White House Seeks Financial Crisis-Era Powers to Buttress Economy

So many executive orders, so much twitter. What to do? Well, discuss it here for one...

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White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by K9s »

Treasury Secretary Steven Mnuchin says he will ask Congress to reinstate authorities that were scaled back by the 2010 Dodd-Frank Act.

He wants to raid the treasury even more without breaking the law, so I hope Congress laughs at him and threatens him with jail time for trespassing and attempted burglary. FDT and FSM.

https://www.nytimes.com/2020/03/15/us/p ... frank.html
Treasury Secretary Steven Mnuchin said on Sunday that he would ask Congress to reinstate powers that were used during the 2008 financial crisis to support the economy as the coronavirus threatens to grind business activity in the United States to a halt.

The comments suggest that the White House is bracing for a widespread downturn that could harm sectors well beyond the travel and cruise ship industries, and that the federal government could need to return to the type of crisis-era measures that were ultimately scaled back by lawmakers in the 2010 Dodd-Frank Act.

Mr. Mnuchin and Jerome H. Powell, the chair of the Federal Reserve, have spoken daily about how to buttress the economy, which faces the prospect of a deep recession as the coronavirus spreads around the world.

“Certain tools were taken away that I’m going to go back to Congress and ask for,” Mr. Mnuchin said on “This Week” on ABC.

He did not specify which tools he was referring to, and a Treasury spokesman declined to comment. In a separate interview on “Fox News Sunday,” Mr. Mnuchin made clear that he meant regulations that were imposed by Dodd-Frank.

That law, passed after the worst financial crisis in decades, took away the Fed’s power to lend to individual failing companies or to take assets off their balance sheets, requiring the central bank to extend emergency credit only through broad-based facilities intended to help the financial system as a whole. Congress also took away Treasury’s ability to use a program, known as the Exchange Stabilization Fund, to guarantee money market funds.

The Fed has already cut interest rates by a half percentage point and is widely expected to usher in another cut at its policy meeting this week. Yet the scope of the Federal Reserve’s role as a lender of last resort remains a subject of debate; it is not certain how the central bank will be able to combat economic fallout from a virus that is disrupting businesses across the globe.

While the Dodd-Frank Act did take away some of the Fed’s tools, former regulators say the situation facing the economy today may not be best solved with the crisis-era measures that were used in 2008 and beyond. Instead, Congress and the White House may need to deploy other programs to help prop up affected industries.

“There were a number of tools taken away that shouldn’t have been taken away,” said Ben S. Bernanke, who was the Federal Reserve chair during the 2008 financial crisis. “If they’re willing to rethink some of those things, that’s a good thing,” but most of the Fed’s use of such tools pertained to the financial sector “that doesn’t seem to be where the problem is now.”

“In 2008 the problem was that major financial firms were facing runs,” he said, and therefore needed cash. “In this situation, the nonfinancial corporates are where the problem is — that is, think about an airline or a restaurant” that is unable to make payroll.

When it comes to preventing such disruptions, Mr. Bernanke said, “that is something, in the first line of defense, that Congress can do.”

The Fed did some lending aimed at nonfinancial companies — including through its commercial paper funding facility and the Term Asset-Backed Securities Loan Facility, which helped meet household and small-business credit needs — and authority for those programs still exists. For corporate bailouts, Mr. Bernanke said, lawmakers should be the first line of defense.

“It’s more democratic and accountable if Congress were to take the lead,” he said.

Henry M. Paulson Jr., who was President George W. Bush’s Treasury secretary in 2008, wrote in a Washington Post op-ed last week that one of the lessons from that crisis was that the executive branch might need more authority from Congress to take quick action.

“Notwithstanding tensions between the parties and between the branches, it may be necessary to give the administration broad authority and flexibility to act, within the parameters and oversight structure set by the legislature,” Mr. Paulson wrote. “Congress can’t design and implement every stimulus program or turn on a dime to give new authorities to the executive when facts on the ground change.”

Hal Scott, an emeritus professor at Harvard Law School and the director of the nonprofit Committee on Capital Markets Regulation, said the Fed must restore its ability to be the world’s most powerful lender of last resort. It was unfortunate that such authorities needed to be reinstated amid a crisis, he said.

“It would have been better to do it before the crisis,” Mr. Scott said. “When you get into a crisis and you do it, there’s a concern that you’re sending a panic signal — that we’ve got to do this, we need this power.”

Even without renewed authorities, economists have widely speculated that the Fed could dust off its crisis-era playbook, reviving programs to help companies and financial institutions to weather the shock of the coronavirus. Michael Feroli, an economist at J.P. Morgan, has suggested that the Fed could use another program like the Term Asset-Backed Securities Loan Facility, or TALF, to help keep credit flowing to households and businesses because “the financial viability of some small businesses is a central concern right now.”

That could also include a Fed program to help corporations that issue short-term debt as a source of funding, known as commercial paper.

Krishna Guha and Ernie Tedeschi at Evercore ISI, an investment banking advisory firm, now expect the Fed to add a commercial paper funding facility “to what we see as an imminent super-aggressive package of measures to mitigate the virus shock and stabilize fixed income and credit markets.”

They said they saw increasing evidence that such a commercial paper measure — which would provide credit to companies to help keep them functioning — is immediately necessary, and speculated that an announcement could come as soon as Sunday or Monday.

Congress has so far taken incremental steps to provide financial help. The House voted early Saturday to pass an economic relief bill that Mr. Mnuchin and Speaker Nancy Pelosi had negotiated to help small businesses cover costs associated with the coronavirus, such as sick leave. It also provides free coronavirus testing and funding for food stamps, among other measures. The Senate is expected to vote on the legislation on Monday.

Mr. Mnuchin said in statement on Saturday evening that in enforcing the law, Treasury would use its regulatory authority to allow employers to use cash deposited with the Internal Revenue Service to pay sick leave wages, and that it would make advances to small businesses that do not have sufficient taxes to draw from to cover such costs.

Despite Mr. Mnuchin’s comments about preparing for a crisis, Trump administration officials continued to express optimism that any economic disruption would be short-lived.

The Treasury secretary said he did not believe that the United States economy was currently in a recession and predicted that economic activity would pick up again after the virus was successfully confronted.

Speaking on “Face the Nation” on CBS, the White House economic adviser Larry Kudlow said he hoped the Senate would quickly pass the House legislation. The administration was considering additional proposals to help airlines, which the White House would discuss on Capitol Hill this week, he said, including potential loan guarantees.

Mr. Kudlow acknowledged that the economic situation would be “very challenging in the short run,” but he said that American supply chains were continuing to flow and that the United States would be back to a strong economy by the end of this year.
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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by TrueTexan »

What is scary with this administration is you give them a little power and they take more. The bailout I foresee would be to the big corporations and Wall Street with loans going to Trump Cronies. None of which would be helping the people that will need the help the 80% the current bill won't help.
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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by K9s »

Federal Reserve slashes interest rates to zero in massive emergency intervention for the U.S. economy

The U.S. central bank on Sunday took its most dramatic actions since the 2008 financial crisis to limit the economic and financial fallout from the coronavirus outbreak. The bank dropped rates a full percentage point to zero, announced at least $700 billion worth of bond purchases and took a variety of actions to enable banks to continue lending during the health crisis.
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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by lurker »

at some point they'll run out of pretty tricks, and then we'll see how bad it can get.
i admit that i'm beginning to understand and appreciate marlene's POV. i may never be comfortable with it, but it seems to make more and more sense the further into this we get.

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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by CDFingers »

These grifters are going to try everything to gain more power as a buttress against dropping voter sentiment in the face of obvious incompetence, criminal acts, and selfish moves.

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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by highdesert »

Hope Pelosi and Schumer hold tough, Trump and Mnuchin want a super healthy and humming economy come election. This virus could be around a long time. China took a victory lap after the big lock down, but now they're getting cases from other countries.
"Everyone is entitled to their own opinion, but not their own facts." - Daniel Patrick Moynihan

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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by CDFingers »

Image

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Turn on channel six, the President comes on the news,
Says, "I get no satisfaction, that's why I sing the blues."

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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by Wino »

I hear thru grapevine that after a pardon this guy may get a chance to replace J. Powell. :sarcasm:

https://denver.cbslocal.com/2020/03/14/ ... h-defects/

He is surely well qualified to serve in this administration. :thumbup:
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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by CDFingers »

Well, heck. Let's have the Fed just print some money (open up unsecured lines of credit). WCGW?

https://www.cnbc.com/2020/03/16/fed-say ... rkets.html

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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by highdesert »

Good cartoon CDF, right on. Everything the WH does is to ensure that Donnie the Greatest gets reelected in November.
"Everyone is entitled to their own opinion, but not their own facts." - Daniel Patrick Moynihan

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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by lurker »

and if he becomes president for life like his idol kim jong un, he can avoid prosecution for his crimes and die a free man. on the plus side, at that point, he will be dead.

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Re: White House Seeks Financial Crisis-Era Powers to Buttress Economy

Post by YankeeTarheel »

Sooner or later he'll get Covid-19 and I'd bet his chances of survival ain't too good.
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