Photo: Mark Makela/Getty Images On Monday, the Federal Reserve announced another expansion of its efforts to keep the financial system running smoothly during the coronavirus-driven economic crisis. The announcement describes several programs, each aimed at shoring up a different part of the credit markets. I think this is the best way to understand what the Fed is and isn’t doing: The Fed is taking steps to promote business liquidity.
So suppose you’ve decided it’s a business necessity to lay off your staff for the duration of your closure. What about your other business costs, like rent or financing payments on equipment? Should you take advantage of a loan that lets you keep up with those costs, or should you go into default on your payments, expecting you may never reopen your doors? That choice depends on when you think this crisis is going to end and what you think the business environment is going to be like afterward.
The Fed also says it intends to set up what it is calling a “Main Street business lending program” intended to support borrowing by small and midsize businesses that don’t issue the sort of bonds the Fed can just buy up. This is presumably where your restaurant would go to borrow money with the Fed’s help. But it is the least-well-defined part of the Fed’s announced actions, and some experts I spoke with were uncertain how it would work.
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