White House, Senate Agree To Historic Deal On Coronavirus Rescue Measure

NPR's Noel King talks to David Wessel of the Hutchins Center at the Brookings Institute about the agreement announced early Wednesday morning on the massive emergency relief package.

NOEL KING, HOST:

Congress is moving toward approving a $2 trillion rescue for the U.S. economy as the coronavirus spreads and as businesses and industries continue to take a hit. Will that be enough to keep this country out of a recession? David Wessel is director of the Hutchins Center at Brookings, and he wrote a book called "In FED We Trust," about the last Great Recession. Hey, David.

DAVID WESSEL, BYLINE: Good morning.

KING: So we are talking about a lot of money here. Let's run through it - $150 billion for the health care system, $150 million for state and local governments. I imagine that's probably $150 billion - not million.

WESSEL: Billion, right.

KING: Three hundred billion to go directly to regular people, households and $350 billion for small business. Is that enough to prevent a recession?

WESSEL: No, it isn't. Look - the recession has almost surely already begun. When we close restaurants, cancel flights, shut factories, tell millions of people to stay home, we're effectively slamming the brakes on the economy. I mean, the output of goods and services is falling steeply, and this won't change that. The second quarter - April, May and June - is going to be one of the worst since the Great Depression.

So what does this package do? What is it designed to do? One, shore up hospitals so we can minimize the human toll. Two, give people money, particularly people who lose their jobs, so they can eat and pay the rent. And three, keep businesses, from airlines to mom and pop shops, on life support so they can more easily restart when the virus recedes and this doesn't go on forever.

KING: I want to ask you about one thing in particular, which is loans to small businesses because we have heard so much concern about small businesses having to stop everything and just losing it. So let's talk about how these loans are going to work. Will the small business get the money and then have to pay the government back at some point?

WESSEL: Well, there are a lot of deals to work out. Some are going to be spelled out in the final legislation, which I haven't read, and some will come later. But as I understand it, both banks and the Small Business Administration will make the loans. Businesses with fewer than 500 employees can get them to cover payroll, up to $100,000 per worker, and some other expenses.

And here's the really interesting thing - under certain conditions, like if they promise not to fire workers, some of these loans will be forgiven; that is, they'll turn into grants from taxpayers. But this is going to be an administrative challenge, and I'm sure it's going to take several weeks to set it up.

KING: What role is the Federal Reserve playing here?

WESSEL: Yeah, that's really interesting. The Fed is going to operate like a giant commercial bank. It's going to lend money, probably through banks and the credit markets, to businesses. But because the Fed isn't supposed to make loans unless it's certain it can be paid back, Congress is essentially giving the Fed $475 billion to cover any losses. And with that foundation, the Fed will be able to expand the lending programs it's already launched, and it'll probably end up lending trillions of dollars to businesses before this is over. It's really interesting. Congress appears to trust the Fed more than it trusts the administration to make the loans without favoritism or corruption.

KING: David, the government already has a huge national debt. Where's the money coming from?

WESSEL: Right. The federal debt is about $17 trillion now. It's a lot of money. Basically, the world is awash in savings, and that's one reason interest rates have been so low around the world. A lot of that savings is looking for the safest possible home, and the safest possible home is lending to the U.S. government by buying Treasury bonds. And secondly, the Fed can create money, and that's what it's going to do. We might get inflation down the road, but that's a risk people think worth taking at a time of crisis like this.

KING: David Wessel of Brookings. Thanks so much.

WESSEL: You're welcome.

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