and at least five environmental violations from the Environmental Protection

Agency. Tyson Foods also failed to take adequate precautions to protect workers from

the spread of the coronavirus. Outbreaks in its facilities have led to the deaths of more

than 24 employees and over 7,000 infections.xviii

 AmerisourceBergen, a wholesale drug company, and its subsidiaries paid $885 million

in 2017 and 2018 to resolve criminal and civil allegations that it illegally repackaged

lifesaving cancer drugs to increase profits by overcharging federal health care programs.

IV. A DISPROPORTIONATE NUMBER OF FOSSIL FUEL COMPANIES

More than ten percent of the Fed’s bond purchases are from fossil fuel companies, even

though fossil fuel firms only employ two percent of all workers among the S&P 1500 stock 

market index.xix

The Fed developed a “Broad Market Index” to guide its corporate bond purchases and 

states that its purchases generally track the weight of eligible issuers along twelve sectors.xx 

However, recent analysis shows that the only sector in which the Fed is consistently overweight 

is the energy sector, which exclusively contains oil, gas, and coal companies.xxi 

Investing in oil, gas, and coal companies not only fuels climate change, but it is also a 

risky investment given longer term declines in the sector. In July and August 2020, 13 oil and 

gas producers filed for bankruptcy, and bankruptices this year are up 62 percent over this time 

last year.xxii Prior to January 2020, the energy sector showed the most deterioration in credit risk 

across all sectors over the past five years and the second worst deterioration over the past 20 

years. The sector has shown a further five percent decline since the start of 2020, reflecting the 

recent decline in oil and gas prices.xxiii

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BlackRock—which executes the bond purchases on behalf of the Fed—has recognized 

that “climate risk is investment risk.”xxiv Yet the Fed, acting on behalf of U.S. taxpayers, has 

purchased a disproportionate amount of fossil fuel bonds. 

 

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ENDNOTES 

i

 Federal Reserve, Press Release: Federal Reserve Announces Extensive New Measures To Support the 

Economy (Mar. 23, 2020) (online at www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm). 

ii The Fed Begins Purchases of Up to $250 Billion in Individual Corporate Bonds, Business Insider (June 

15, 2020) (online at https://markets.businessinsider.com/news/stocks/federal-reserve-begins-individual-corporatebond-purchases-secondary-market-relief-2020-6-1029309910#). 

iii Committee on Financial Services, Testimony of Chair Jerome H. Powell, Board of Governors of the 

Federal Reserve System, Hearing on Monetary Policy and the State of the Economy (June 17, 2020) (online at 

https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=406614). 

iv Powell Says Fed Policies ‘Absolutely’ Don’t Add to Inequality, Bloomberg (May 29, 2020) (online at 

www.bloomberg.com/news/articles/2020-05-29/powell-says-fed-policies-absolutely-don-t-add-to-inequality). 

v

 To calculate this number, Select Subcommittee staff reviewed public reporting about each of the 

companies that issued bonds purchased by the Fed, including media reports, Worker Adjustment and Retraining 

Notifications (WARN) Act notices, and public filings. 

vi Boeing’s Debt Now Larger than New Zealand’s After Huge Bond Sale: Boeing Rejects Government 

Bailout Money But Takes on $25 Billion in New Debt To Do So, Washington Post (May 1, 2020) (online at 

www.washingtonpost.com/business/2020/04/30/boeing-raises-25-billion-massive-bond-sale-turns-down-bailoutfunds/). 

vii Boeing Plans More Job Cuts On Top of 16,000 Announced This Spring, CNN (Aug. 18, 2020) (online at

www.cnn.com/2020/08/18/business/boeing-more-job-cuts/index.html). 

viii Raytheon to Lay Off 15,000 Employees Amid $2B Cost-Savings Initiative, Hartford Business Journal 

(Sept. 17, 2020) (online at www.hartfordbusiness.com/article/raytheon-to-lay-off-15000-employees-amid-2b-costsavings-initiative). 

ix Raytheon Earnings Beat as Costs Slashed Amid Aviation Collapse, Investor’s Business Daily (July 28, 

2020) (online at www.investors.com/news/raytheon-earnings-q2-2020-raytheon-stock-rtx/). 

x Schlumberger Cuts 21,000 Jobs Amid Historic Oil Downturn, Wall Street Journal (July 24, 2020) (online 

at www.wsj.com/articles/schlumberger-cuts-21-000-jobs-amid-historic-oil-downturn-11595591476). 

xi To calculate this number, Select Subcommittee staff compared the list of companies that issued bonds 

purchased by the Fed with publicly available data about dividend distributions. 

xii The Fed Helped Companies Borrow Money. Some Laid Off Thousands Anyway, NPR (June 10, 2020) 

(online at www.npr.org/2020/06/10/873190315/the-fed-is-throwing-money-around-not-everyone-is-reaping-thebenefits). 

xiii U.S. Companies Cut Thousands of Workers While Continuing to Reward Shareholders During 

Pandemic, Washington Post (May 5, 2020) (online at www.washingtonpost.com/business/2020/05/05/dividendslayoffs-coronavirus/). 

xiv Id. 

xv To conduct this analysis, Subcommittee staff used data from Good Jobs First’s Violation Tracker. See 

Violation Tracker, Good Jobs First (online at www.goodjobsfirst.org/violation-tracker).

xvi Political Economy Research Institute, Marathon Petroleum (online at 

https://grconnect.com/tox100/ry2017/index.php?search=yes&company2=4274) (accessed on Sept. 19, 2020). 

xvii The Fed Invested Public Money in Fossil Fuel Firms Driving Environmental Racism, Bailout Watch 

(Sept. 15, 2020) (online at https://bailoutwatch.org/blog/fed-invested-public-money-in-fossil-fuel-firms). 

xviii COVID-19 Outbreaks at Tyson Foods Plants Sicken Nearly 5,000 Workers, Expert Institute (June 25, 

2020) (online at www.expertinstitute.com/resources/insights/covid-19-outbreaks-at-tyson-foods-plants-sickennearly-5000-workers/); Tyson Reverts to its Pre-Pandemic Absentee Policy. More Than 7,100 Workers Have Tested 

 

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Positive for COVID-19, Including Hundreds in Recent Weeks, Business Insider (June 8, 2020) (online at 

www.businessinsider.com/tyson-ends-covid-19-policy-as-more-workers-get-sick-2020-6). 

xix The Fed Invested Public Money in Fossil Fuel Firms Driving Environmental Racism, Bailout Watch 

(Sept. 15, 2020) (online at https://bailoutwatch.org/blog/fed-invested-public-money-in-fossil-fuel-firms).

xx Federal Reserve Bank of New York, FAQS: Primary Market Corporate Credit Facility and Secondary 

Market Corporate Credit Facility (Aug. 14, 2020) (online at www.newyorkfed.org/markets/primary-and-secondarymarket-faq/corporate-credit-facility-faq). 

xxi A Financial Analysis of the US Federal Reserve’s Corporate Bond Market Interventions, InfluenceMap 

(Sept. 18, 2020) (online at https://influencemap.org/report/Is-the-Fed-Being-Sector-Neutral3a1294e4de3b6275fae9370d6f68cc70). 

xxii Haynes & Boone, LLP, Oil Patch Bankruptcy Monitor (Aug. 31, 2020) (online at 

www.haynesboone.com/-/media/Files/Energy_Bankruptcy_Reports/Oil_Patch_Bankruptcy_Monitor). 

xxiii Necessary Intervention or Excessive Risk? Corporate Bond Risk Before and After COVID-19 Amid the 

Fed’s Buying Programs, InfluenceMap (June 2020) (online at https://influencemap.org/report/NecessaryIntervention-or-Moral-Hazard-5e42adc35b315cc44a75c94af4ead29c). 

xxiv Letter from Chairman and CEO Larry Fink, BlackRock, to CEOs (Jan. 14, 2020) (online at 

www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter). 

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