Policymakers on Capitol Hill and in the Trump administration have taken several steps to soften the economic impact of the COVID-19 crisis, and are standing by to do even more.
Treasury Secretary Steven Mnuchin said March 19 that while he cannot predict where the market is headed, "what we are really focused on is providing liquidity to American businesses and to American workers."
The Federal Reserve Open Market Committee moved to blunt economic disruptions by slashing interest rates by a full percentage point March 15, lowering the target range for the federal funds rate to zero to 0.25%, and by setting a $700 billion target for purchases of U.S. Treasuries and mortgage-backed securities to help provide some liquidity.
Fed Chairman Jerome Powell said after the decision that the various measures being taken to protect people's health during the outbreak "will nonetheless understandably take a toll on economic activity in the near term," and that the Federal Reserve is "prepared to use our full range of tools to support the flow of credit to households and business, to help keep the economy strong, and to promote our maximum employment and price stability goals."
One of the tools deployed was the Federal Reserve Board's Commercial Paper Funding Facility to provide liquidity to the financial system, including short-term credit to businesses.
Hoping to avoid a run on money market mutual funds like that experienced during the 2008 global financial crisis, the Fed also said it would launch the Money Market Mutual Fund Liquidity Facility to make loans available to eligible financial institutions to help meet demand for redemptions during the crisis. Congress will have to give the Treasury Department permission to tap into the Exchange Stabilization Fund — a government cash reserve created to stabilize currency markets, to backstop the mutual funds — since it removed that authority after its controversial use during the 2008 crisis.
The request was part of a $1 trillion package the White House sent to Congress March 18 to blunt the impact of the crisis, including fears of rising unemployment.
The package includes up to $300 billion in loans for affected small businesses and $50 billion in loans to the airline industry, with some restrictions. Another $150 billion would be available for loans or guarantees to other "severely distressed" economic sectors impacted by the outbreak.
President Donald Trump supports an idea being floated by economic adviser Lawrence Kudlow that would give the federal government some equity in companies receiving the crisis-related funds, similar to arrangements made during the last economic crisis.
The $300 billion in business interruption loans would be available for employers with 500 or fewer employees to keep paying them for at least eight weeks, while firms that hire workers could have their loans forgiven, according to Mr. Mnuchin, who said smaller firms make up 40% of the workforce.
The administration's plan would send another $250 billion directly to American taxpayers starting April 6, with a second $250 billion round scheduled for May 18.