JUDY WOODRUFF: And, as we have been mentioning,
a financial panic rocked world markets again
today.
On Wall Street, the Dow Jones industrial average
burned through nearly 3,000 points, nearly
13 percent, to close at 20188. It's down nearly
one-third of its value since peaking in mid-February.
The Nasdaq fell 970 points, and the S&P 500
slumped 325 points.
John Yang looks now at the economic pain that
is being inflicted by the widening coronavirus.
JOHN YANG: Judy, today's market plunge followed
extraordinary action from the Fed yesterday.
It cut a key interest rate to zero. The move
was aimed at shoring up investor confidence,
as restaurants are closing, sporting events
are canceled, and people are being urged to
stay home.
David Wessel is director of the Hutchins Center
on Fiscal and Monetary Policy at the Brookings
Institution.
David, thanks for joining us.
How big a deal is what the Fed did yesterday?
DAVID WESSEL, Brookings Institution: It was
a pretty big deal, meeting on a Sunday, ahead
of schedule.
The Fed basically said, we are going to use
almost all the monetary ammunition we have.
They cut interest rates, as you said. They
restarted the process of bond buying, quantitative
easing.
And they said that, we are making it as easy
as possible for banks to borrow from the Fed,
so they can keep lending. So it was a very
big deal.
JOHN YANG: And, as you say, it's just about
everything the Fed can do in terms of monetary
policy.
So, as the president says we may be going
into a recession, what's left? What can be
done?
DAVID WESSEL: Well, I think it's clear we're
going into a recession. The only question
is, how long will it last? And that's really
dependent on the coronavirus.
The Fed has a few emergency powers it hasn't
used yet, the ones it used during the 2008
financial crisis, to lend under circumstances
determined to be exigent and unusual.
But, really, the game is now up to fiscal
policy. We need a big package from Congress,
tax cuts and spending increases, to replace
the demand that has evaporated as people are
told not to go out and people are losing their
jobs by the minute.
JOHN YANG: We have not-so-distant history
with fiscal policy in times of economic turmoil,
the financial crisis, at the end of the Bush
administration, beginning of the Obama administration.
What lessons did we learn then that they ought
to be keeping in mind now?
DAVID WESSEL: Right.
There are some lessons to learn, I think.
The situation is different. This was not caused
by some imbalance in the financial system
or the housing thing. It was really a shock
from outside, the virus.
But one of the key lessons that we learned
during the crisis is, it's important to do
a lot and do it soon. Waiting to see how things
develop at a time like this is a mistake.
And although the government has a very big
debt, which they do, they're also able to
borrow at very, very low interest rates.
So I think, most economists -- and I have
been talking to a number of people on Wall
Street today -- say it's time for Congress
and the president to borrow some money, do
a big fiscal stimulus, and get on with it.
And they're worried that the political dysfunction
in Washington may slow it down.
JOHN YANG: Yes, talk about that.
I mean, the -- haggling over the details,
what goes into this package, paid sick leave,
bailing out -- or I shouldn't say building
out, but the financial help for airlines,
cruise ship industry...
DAVID WESSEL: Well, there is this smaller
package that the House passed that seems to
be having trouble getting through the Senate
that would basically repair some of the weakness
in the safety net.
But I think the next step is going to be hundreds
of billions of dollars. Some will go to industries
like airlines, hotels, restaurants, businesses,
so that they will be able to stay alive, and
they will be able to function when this ends.
But I think, eventually, some of it will go
to individual households. After all, a lot
of people are not going to see as much income
because they don't work as many hours. They
will be laid off. Some of them will get unemployment.
Some won't.
And it's not -- this is something really unusual.
We haven't seen such an abrupt end of consumption,
people told not to shop. Think how different
this is from 9/11, when President Bush said
the patriotic thing was to go out and shop.
Now we're being told the patriotic thing is
to stay home. Netflix and Amazon will make
some money, but a lot of other people are
going to be in trouble.
JOHN YANG: David Wessel, the director of the
Hutchins Center on Fiscal and Monetary Policy
at the Brookings Institution, thank you very
much.
DAVID WESSEL: You're welcome.
