Still, the online commentary was inaccurate both about what the Fed was doing and about why it was doing it. And there is a good progressive case for the Fed doing as much as it can to help the financial markets—and for Congress doing even more to help regular people.

A few technical points: The Fed did not spend $1.5 trillion. This was not a $1.5 trillion bailout. It did not cost Americans $1.5 trillion. It was not a $1.5 trillion subsidy for hedge funds and the like. It did not use up $1.5 trillion in resources that could have gone to another cause, whether Wall Street bailouts or Medicare for All.

The Fed works in weird ways, but here goes: The central bank announced that it would offer financial firms up to $1.5 trillion in short-term, collateralized loans. A firm can borrow $100 in cash overnight, for example, but only if it gives the Fed $100 in Treasury securities backed by the full faith and credit of the American government, and pays a small amount of interest too. Doing this costs the Fed nothing, and costs the American taxpayer nothing; when all is said and done, the central bank will probably make a small amount of money off the interest payments.

The Fed chose to do this not as a payoff for Wall Street or to calm the stock market. (It has nothing to do with the stock market at all, though equities crashing is in part a sign of the very financial strain the Fed is attempting to soothe.) It did it to help make sure that the market for Treasury bonds continues to function normally. It was not using taxpayer dollars to juice a money-losing industry, but instead acting as an emergency backstop for the markets writ large.

Signs indicate that it needs to do more, not less, in the coming days: The markets continue to act in strained and strange and erratic ways. Investment banks expect the central bank to drop interest rates to zero soon, and to begin purchasing huge sums of assets, something called “quantitative easing.” There is some chance, as well, that the Fed might end up setting up special facilities to supply liquidity to the financial system, as it did during the 2008 debacle.

There’s a lot for average folks to like about what the Fed is doing, as much as it might seem arcane or technocratic or unfair. For one, recessions complicated by financial crises are much, much harder to fight, and much, much worse than plain-vanilla downturns: If the Fed and other central banks keep the markets functioning, that benefits everybody. But a credit crunch would hurt everybody. Businesses are already seeing revenue evaporate. Many will seek loans to help tide them over. Low interest rates and liquid markets will help those businesses, the families that rely on them for work, and the communities they serve.

That said, there’s a lot not to like too. Morgan Ricks, a law professor at Vanderbilt University and an expert on financial regulation, questions why markets needed this kind of emergency oxygen now, and whether the Fed should be doing more to make markets work, even in times of crisis, without the government’s help. The Fed’s repo transactions may not cost anything, but the Fed is still propping up the financial sector.



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