Fed officials flag possible further steps in Fed crisis response

Federal Reserve officials are deliberating over next steps in their response to the fallout from the coronavirus epidemic, with some urging a broad debate about how the central bank might help small and medium-sized businesses, policymakers said on Tuesday.

“At this stage everything is on the table. … Work continues,” Atlanta Federal Reserve Bank President Raphael Bostic said in a phone interview with journalists, just hours after the Fed restarted a key lending program to ensure larger companies can get the short-term loans they often use to pay wages and buy supplies.

A possible next step, Bostic said, could be the resumption of other programs rolled out during the 2007 to 2009 financial crisis, such as the Term Auction Facility that broadened the ability of banks to borrow from the Fed.

Bostic said he hoped for a broader discussion about how the federal government “writ large” might help small businesses, perhaps with a program, likely outside the Fed, to offer assurances or guarantees for rent and lease payments so that a temporary cash crunch does not lead to a business getting evicted.

“These challenges are going to be acute and are going to come fast,” for restaurants, bars and other small firms that may be closed by government edict as a health measure or see their business collapse as their patrons practice “social distancing,” Bostic said. “This is something we need to think about and be creative.”

Discussions in Washington continued throughout the government on Tuesday, including a call by House of Representatives Speaker Nancy Pelosi with Fed Chair Jerome Powell. Pelosi, a Democrat, asked the central bank to also think how it might help local governments deal with the economic shock that is developing.

The Fed rolled out an extensive set of measures in recent days designed to lessen the economic damage from the epidemic, which Bostic said was meant to show that “maximum” stimulus will be provided until the crisis passes.

Fed officials on Tuesday began discussing their actions in more detail, urging banks to tap Fed facilities if needed and highlighting how uncertain the outlook remains.

“Come and get what you need to keep the funds flowing,” Philadelphia Federal Reserve President Patrick Harker said in an interview.

Minneapolis Federal Reserve President Neel Kashkari said on CNN International that his base case for the U.S. economy is a mild recession, but “many businesses are going to be under tremendous strain, probably laying off many of their workers, and so this is quickly going to become an economic crisis.”