March 30, 2020

Fed’s Powell Says U.S. Must Get Virus Under Control Before Economy Restarts

The Fed committed to buying as many government bonds as necessary to soothe markets after ruptures appeared in Treasury and housing debt. It has intervened aggressively in the market for short-term loans between banks to keep that corner functioning smoothly, and it is using its emergency lending powers to backstop corporate bonds.

The aid legislation working its way through Congress would give the Fed money to ramp up those lending programs. The central bank had already announced facilities to help large corporations, small businesses and money market funds, backed by a Treasury Department fund containing $94 billion.

Now, it can scale up those programs with Treasury agreeing to take initial losses on any loans that go sour. Treasury Secretary Steven Mnuchin has estimated that the financing, $454 billion, could support more than $4 trillion in Fed operations.

“When it comes to this lending, we’re not going to run out of ammunition,” Mr. Powell said. “That doesn’t happen.”

His appearance at a fraught economic moment recalled a similar one by a predecessor, Ben S. Bernanke, during the depths of the 2007-09 recession.

Mr. Bernanke appeared on “60 Minutes” in March 2009, six months after Lehman Brothers filed for bankruptcy and seven before the unemployment rate would peak at 10 percent. Fed chairs never appeared in television interviews at the time, making it a momentous attempt to reassure the American people.

“I think we’ve averted that risk,” Mr. Bernanke said when asked if the country was headed into a new Great Depression. “Now the problem is to get the thing working properly again.”

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