Some of the companies that the direct government programs miss – think Gap, Dell Technologies and Kraft Heinz – are household names with enormous manpower. If such companies were to have trouble accessing cash, it could lead to job cuts, the researchers said.
But there is a reason that the business assistance programs have avoided directly investing in more debt-laden large companies. Including shaky businesses in Main Street facilities or the group's bond program would increase the risk of companies failing to repay the Fed and Treasury, and increase the chances that the lending programs would lose money and ̵
The Fed should "refrain" from using the Main Street program "to help companies document existing problems caused by excessive leverage, international pricing competition and long-term viability concerns," Senator Sherrod Brown, the Senate's highest-ranking Democrat, wrote Banking Committee, in a letter to Fed leader Jerome H. Powell and Mr. Mnuchin on May 18.
The Fed has helped risky companies less directly. One of the company's bond programs will buy a limited amount of listed funds, which act as equities, but track a broad basket of the company's debt. That, along with just the signal that investment purchases of bond loans are coming, has breathed life back into troubled bond markets, including for junk debt.
But the fact that a group of companies have little or no access to direct assistance – essentially leaving these companies at affordable market conditions – can come at a price if things deteriorate again, in which case it is likely that borrowing will be more difficult for high-yielding companies that do not actually have Fed support to support them.
"You have to be a little careful to assume that you can only do things with magic," said Stein, the analyst who is a former Fed governor. Although markets may assume that the central bank will step in to help the market, conditions can deteriorate sharply if they do not when the pressure comes.