Fed Unveils Unlimited Asset Purchases, $300 Billion Loan Program. What Does It Mean For You?
Sarah Hansen, Forbes
Mar 23, 2020
Topline: The Federal Reserve is taking extraordinary steps to stabilize the U.S. economy, which is reeling from the economic damage caused by the coronavirus—but will consumers see any impact from the billions it is spending?
On Monday morning, the Fed unveiled a sweeping set of new
programs designed to prop up markets: it will buy Treasury securities and
mortgage-backed securities in whatever amounts are needed to support “smooth
market functioning” and launch new lending programs worth a collective $300
billion to help companies affected by the slowdown.
The goal of all this activity is to pump up liquidity— in other
words, it’s all about the cash.
“With everybody hunkered down in their bunkers, that money's not
circulating,” says James Angel, a finance professor at Georgetown University;
to keep the economy humming, banks need to be able to lend money and businesses
need to be able to access it.
So will this help the consumer at all? “Time will tell,” says
Angel. In an ideal world, the Fed’s steady stream of cash helps banks and
businesses access enough money to stay afloat and pay workers. “That appears to
be the plan to weather this storm.”
How much of this the consumer actually sees in action, on the
other hand, is “probably very little,” says Jeanette Garretty, chief economist
at Robertson Stephens Wealth Management, because the Fed’s role in maintaining
liquidity happens mostly behind the scenes.
· What consumers will surely notice are the stimulus packages being proposed by the White House and Congressional Democrats which could include small business retention loans, checks sent directly to Americans (Treasury Secretary Mnuchin said the average family of four can expect to receive $3,000) and expanded unemployment insurance for workers laid off as a result of the virus.
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