By Lending More Broadly, the Fed Can Avoid Picking Winners and Losers

Federal Reserve in Washington, D.C. (Kevin Lamarque/Reuters)
The central bank can't lend to struggling businesses that don't meet an arbitrary criterion. Congress can fix this.

NRPLUS MEMBER ARTICLE T he Coronavirus fiscal-relief package (the CARES Act) is clear on who will receive its much-needed payments, in the form of checks to individuals and expanded unemployment insurance plus relief for small businesses and certain industry sectors. But the rules governing the Federal Reserve Bank’s lending authority will severely limit the ability of some mid- and large-size businesses to obtain the financing they desperately need to get through the current economic shutdown.

On March 23rd, the Fed committed to “using its full range of authorities to provide powerful support for the flow of credit to American families and businesses.” The recently passed relief bill authorizes the Treasury

Jon Hartley is an economics Ph.D. student at Stanford University and a visiting fellow at the Foundation for Research on Equal Opportunity. He formerly served as a senior policy adviser to the Congressional Joint Economic Committee.

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