Help for three main groups looks to ‘stabilize’
NIAGARA UNIVERSITY, N.Y. – Early Wednesday, White House and Senate leaders reached agreement on a landmark $2 trillion coronavirus stimulus deal, which has yet to pass both houses of Congress.
Speaking to WBEN radio in Buffalo, Ed Hutton, CFA, director of the financial markets lab at Niagara University, said the deal and the current state of the stock market points to an economic shutdown that will last “somewhere in the 60-day range” and that forecast is causing a bit of a stabilization. He pointed to the overseas markets that are rising a bit and some good signs in the U.S.
If it passes Congress, the stimulus package would be the largest emergency aid package in U.S. history and would include $250 billion designated for direct payments to individuals and families, $350 billion in small business loans, $250 billion in unemployment insurance benefits, and $500 billion in loans for distressed companies.
Hutton pointed to the “Green Shoots” theory, analogous to springtime in our gardens. He said there is some budding of the financial markets. (The term was first used by Norman Lamont, Chancellor of the Exchequer of the United Kingdom, during the 1991 Recession.)
Hutton said he was hopeful Congress would pass the package and said the Federal Reserve has done its part by lowering interest rates.
Three Groups To Benefit
Hutton said the most significant aspect of the stimulus plan will directly assist three groups:
1) Workers – Individuals in need will be eligible for cash payments and relief from student loan debt and mortgage foreclosures. Those who are unemployed will see their benefits extended beyond the usual 26 or 39 weeks.
2) Small Business – Will get disaster relief lending from FEMA and the SBA, similar to what occurs after a weather calamity like a hurricane or tornado. There will also likely be relief from the payroll tax. Those measures, with lower interest rates, will help small businesses considerably.
3) Large companies – Like the airlines and hotel industry, that are directly affected by the shutdown may benefit from the government buying their stock. But, Hutton warns, this point has been a hang-up in getting an agreement through Congress.
“In the financial crisis of 2008, we saw the government step in to buy company stock,” said Hutton, citing General Motors as an example. “There’s talk right now about that for some of the airlines. But, Congress wants to make sure that if the government does provide what’s going to amount to billions and billions of dollars of direct aid to airlines, restaurant companies, hotels and others, that money can’t be used to buy back company stock or pay dividends.”
Asked about the timeframe for recovery, Hutton said, “We’re talking about bridge financing, measures that will help us get to the other side of this crisis, which seems to be about 60 days at the moment,” said Hutton.
Founded by the Vincentian community in 1856, Niagara University is a comprehensive institution, blending the best of a liberal arts and professional education, grounded in our values-based Catholic tradition. Its colleges of Arts and Sciences, Business Administration, Education, and Hospitality and Tourism Management offer programs at the baccalaureate, master’s and doctoral level.