Fed Chair Jerome Powell on lending: ‘We’re not going to run out of ammunition’
Yahoo Finance’s Brian Cheung joins the On The Move panel to discuss Federal Reserve Chairman Jerome Powell’s statement on the state of the economy and business.
Video Transcript
ADAM SHAPIRO: So we heard from Federal Reserve chair Jerome Powell. To give you an understanding of just what an unprecedented period in history we are living in, he went on the Today Show this morning to reassure the nation about what the Fed is prepared to do. Here's some of what he said.
JEROME POWELL: When it comes to this lending, we're not going to run out of ammunition. That doesn't happen. You know, we set the interest rates in time at what we think is the right-- given the economy, the right level of support. If we'd raised interest rates more, we would have been higher than we thought and economic growth would have been a little bit slower. So it wouldn't have mattered in the end.
ADAM SHAPIRO: --cover the Fed for us at Yahoo Finance. What do you think of what the Fed chair is attempting to do here?
JEROME POWELL: Well, first of all, we have to acknowledge that the Fed chair rarely ever goes on national television, let alone "The Today Show" to speak. And actually Savannah Guthrie, who is hosting that interview, asked the question, why are you coming on air to talk about this? And he said, his message to the American people is that the Fed is quote, "working hard to support you now and our policies will be very important." And this is the best-- this is the most important part-- when the recovery does come.
And his emphasis here is that the Federal Reserve has opened up all of these lending programs. The Fed already slashed interest rates to zero in that emergency Sunday meeting on March 15. But he said that these lending facilities that they've been using to try to cover up the holes in the US Treasury market, in the US dollar market, corporate debt, muni debt-- the list goes on and on-- he said those are all designed to backstop and make sure that credit is still flowing to those Main Street businesses and to American households.
Keep in mind that the timing of his interview also comes as the Senate overnight approved that bill that would appropriate $454 billion to the Federal Reserve and the Treasury to then disperse loans out to Main Street businesses. The terms that were included in that draft texts would say that the Fed would be able to originate loans through financial intermediaries with no higher than 2% interest to any firm that employs between 500 and 10,000 employees. That also pledged not to pay dividends or buy back shares during the time that they're paying off those interest payments. And then thirdly, commit to retaining at least 90% of the workforce through September 30.
This is the really key point here-- is that the Federal Reserve and the Treasury are saying we're going to provide this credit to businesses on Main Street that need it, but we need them to retain their employees, because as we saw with the jobless claims numbers this morning, there is a huge falling off of a cliff for people losing their jobs here. So the Fed trying to backstop that. But chairman Powell going out there this morning and saying the Federal Reserve still has ammunition to address this.
