• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 3 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 6 hours How Far Have We Really Gotten With Alternative Energy
  • 8 hours If hydrogen is the answer, you're asking the wrong question
  • 4 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 5 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 21 hours Biden's $2 trillion Plan for Insfrastructure and Jobs
  • 4 days "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
Saudi Arabia’s Non-Oil Revenue Hits 50% Of GDP

Saudi Arabia’s Non-Oil Revenue Hits 50% Of GDP

Saudi Arabia’s Ministry of Economy…

Mnuchin: Struggling Shale Firms Should Seek Help From The Fed

As part of the Coronavirus CARES Act, the $2 trillion fiscal stimulus meant to resuscitate the US economy, Congress allocated $454 billion to help underwrite the special lending programs from the Federal Reserve. This could generate up to $4.540 trillion in new lending (assuming 10x leverage for highly-rated assets) likely geared toward small and medium-sized businesses.

(Click to enlarge)

It now turns out that the first industry to benefit from direct Fed loans is the imploding US energy sector, which for the past decade benefited indirectly from Fed generosity by issuing junk bonds to yield-starved investors who are now facing near-certain bankruptcy in the face, as the price of oil - if it stays at this level - assures they will never be repaid.

Speaking at a White House news conference on Thursday, Treasury Secretary Steven Mnuchin said energy companies squeezed by the oil-price war can turn to the Federal Reserve’s lending facilities for aid but won’t get direct loans from his department.

“I have very limited ability to do direct loans out of the Treasury,” he said, suggesting that distressed shale companies should instead beg the Fed.

Related: Trump Tweet Sends Oil Soaring 25%

As Bloomberg notes, the $2.2 trillion coronavirus-related economic package authorizes the secretary to provide loans and grants to passenger airlines, cargo airlines, contractors and companies important to national security, Mnuchin said. Other companies must turn to the Fed, which is authorized to inject $4 trillion into the U.S. economy through various lending facilities approved by Congress.

"Our expectation is the energy companies, like all our other companies, will be able to participate in broad-based facilities, whether it’s the corporate facility or whether it’s the main street facility, but not direct lending out of the Treasury,” he said, leaving the Fed as the only option.

ADVERTISEMENT

And now we look forward to the populist backlash when a line of insolvent shale CEOs forms outside the Marriner Eccles all begging to have their junk bonds taken out at par, and refinance with a Fed loan yielding, well, nothing and ideally forgivable if the new round of cheap debt manages to bankrupt Saudi Arabia as the price of oil goes negative.

By Zerohedge.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage



Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News