There does not seem to be a limit to the amount of money the government and Federal Reserve are willing to pump into the U.S. economy to save it from the effects of the coronavirus crisis, at least according to one official.
Federal Reserve Chairman Jerome Powell appeared on the “TODAY” show with host Savannah Guthrie to discuss the state of the economy and the lengths officials will go to make sure it survives.
Guthrie asked Powell at what point will the funds stop flowing.
“Is there any limit to the amount of money the Fed is willing to put into this economy to keep it afloat? Is it a blank check?” Guthrie asked.
Powell answered by explaining that the Federal Reserve is able to “use emergency lending authorities” in times such as the present.
They are also required to obtain security for loans so they avoid losing money.
He went on to give a definitive answer to her question.
“Essentially, the answer to your question though is no,” Powell said, adding, “We can continue to make loans and really the point of all that is to support the flow of credit in the economy to households and businesses.”
Watch his comments below:
“Is there any limit to the amount of money the Fed is willing to put into this economy to keep it afloat? Is it a blank check?” –@savannahguthrie
— TODAY (@TODAYshow) March 26, 2020
"… Essentially, the answer to your question is no," Federal Reserve Chairman Jerome Powell explains. pic.twitter.com/1pzZ4zZdnE
Guthrie asked for clarification on the answer and whether the Federal Reserve is prepared to spend “an unprecedented amount.”
“We certainly are,” Powell said, continuing, “It’s not a blank check in the sense that we are limited by the ability to take losses.”
Powell explained how investors have “pulled back” to “less risky things.” He describes the reason why this is an issue, which is how places in the markets supporting mortgages and car loans “have just stopped working.”
Powell continued to reiterate that the Federal Reserve can do something about that.
“We can step in and replace that lending under our emergency lending powers and we will do that,” Powell said, adding, “We will look wherever there is, in the capital markets where credit is not flowing, we have the ability in this unique circumstance to temporarily step in and provide those loans.”
