Approving the biggest economic stimulus bill in U.S. history today, both houses of Congress passed a $2 trillion dollar package designed to offset the damage from the coronavirus AKA CoV-2 or Covid-19 pandemic, causing damage to the U.S. economy. Voicing its approval, perhaps prematurely, Wall Street has been in rally mode since Monday, with the Dow Jones Industrial Average gaining over 3,000 points or about 20%, cutting in half the 40% decline over the last three weeks. Whether Wall Street can keep the rally going depends on how today’s $2 trillion stimulus bill can undo the damage done by the coronavirus. More important than how federal agencies oversee spending of $2 trillion is what happens to the national CoV-2 epidemic. Stanford University’s 72-year-old Nobel laureate biology professor Michael Levitt thinks things are in place for a leveling off and slowdown of the epidemic.
If Levitt’s right, Wall Street now has the fiscal tools to overcome the damage the virus caused to the U.S. economy. With the Federal Reserve Board slashing interest rates March 15 to zero and starting Quantitative Easing again, Wall Street should continue to show confidence, with the nation’s biggest funds repositioning for long-term stock purchases. “This is a wartime level of investment into our nation,” said 78-year-old Sen. Mitch McConnell (R-Ky.) who led negotiations on the $2 trillion package for the Senate’s GOP majority. Individual taxpayers will stand to get $1,200 checks to help defray layoffs for “shelter in place” orders requiring individuals to stop working. “Like all compromises, this bill is far from perfect, but we believe the legislation has improved significantly,” said Senate Minority Leader Chuck Schumer (D-N.Y.), demanding more oversight for money going to businesses.
With the airline industry practically grounded, the bill gives $40 billion or the struggling industry, $25 billion for passenger airlines, $4 billion for cargo carriers and $17 billion for airlines connected to national security. Sen. Pat Toomey (R-Pa.) confirmed that much of the help to the industry would be made in government grants, not low interest loans. Toomey didn’t rule out the government taking stock for airlines at bargain prices, a good investment to offset government grants. Treasury Secretary Steve Mnuchin said that, “airlines do provide significant resources and national security issues,” worthy of preferential treatment. “I believe that’s something that very important to Americans,” Mnuchin said. Hospitality businesses, including hotels, restaurants and cruise lines will also get cash infusions not from the Small Business Administration but from a new funding agency.
Sen. Marco Rubio (R-Fl.), Chairman of the Senate Committee on Small Business and Entrepreneurship, expects more quick disbursements than going through SBA red tape. “This is not a program where you are going to the SBA, you are going to a tent somewhere in a disaster area or some government office or some government website,” Rubio said. Rubio’s small business programs included a $350 billion paycheck protection program, as well as a $454 billion fund for a new lending agency. Treasury Department will manage $454 billion to dole out to a wide variety of businesses. “It’s the single biggest piece in the whole thing,” said Toomey. Both Rubio and Sen. Mark Warner (D-Va.) wanted a new agency to fund small businesses outside the SBA. Some of the SBA loans will be used to pay two months of payroll and overhead,” eventually forgiven by the government as grants.
Democrats wanted more oversight in the final billing, agreeing to an Inspector General to keep track of every loan made to small-and-large businesses. Former 2008 Troubled Asset Relief Program [TARP] administrator Neil Barofsky said the first step was to set up the entity to disburse funds to troubled businesses. Government unemployment compensation would be raised to $600 per week to insure “laid off workers, on average, will receive their full pay for up to four months.” Hospitals and clinics will receive grants over $130 billion to fight coronavirus, including another $150 billion for states to administer health care programs. Passing the whopping relief bill, the White House and Congress hope they can keep Wall Street in rally mode, something not so guaranteed. Wall Street has a life of its own, detached from Main Street, making money whether markets go up or down.
Congress and the White House showed that in the most contentious political atmosphere, lawmakers can get on the same page for the good of the country. Whether the $2 trillion aid package is enough to offset the effect of the large-scale work stoppage to battle the coronaviurs is anyone’s guess. When the euphoria fades or if more CoV-2 flares up, it hard to say what Wall Street will do. “If things are turning around at that point, then the answer is no,” said Sen. Chuck Grassley (R-Iowa), responding to questions about a second stimulus bill. “But if we are in the same place three or four months from now as where we are today, we are going to have to do more,” Grassely said, not knowing what the future will bring. While no one’s Nostradamus, listening to scientists like Stanford’s Levitt gives some estimate about where the coronavirus—and U.S. economy—goes from here.
