U.S. Treasury Secretary Steven Mnuchin’s goal to pump money into the economy quickly has him adding another decimal-point to his plan nearly every time he speaks.
It started with $850 billion on Monday, and on Tuesday he confirmed reports of a “big number” — $1 trillion. On Wednesday the figure had reached $1.3 trillion for the next round of fiscal stimulus Congress plans to take up after the Senate passes a smaller package of measures that the House already passed.
In a proposal sent to lawmakers Wednesday, Mnuchin’s department laid out a plan to spend $500 billion in total on checks to individuals that would start landing in bank accounts in less than three weeks, according to a document seen by Bloomberg News.
Mnuchin also proposed that lawmakers approve $50 billion in loans to the distressed airline sector, rejecting the industry’s request of nearly $30 billion in grants.
“We’re going to deliver assistance,” Mnuchin said Wednesday in a CNBC interview. “The president has said: Let’s think big,” adding that Donald Trump has a “whatever-it-takes” attitude.
Mnuchin proposed sending electronic payments to individuals on April 6 and May 18, in equal value, according to the document. The amount of the payment would be linked to income and number of children in a family.
The stimulus measures aim to help cushion the economic hit to families during the coronavirus as businesses have shut down and Americans have been encouraged to stay home. That’s resulted in widespread firings, closures and foregone pay.
Mnuchin on Tuesday raised the possibility with Republican senators that U.S. unemployment could rise to 20% without government intervention because of the impact of the outbreak. He told the senators that he believes the economic fallout from the virus is potentially worse than the 2008 financial crisis.
“It was just a mathematical statement to say if half these people were to lose their jobs, this is what it would be — but we’re not going to let that happen,” Mnuchin said on CNBC Wednesday, referring to the outlook he shared on Capitol Hill.
Mnuchin is also seeking use the Treasury’s Exchange Stabilization Fund to loan money to passenger and cargo airlines that have been crushed by shriveling travel demand. A Standard & Poor’s airlines index was down more than 19% Wednesday, pushing the year-to-date decline to more than 50%.
Treasury also proposed to lawmakers that the stimulus package provide $150 billion to “severely distressed sectors” of the economy from the virus outbreak.
There’s support for financial markets in the plan as well through the Exchange Stabilization Fund, with the Treasury proposing to temporarily guarantee money market mutual funds if needed.
The authority would be terminated, according to the proposal, when Trump ends the national emergency declaration he announced Friday.
Money market mutual funds became a crucial weak spot during the financial crisis when losses from the collapse of investment bank Lehman Brothers caused the venerable Reserve Primary Fund to break the one dollar net asset value mark — known as breaking the buck — in September 2008. That contributed greatly to the sense of panic in financial markets, causing credit to seize up and the crisis to go global.
This time around, the Fed’s unleashing of massive liquidity to the money market has already helped ease the squeeze for funding that had reached levels not seen since that time. But Treasury backstopping money market mutual funds, that have trillions in assets, could be essential if conditions worsen.
— With assistance by Laura Litvan, Christopher Condon, and Justin Sink
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