White House Unveils $850 Billion Economic Rescue Package, “Sending Checks To Every Household” A Good Idea, Dudley Says

Update (0830ET): Former NY Fed President Bill Dudley appeared on Bloomberg TV Tuesday morning to say that if the administration really wants to restore confidence, it should reconsider its insistence on a payroll tax holiday, and instead start firing off checks to every US household.

“I think one good idea is to actually send out checks to households” to provide support during the coronavirus outbreak, Dudley said, who added that while the Fed is doing “everything it can” to support the availability of credit, the central bank is virtually powerless to blunt the initial demand shock: Only fiscal stimulus can accomplish that.

“If that situation continues to deteriorate then I think we’ll start to see the kind of special emergency interventions that we saw in 2008.”

His comments come amid rumors that the Fed is about to intervene in the Commercial Paper market.

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With the markets screaming for more federal fiscal stimulus to help cushion what will almost certainly become an extremely deep, but potentially short-lived, recession, the administration has unleashed headlines claiming that the third economic package will include $850 billion (more than 100x the $8.3 billion included in the first package).

The headline hit earlier this morning, with a barebones report in Politico’s ‘Playbook’ newsletter, which frequently publishes administration scoops.

NEW … PLAYBOOK: MNUCHIN seeking $850 billion from Congress …

… @united CEO: “The financial impact of this crisis on our industry is much worse than the stark downturn that we saw in the aftermath of the 9/11 attacks.”https://t.co/BQ70UXWH1G

— Jake Sherman (@JakeSherman) March 17, 2020

Then, the Washington Post followed up that initial report with a lengthier story offering more details:  The package would be mostly devoted to flooding the economy with cash, through a payroll tax cut or other mechanism, two of the officials said, with some $50 billion directed specifically to helping the airline industry.

Roughly 30 minutes after the Washington Post report, an administration official confirmed the story.

Mnuchin is reportedly planning to introduce the package to the Republic-controlled Senate on Tuesday, and would like to see the package pass the upper chamber of Congress by the end of the week, he told senators during a Monday evening call.

This comes after Larry Kudlow hinted at helicopter money yesterday, and Mitt Romney called for ‘Andrew Yang-style’ cash injections for every American adult.

Some $50 billion in aid directed specifically for the airlines has also been earmarked, according to Sen. Marco Rubio.

“I think the assumption’s going to be that we’re going to do something, it should be big. Because we can’t assume that we’re just going to keep coming back,” Sen. Marco Rubio (R-Fla.) said Monday night leaving a meeting with Mnuchin and other administration officials.

Rubio said aid to airlines was likely to be included. “We still need to get people around the country. I have no doubt that’s going to be a major feature of the next step.”

Earlier this month Congress approved $8.3 billion in emergency spending for public health programs, and last week the House passed a package with paid sick leave, unemployment insurance, money for food stamps, free coronavirus testing and more, the Senate made modifications to the House package over the weekend that were billed as “technical corrections” but really scaled back the sick leave section of the bill’s benefits.

With America’s screeching to a halt, the intervention may need to be faster and even more extreme than the action taken during the financial crisis. In 2008, Congress passed the now-infamous $700 billion TARP package to bail out the banks. This time around, Trump is clearly hoping to make a statement by spending $850 billion – a larger number than TARP – to bail out Main Street.