Nothing that’s been floated in Washington, either by the White House, Congress or the Federal Reserve comes remotely close to what Wall Street wants to end the market meltdown and rescue credit markets.
The White House is considering a temporary expansion of paid sick leave and possible help for companies facing disruption from the outbreak. Congress is looking at an expansion of paid sick leave but Democrats seem skeptical of direct aid to companies. The Fed is planning to provide more liquidity to the overnight funds market
Wall Street, on the other hand, would like to see fiscal stimulus on the size offered during the global financial crisis–or abut 1% of global GDP. (Global GDP is roughly $85 trillion so we’re talking $840 billion. U.S. GDP is $21.4 trillion so 1% of that is $214 billion.) And it would like central banks to buy risky assets including stocks and corporate bonds. Oh, and another 50 basis point interest rate cut from the Fed.
The size and nature of the Wall Street wishlist is a reflection of exactly how spooked Wall Street is at the prospect that the coronavirus will tip the nation into recession.
The size of today’s (March 9) drop and especially the fact that the market, after rallying from 7% down to 4% down by mid-day sold off again to end the day with the Standard & Poor’s 500 down 7.6% and the Dow Jone Industrial Average lower by 7.8%, argues that some of Wall Street’s wishlist may actually be on the table. Certainly another interest rate cut from the Fed, which looked unlikely last week, looks much more possible today. And it’s likely that the Democratic House of Representatives, at least, is thinking bigger rather than smaller after today. I’ve even heard talk that an Andrew Yang-style program to send a check directly to consumers would be the best way to stimulate an economy suffering from a lack of demand.