Is this what good news feels like?
We seem to be in the strange stage of the crisis where we are starting to look across the abyss to the other side, or at least starting to think about what the other side of the abyss could look like, all while the current situation on the ground continues to deteriorate. For instance, the stock market posted its best week in 46 years as 6.6 million filed for unemployment, bringing the total to 17 million over three weeks, or more than 10% of the labor force.
Like we said, strange.
To be clear, the situation in the U.S. economy is still dire, but we are beginning to envision some way out. The Federal Reserve continues to lead the way, unveiling even broader new programs to help small and midsize businesses, state and local governments, junk-rated corporations, asset-backed securities and small businesses a second timeby purchasing Paycheck Protection Program loans issued by banks. The new Fed programs allocate more than $2 trillion in lending and purchases, and utilize less than half of the federal CARES Act funding it was appropriated from the Treasury as equity.
Chairman Jerome Powell has embraced the Fed’s role as lender of last resort, and now commercial banker of last resort. Even as we wait for these programs to get up and running, the Fed’s balance sheet has reached $6 trillion, $1.5 trillion above its prior peak and up $2 trillion in less than two months.