Lending in the Time of Coronavirus

ABSTRACT

In the twenty-first century, central banks' ability to conduct monetary policy through conventional means (namely, changes to interest rates) has proven limited, forcing central banks to resort to novel and controversial tools to combat economic downturns. In March 2020, when economic activity in the United States came to a screeching halt, the Fed was forced to test out its post-2008 crisis-response toolkit for the first time. In concert with Congress and the Department of the Treasury, the Fed would make more than $454 billion available to financial and nonfinancial businesses, states, and municipalities. Miraculously, leveraging its emergency powers under section 13(3) of the Federal Reserve Act, the Fed would loosen calcifying credit markets across the economy and restore the functioning of the financial system. Almost as quickly as the Fed mounted its heroic response, skepticism surrounding the intervention permeated academic and policy circles alike. With the benefit of hindsight, however, this Note aims to problematize some of the qualms and critiques surrounding the Fed's actions in 2020.