It's good for the little guy, but it may be even better for CEOs and investors.
For the second time in a dozen years, Congress is giving the Treasury secretary a nearly blank check to rescue imperiled companies in the midst of an economic crisis. This time, there's little opposition.
In part that's because lawmakers and President Donald Trump are also set to approve unprecedented support for ordinary Americans in the form of direct payments, the extension and expansion of benefits for the unemployed, and a provision forcing companies to keep 90 percent of their workforce on payroll if they accept government assistance.
The cash infusion will bring badly needed relief to millions of Americans across the country.
But faced with difficult choices about who to help and who to help the most, Congress opted for all of the above on the first question and major corporations on the latter. The result is an emergency coronavirus bill that lawmakers say contains $2.2 trillion in relief, 880 times the size of what Trump said was needed a month ago as he needled Democrats who sought $8 billion.
"Saving businesses vs aiding individuals is such a bogus choice," CNBC contributor Ben White, the author of Politico's influential Morning Money newsletter, wrote on Twitter. "Obviously gotta do both."
The devil is in the details, which members of Congress are still learning, even after the Senate passed the bill 96-0 on Wednesday night.
The House plans to send it to the president Friday by voice vote — which would avoid most members having to come back to Washington — but there could be a complication after Democratic and Republican leaders Thursday believed at least one member could demand a recorded vote.
Ultimately, passage isn't in jeopardy. A handful of the most liberal and conservative lawmakers have raised objections to parts of the bill.
But the overall decision to bolster the private sector with hundreds of billions of tax dollars — and to have taxpayers assume even more risk than that — has been far less controversial than the fight over the 2008 Troubled Asset Relief Program.
The political class is making a bipartisan bet: First, that voters will believe it's the right thing to do to help companies devastated by the economic impact of the coronavirus; and second, that TARP actually worked to stabilize the economy and reignite growth.
Gary Gensler, who served as chairman of the Commodity Futures Trading Commission under President Barack Obama, said there are important similarities and differences between the coronavirus bill and the 2008 bailout.
"It's a far different crisis, and this time it's a different Treasury secretary, chairman of the Fed and president, but they basically went to Congress and asked for $500 billion to buy corporate debt," said Gensler, referring to the current administration. "They’re using similar tools to what they were using back then, whether you like them or you don’t like them."
The $700 billion rescue measure in 2008, considered a behemoth in its day, failed the first time it was brought to the House floor. Vice President Mike Pence, then a member of the House, voted against it, explaining that "there are alternatives to massive federal spending" and judging that the measure was "the largest corporate bailout in American history, forever changes the relationship between government and the financial sector, and passes the cost along to the American taxpayer."
On Thursday, Wall Street demonstrated its love for the new bill as the Dow Jones Industrial Average, the NASDAQ composite and Standard & Poor's 500 indices shot skyward, largely ignoring the record 3.3 million new unemployment claims reported an hour before the New York Stock Exchange's opening bell.
It was a must-do, according to Tony Fratto, a former Treasury and White House official in President George W. Bush's administration.
"We don't know whether this bill will be enough spending to get us through to the other end of the tunnel, but it has all the right parts — it helps people, and businesses, and health care providers, and it tries to do it very quickly and with very few strings attached," said Fratto, who is now managing partner at the Washington communications and crisis-management consulting firm Hamilton Place Strategies. "That's the best way to solve the problem."
Still, liberals worry that the gulf between the rich and the poor will widen and deepen. Conservatives say the unemployment benefits are too generous and that the measure includes items that are superfluous to the crisis at hand. And special interests of all varieties are scouring the final text to see if they got what they wanted or were left in the lurch.
Speaker Nancy Pelosi, D-Calif., a former leader of her chamber's Progressive Caucus, said Thursday that the U.S. hasn't "seen the end" of direct payments to Americans as she called for a fourth coronavirus bill to get moving soon.
On the other side of the Capitol, some Republicans suggested they were holding their noses as they voted.
"I have significant reservations about many provisions in this bill that are antithetical to everything I believe in, but we're facing a crisis and this is the only option to get immediate help to small businesses and unemployed workers," Sen. Rick Scott, R-Fla., said in a statement after he and several colleagues failed to convince the Senate that the unemployment insurance provisions would create a disincentive to work.
While top congressional leaders have said they expect this won't be the last relief bill, it won't be clear for some time whether the money and new authorities granted to the administration will be the right salve, or if they will be viewed as a prudent expenditure of taxpayer dollars.
The real cost of the legislation will take years to be determined. The unemployment benefits will be paid out to an unknown number of people. Treasury now has the authority to underwrite half a trillion dollars in assistance to companies. And the department has the flexibility to take advantage of a corporate resurgence by taking stock in participating companies.
One new feature of the coronavirus bill is authority for the Treasury secretary to accept warrants from companies seeking loans, which effectively give the government the potential to reap bigger benefits from companies that do well.
Much of the outgoing flow of money is expected to come in the form of guarantees that will secure loans from the Federal Reserve to major corporations, with a fraction of the value of the loan provided by Treasury.
"It's not a blank check in the sense that we are limited by the ability to take losses," Federal Reserve Chairman Jay Powell told NBC's Savannah Guthrie on NBC's "TODAY" show. The loans require "full security, so we don't lose money" and "one-dollar of loss absorption is worth 10 dollars worth of loans."
In plain English, that means the Federal Reserve won't take the hit if companies borrow money and fail to repay it. Instead, Treasury — really, the American taxpayer — is on the hook for loans valued at 10 times the amount it costs to obtain them. The upside is an injection of as much as $5 trillion into the bloodstream of the private sector with the chance that the government will end up making money.
The risk is that collapsing companies put the government deeper into debt.
"We are trying to create a bridge from our very strong economy to another place of economic strength, and that's what our lending really does," Powell said, adding that there is "essentially" no limit to the amount of money the Fed is willing to pump out.
That should make CEOs and investors very happy — at least, for the moment.