Moxie move: Fed rolls out massive $2.3 trillion economic backstop

Marco Green
April 10, 2020

Fed policy makers are essentially signalling that the U.S. central bank has the backs of USA businesses great and small, state and local governments and American households and is prepared to do whatever it takes to get the country through this crisis and rebound successfully on the other side of it.

As the coronavirus pandemic continues, the Federal Reserve released its plans to provide an additional $2.3 trillion in loans to help to support households and local governments. The program provides loans to businesses with fewer than 500 employees.

The plan includes a boost to the Main Street business lending program, support for state governments and other initiatives to help the economy, as businesses across the country have been forced to close in order to slow the spread of the disease. Included in the measures is the Main Street Lending Program, which may purchase up to $600 billion in loans owed by small- and medium-sized firms "that were in good financial standing before the crisis", the Fed said in a statement.

"What they're saying: "Our actions today will help ensure that the eventual [economic] recovery is as vigorous as possible", Fed Chair Jerome Powell said in a press release".

Federal Reserve Chair Jerome Powell speaks at a press conference in Washington, on January 29, 2020. Banks that handle the loans will be required to retain a 5 per cent interest in each loan, with the facility purchasing the remainder.

Unionized hospitality workers wait in line in a basement garage to apply for unemployment benefits at the Hospitality Training Academy in Los Angeles on March 13, 2020. The Fed announcement came at the same time the labor department report showed 6.6 million more people filed for unemployment benefits last week, following 6.9 million in the prior week, and 3.3 million in the week ended March 21. Even in the best case, the International Monetary Fund expects only a "partial recovery" next year, assuming the virus fades later in 2020, allowing normal business to resume as the lockdowns imposed to contain its spread are lifted. "I would say that the Fed's forceful action today underscores the unlimited firepower that the central bank wields and that's going some way into sustaining the calm that's descended on markets this week", said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

In announcing what may prove its most groundbreaking step in the crisis fight, Fed chairman Jerome Powell said the central bank's role had now broadened beyond its usual focus in keeping markets "liquid" and functioning, to helping the United States get the economic and financial space it needs to fix a dire health emergency.

He said that the Fed fully meant to use its powers "forcefully, proactively and aggressively until we are confident that we are solidly on the road to recovery".

Other reports by Click Lancashire

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