In the increasingly probable absence of prompt Congressional action to provide state and local revenue shortfall replacement money, it feels like high time that the Federal Reserve's decision-makers find ways to fight/shorten the likely duration of the Greater Recession with far more robust assistance to this sector. In his recent inflation policy-clarifying statements emphasizing the Fed's full-employment mission and indicating that interest rates would remain low for a long time to come, Chairman Powell has also laid a stronger monetary policy foundation for central bank action in aid of a sector that will continue prolonging the Greater Recession without that assistance.
Writing in today's Governing.com, Girard Miller presents a plausible rationale for - and outlines of how - the Fed could help the states and localities by extending the maximum term of loans provided through the existing Municipal Liquidity Facility (MLF) from the current three years to a new maximum of seven years and reducing the interest rate to zero for the time being. Although this would certainly qualify as a big step for the ever-cautious Fed, Miller's plan is actually a much more cautious (though much more fully fleshed out) idea than what Matthew Klein put forward in a Barron's column published 8/21/2020, which suggested a maximum term term of MLF loans of 40 - 50 years (and as I had suggested in a 8/16/2020 post in this space, riffing off the draft concept paper published by the Northeast-Midwest Institute in early April).
Of course a sufficient number Senators could suddenly see the light and quickly help pass the $500 Billion Menendez-Cassidy/Sherrill-King SMART Act which has some bi-partisan support in both the Senate and House (or a somewhat reduced version of the HEROES act already passed by the House). After all, both houses surprised us all with their swift bi-partisan action on earlier rounds of stimulus like the CARES Act...
Opmerkingen