U.S. Federal Reserve officials have talked broadly about helping households and firms through the current economic crisis and quickly unleashed trillions of dollars in cash and credit guarantees to build a 'bridge' to the post-pandemic world.
WASHINGTON - U.S. Federal Reserve officials have talked broadly about helping households and firms through the current economic crisis and quickly unleashed trillions of dollars in cash and credit guarantees to build a “bridge” to the post-pandemic world.
It’s a longer-term dilemma, to be sure, when the priority is to prevent a wave of personal and business bankruptcies from creating an even deeper economic hole. But it is one the world’s central banks and elected leaders are struggling to get right even as they roll out unprecedented support. A misstep could damage productivity and slow the hoped-for recovery.
Boston Fed President Eric Rosengren, whose bank will administer the program, described the hunt for a sweet spot in which loans are too expensive for firms that “have no problems” while troubled borrowers are weeded out by private banks who must put some of their money at risk for each loan the Fed makes.
Central banks in Europe and elsewhere have seen similar tepid use of “liquidity” programs, which is also viewed as evidence the financial sector only needs to know that central bank help is available if needed, not to actually tap it.
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