The Fed cares about banks. Because the Fed is a bank. The Fed isn't a tech company. They don't care if a tech company goes under. Kind of a bizarre comparison.
The Fed's mandate is full employment and price stability. Sure they care about banks and have bank oversight, but
banks fail all the time and that doesn't influence policy every time they do.
The Fed is not ignorant to the goings-on in the broader, non-bank economy and it's a substantial component of how they set policy. If they're setting policy purely based on bank-runs and bank-failures then it means they did their job wrong. Bigly wrong.
Their interest in the broader economy is why they track about
every single hiring/productivity/investment/GDP metric imaginable across all the industries out there. So, if you start to see
zombie companies, whether CRE/Tech/financials/etc, collapse because they can't rollover their debt or continue to make higher interest rate debt service payments, that'll be of top interest to the fed. They don't sit back and wash their hands of the situation and say "
well, it's not a bank so I don't care".
My concern is that rather than accepting this as the cost of running a healthy economy where unproductive companies perish, it will be tempting for the Fed to reverse course at the first sign of "economic damage" and revert back to easy monetary policy. This would be
extremely politically favorable (
I mean, who doesn't love high growth + free money?). Given their recklessly accommodative stance since the blow up 15 years ago, one can imagine a scenario where the fed backpedals in a hurry at the first sign of trouble.
I mean, these are the same circus clowns who
presided over a 40% increase in the M2 supply over 2 years and told you with a straight face that there was no need to raise rates, reciting the "inflation is transitory" line when trouble started to hit. So I'm quite sure that if they saw some shi**ily run, high name-recognition tech company go under because their outrageous debt load became too expensive, the fed would take notice and work on backpedaling as quickly as humanly possible.
Long monologue. Sorry. I hope this at least **kind of** clarifies why I think the federal reserve will give substantial consideration to leveraged tech companies when they inevitably go under.
EDIT: And I call out tech specifically because many (if not most) of them haven't even gone through 1 economic cycle. They're younger companies on average compared to, say, materials/mining co. They've only ever existed during the "grow at all costs" fundraising periods where they were showered with free money in private and public markets. Many of them simply cannot survive in a more normal rate environment.
When a bank collapses, you lose some ability for lending, losing the ability to borrow money slows the economy.
Do you lose that ability for lending? Not really, you're just shifting all that money to another bank (like JPM) who then will need to put that capital to work. They won't just sit on a mountain of cash and not lend it unless *credit* conditions tighten.
I have one more card to play before then. Desperate times.
