<p>@capm is correct that the Fed is not allowed to buy equities (though they may lend against them if need be, so long as they are secured to their satisfaction— see, for example, all the things they lent against in the Maiden Lane transactions), however, they're allowed to buy a lot more than "government securities" (i.e., Treasuries).</p>

<p><a href="https://www.federalreserve.gov/aboutthefed/section14.htm">Section 14 of the Federal Reserve Act</a> details what they can purchase, which includes Treasuries, GSE (i.e., Fannie and Freddie) securities (which are <em>not</em> legally considered to be government-backed securities, though they're often casually treated as such), gold, cable transfers, bankers' acceptances, bills of exchange, discount notes, municipal bonds, obligations of federal agencies, and (by allowing them to hold accounts at other central banks) foreign currencies.</p>

CC BY-SA 3.0
2016-06-01T01:13:56.177Z
2016-06-01T01:13:56.177Z
dismalscience
<p>The Fed can not buy stock. However a negative yield on bonds will forced investors
to buy index/etf that pays huge dividend. In effect the Fed can invest in equity or 
stock.</p>

<p>Central bank of China and Japan had done the above in the past.</p>

CC BY-SA 4.0
2020-03-12T17:36:46.593Z
2020-03-12T17:36:46.593Z
romeo mactal
<p>I believe Federal Reserve's mandates are to ensure a good monetary policy, m1/m2 money supply, manage interest rates etc. The government has taken equity position in Auto industry during 2008 financial crisis, which was approved by congress. But, to my knowledge, fed has not invested directly in the stock market in the past. It appears that federal reserve, for the first time in history, is directly investing in index funds, ETF funds and may even be picking specific stocks to support the stock market during this unprecedented Covid Pandemic. I read another article that said Fed has been investing about $60 Billion a day for the past few weeks thru Black Rock, Blackstone or some other third party. I don't know for a fact, but if it is true that Fed is investing directly or indirectly to support the stock market, I think that is dangerous. That can lead to tremendous amount of corruption, manipulation and lead to financial socialism or even financial communism. </p>

CC BY-SA 4.0
2020-04-27T17:00:15.263Z
2020-04-27T17:00:15.263Z
Stock Trader
<p>Is it relevant here to speak about the Plunge Protection Team (PTT) or the <a href="https://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets" rel="nofollow noreferrer">Working Group on Financial Markets</a>? There is lots of talk that they do interfere in the broader stock market. One can also question that when a central bank like the FED prints tons of money and lends it out at 0 interest rates that money will start looking for yield... in the stock market. It's my opinion that the FED (and the other central banks around the world) reinflated the stock markets. The runup since 2009 is largely based on money printing, not on genuine 'growth': 
<a href="https://i.sstatic.net/E3dWC.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/E3dWC.jpg" alt="enter image description here"></a></p>

CC BY-SA 3.0
2016-06-03T14:34:23.973Z
Why is this getting downvoted? Not relevant? just a question I'm very new here...
tibo
CC BY-SA 3.0
2016-06-30T13:27:03.797Z
The answer was flagged as being primarily opinion based. You could improve the quality by citing more sources and explaining your inclusion of the graph. Removing opinion based and incendiary words like "tons of money", 'genuine "growth"' (provide a measure that supports your argument i.e. wage stagnation vs. stock indices), and generally the Fed does not lend at 0, even under TARP or asset purchase strategies, they are purchasing equities and looking for growth, just not interest.
Jason Nichols
CC BY-SA 4.0
2020-04-27T18:37:00.743Z
Negative yields force investors to plunge into riskier debt 
https://www.ft.com/content/34c4944c-bab2-11e9-8a88-aa6628ac896c
paulj
CC BY-SA 4.0
2020-04-27T18:39:25.113Z
Bloomberg: The growth and persistence of negative-yielding debt in 2019 has done more than deliver attractive price appreciation on government bonds. It has pushed investors to take on more risk, pushing up the price of assets from investment-grade and high-yield corporate bonds to emerging markets to, of course, equities. It has also encouraged companies to intensify their financial engineering, often involving debt issuance to pay for stock buybacks. And it has supported a range of mergers and acquisitions
paulj
CC BY-SA 4.0
2016-06-02T20:55:51.190Z
2020-02-11T23:09:37.693Z
2020-02-11T23:09:37.693Z
tibo
<p>No, the Fed is not allowed to buy stocks, they are allowed to buy government securities in open market operations in order to achieve the target rate for the federal funds rate. The guidelines for this are explained in the <a href="https://www.federalreserve.gov/aboutthefed/section14.htm" rel="noreferrer">Section 14</a> of the Federal Reserve Act. You can find the Fed holdings in the <a href="https://www.federalreserve.gov/releases/h41/Current/h41.pdf" rel="noreferrer">Federal Reserve Statistics</a>.</p>

<p>However other central banks, like the Bank of Japan, started buying stocks as a measure to support their financial institutions (their banks were subject to too much market risk because of their stock holdings). The have detailed their stock purchasing plan in their <a href="http://www.boj.or.jp/en/finsys/spp/index.htm/" rel="noreferrer">website</a>.</p>

CC BY-SA 3.0
2016-06-01T00:57:42.557Z
However, you can read in the news that another central bank is considering such a policy: Bank of Japan.
Alexis L.
CC BY-SA 3.0
2016-06-01T15:46:08.340Z
I update the answer with the information provided by @dismalscience and the Bank of Japan stock purchase plan.
capm
CC BY-SA 3.0
2016-06-01T20:04:17.047Z
@capm wouldn't this behavior drive the price as opposed to actual market forces?
dnbwise
CC BY-SA 3.0
2016-06-01T23:19:06.950Z
@dnbwise Yes, of course it would affect the price—the implications of a government entity supporting companies' share prices (possibly in a way that favored one firm over another) is exactly why the Fed isn't allowed to do it. If you're looking for an example of what it looks like when a central bank does buy stocks, China's central bank engaged in equity market interventions last summer when their stock market was falling (I don't know whether some firms were favored over others; that would be an interesting paper).
dismalscience
CC BY-SA 3.0
2016-06-02T15:41:21.160Z
Also following today's decision by the ECB: no equity purchase but corporate bonds  (further reading: http://www.wsj.com/articles/ecb-keeps-interest-rates-unchanged-1464868369)
Alexis L.
CC BY-SA 3.0
2016-06-02T15:57:43.587Z
@dnbwise Yes, but it depends on the objective of the central bank. In the case of the BoJ they don't want to support the price of the stocks, the want to take the risk off the balance sheets of their banks, in order to avoid volatility of their banks tier 1 capital. Like dismalscience said, in the case of the Bank of China, they openly intervened the market to avoid further crashes and loss of market cap.
capm
CC BY-SA 3.0
2016-06-04T07:05:19.133Z
Might also add that the BoJ is buying large amounts of [ETFs](https://en.wikipedia.org/wiki/Exchange-traded_fund). The BoJ's ETF holdings now make up over 50 % of the entire ETF market in Japan. ETF are essentially funds that consist of various asset classes, including equity stocks.
P A N
CC BY-SA 3.0
2016-05-31T21:57:46.150Z
2016-06-01T15:44:36.093Z
2016-06-01T15:44:36.093Z
capm
<p>Can the Fed buy and sell stock in publicly traded companies? Is there evidence of this and, wouldn't this behavior drive the price as opposed to actual market forces?</p>

CC BY-SA 3.0
2016-06-02T20:00:41.127Z
both capm and dismalscience answers added value to the question, i just accepted the first one to address it.
dnbwise
<macroeconomics><stock-market><federal-reserve>
Does the Federal Reserve buy and sell stocks?
dnbwise
# Does the Federal Reserve buy and sell stocks?

(Asked by: username_0 on 2016-05-31)

Can the Fed buy and sell stock in publicly traded companies? Is there evidence of this and, wouldn't this behavior drive the price as opposed to actual market forces?

**Tags:** macroeconomics, stock-market, federal-reserve
> **Comments:**
> **username_0**: both capm and dismalscience answers added value to the question, i just accepted the first one to address it.  

---

## 5 answers

### Answer by username_7 on 2016-05-31. Score: 14 | Accepted answer

No, the Fed is not allowed to buy stocks, they are allowed to buy government securities in open market operations in order to achieve the target rate for the federal funds rate. The guidelines for this are explained in the [Section 14](https://www.federalreserve.gov/aboutthefed/section14.htm) of the Federal Reserve Act. You can find the Fed holdings in the [Federal Reserve Statistics](https://www.federalreserve.gov/releases/h41/Current/h41.pdf).

However other central banks, like the Bank of Japan, started buying stocks as a measure to support their financial institutions (their banks were subject to too much market risk because of their stock holdings). The have detailed their stock purchasing plan in their [website](http://www.boj.or.jp/en/finsys/spp/index.htm/).

> **Comments:**
> **username_8**: However, you can read in the news that another central bank is considering such a policy: Bank of Japan.  
> **username_7**: I update the answer with the information provided by @dismalscience and the Bank of Japan stock purchase plan.  
> **username_0**: @capm wouldn't this behavior drive the price as opposed to actual market forces?  
> **username_1**: @dnbwise Yes, of course it would affect the price—the implications of a government entity supporting companies' share prices (possibly in a way that favored one firm over another) is exactly why the Fed isn't allowed to do it. If you're looking for an example of what it looks like when a central bank does buy stocks, China's central bank engaged in equity market interventions last summer when their stock market was falling (I don't know whether some firms were favored over others; that would be an interesting paper).  
> **username_8**: Also following today's decision by the ECB: no equity purchase but corporate bonds  (further reading: http://www.wsj.com/articles/ecb-keeps-interest-rates-unchanged-1464868369)  
> **username_7**: @dnbwise Yes, but it depends on the objective of the central bank. In the case of the BoJ they don't want to support the price of the stocks, the want to take the risk off the balance sheets of their banks, in order to avoid volatility of their banks tier 1 capital. Like dismalscience said, in the case of the Bank of China, they openly intervened the market to avoid further crashes and loss of market cap.  
> **username_9**: Might also add that the BoJ is buying large amounts of [ETFs](https://en.wikipedia.org/wiki/Exchange-traded_fund). The BoJ's ETF holdings now make up over 50 % of the entire ETF market in Japan. ETF are essentially funds that consist of various asset classes, including equity stocks.  

---

### Answer by username_1 on 2016-06-01. Score: 14

@capm is correct that the Fed is not allowed to buy equities (though they may lend against them if need be, so long as they are secured to their satisfaction— see, for example, all the things they lent against in the Maiden Lane transactions), however, they're allowed to buy a lot more than "government securities" (i.e., Treasuries).

[Section 14 of the Federal Reserve Act](https://www.federalreserve.gov/aboutthefed/section14.htm) details what they can purchase, which includes Treasuries, GSE (i.e., Fannie and Freddie) securities (which are *not* legally considered to be government-backed securities, though they're often casually treated as such), gold, cable transfers, bankers' acceptances, bills of exchange, discount notes, municipal bonds, obligations of federal agencies, and (by allowing them to hold accounts at other central banks) foreign currencies.


---

### Answer by username_2 on 2020-03-12. Score: 2

The Fed can not buy stock. However a negative yield on bonds will forced investors
to buy index/etf that pays huge dividend. In effect the Fed can invest in equity or
stock.

Central bank of China and Japan had done the above in the past.


---

### Answer by username_3 on 2020-04-27. Score: 0

I believe Federal Reserve's mandates are to ensure a good monetary policy, m1/m2 money supply, manage interest rates etc. The government has taken equity position in Auto industry during 2008 financial crisis, which was approved by congress. But, to my knowledge, fed has not invested directly in the stock market in the past. It appears that federal reserve, for the first time in history, is directly investing in index funds, ETF funds and may even be picking specific stocks to support the stock market during this unprecedented Covid Pandemic. I read another article that said Fed has been investing about $60 Billion a day for the past few weeks thru Black Rock, Blackstone or some other third party. I don't know for a fact, but if it is true that Fed is investing directly or indirectly to support the stock market, I think that is dangerous. That can lead to tremendous amount of corruption, manipulation and lead to financial socialism or even financial communism.


---

### Answer by username_4 on 2016-06-02. Score: -4

Is it relevant here to speak about the Plunge Protection Team (PTT) or the [Working Group on Financial Markets](https://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets)? There is lots of talk that they do interfere in the broader stock market. One can also question that when a central bank like the FED prints tons of money and lends it out at 0 interest rates that money will start looking for yield... in the stock market. It's my opinion that the FED (and the other central banks around the world) reinflated the stock markets. The runup since 2009 is largely based on money printing, not on genuine 'growth':
[![enter image description here](https://i.sstatic.net/E3dWC.jpg)](https://i.sstatic.net/E3dWC.jpg)

> **Comments:**
> **username_4**: Why is this getting downvoted? Not relevant? just a question I'm very new here...  
> **username_5**: The answer was flagged as being primarily opinion based. You could improve the quality by citing more sources and explaining your inclusion of the graph. Removing opinion based and incendiary words like "tons of money", 'genuine "growth"' (provide a measure that supports your argument i.e. wage stagnation vs. stock indices), and generally the Fed does not lend at 0, even under TARP or asset purchase strategies, they are purchasing equities and looking for growth, just not interest.  
> **username_6**: Negative yields force investors to plunge into riskier debt  https://www.ft.com/content/34c4944c-bab2-11e9-8a88-aa6628ac896c  
> **username_6**: Bloomberg: The growth and persistence of negative-yielding debt in 2019 has done more than deliver attractive price appreciation on government bonds. It has pushed investors to take on more risk, pushing up the price of assets from investment-grade and high-yield corporate bonds to emerging markets to, of course, equities. It has also encouraged companies to intensify their financial engineering, often involving debt issuance to pay for stock buybacks. And it has supported a range of mergers and acquisitions  

---

