We don't want to repeat 2007. We don't want to do make the same mistakes we made back then. Chief among these errors: Major policy makers refused to take action, and instead, continually said they didn't' have the authority to make commonsensical moves that could have made the recession much more shallow and our financial institutions much stronger and avert the huge number of job losses that Great Recession was responsible for.
I have a similar set of commonsensical moves that would tide the system over while we deal with a biological crisis that we know can be controlled because it has been controlled by other nations. If we put to rest these financial woes while we get the test kits we need - and we know are not available - we can beat this. But to beat it means to take the recession that's caused by rules against gathering, rules that make you stay home, and rules that will really help small businesses which will not be able to pay their workers.
So, here goes.
First, that everyone pays the federal government, every entity, every person. The Treasury needs that money to fund the government. Interest rates are incredibly low. The Treasury needs the authority to raise $500 billion dollars so it can suspend any payments that are owed the government. Any payments by any entity or individual. That would be so much more powerful than a payroll tax cut. After we beat the virus the money owed will be paid.
Second, Treasury needs to create a gigantic fund, again, if necessary, to generate interest free loans to small businesses if they agree to keep their employees and pay them through this downturn. We need people who are sick to stay home. We need workers and companies in place and paid or else we will have giant bankruptcies and huge lay-offs from a lack of customers all because of a China imported virus. These people deserve the protection of our federal government.
Third, large companies are furiously taking down their bank revolvers all at once. The banks, as well capitalized as they are, cannot possibly handle that pressure. We need backstops to those loans, yes, even guaranteeing them, so we do not see huge shutdowns and a lack of a base of this nation when the virus is beaten. We do not want to beat ourselves.
Fourth, the sudden decline in oil prices is causing a flirtation with bankruptcy for many companies in the patch. We like low oil prices as consumers but as Americans we like energy independence. So why not buy cheap oil for the strategic petroleum reserve and enlarge it so we will never worry?
Fifth, have the Fed buy mortgage backed bonds. Despite the incredible decline in Treasury rates the 30 year mortgage hasn't budged. I got a lower mortgage several years ago when the 30 year was dramatically higher. Fed mortgage bond buying can get those rates lower which would make the housing market, which has been flagging, stay strong.
I know, I can hear it. Oh this one's blocked by Dodd-Frank, or this one needs the House to agree with the White House, or this one creates moral hazard.
I say these are not normal times. These are all temporary. The moment we beat the virus these can be undone. If we don't do this five part plan we will have a financial emergency as certain as we will have a health care one. The latter isn't our fault, but if we don't do the former, shame on us.