None of those transactions took place between late March and May 1, a Fed official said, which would have curbed Mr. Kaplan’s ability to use information about the coming rescue programs to earn a profit.
But the trades drew attention for other reasons. Mr. Conti-Brown pointed out that Mr. Kaplan was buying and selling oil company shares just as the Fed was debating what role it should play in regulating climate-related finance. And everything the Fed did in 2020 — like slashing rates to near zero and buying trillions in government-backed debt — affected the stock market, sending equity prices higher.
“It’s really bad for the Fed, people are going to seize on it to say that the Fed is self-dealing,” said Sam Bell, a founder of Employ America, a group focused on economic policy. “Here’s a guy who influences monetary policy, and he’s making money for himself in the stock market.”
Mr. Perli noted that Mr. Kaplan’s financial activity included trading in a corporate bond exchange-traded fund, which is effectively a bundle of company debt that trades like a stock. The Fed bought shares in that type of fund last year.
Other key policymakers, including the New York Fed president, John C. Williams, reported much less financial activity in 2020, based on disclosures published or provided by their reserve banks. Mr. Williams told reporters on a call on Wednesday that he thought transparency measures around trading activity were critical.
“If you’re asking should those policies be reviewed or changed, I think that’s a broader question that I don’t have a particular answer for right now,” Mr. Williams said.
Washington-based board officials reported some financial activity, but it was more limited. Jerome H. Powell, the Fed chair, reported 41 recorded transactions made by him or on his or his family’s behalf in 2019, and 26 in 2020, but those were typically in index funds and other relatively broad investment strategies. Randal K. Quarles, the Fed’s vice chair for supervision, recorded purchases and sales of Union Pacific stock from 2019 in his 2020 disclosure. Those stocks were assets of Mr. Quarles’s wife and he had no involvement in the transactions, a Fed spokesman said.
Despite the chaotic end to its presence in Afghanistan, the United States still has control over billions of dollars belonging to the Afghan central bank, money that Washington is making sure remains out of the reach of the Taliban.
About $7 billion of the central bank’s $9 billion in foreign reserves are held by the Federal Reserve Bank of New York, the former acting governor of the Afghan central bank said Wednesday, and the Biden administration has already moved to block access to that money.
The Taliban’s access to the other money could also be restricted by the long reach of American sanctions and influence. The central bank has $1.3 billion in international accounts, some of it euros and British pounds in European banks, the former official, Ajmal Ahmady, said in an interview on Wednesday. Remaining reserves are held by the Swiss-based Bank for International Settlements, he added.
Mr. Ahmady said earlier on Wednesday that the Taliban had already been asking central bank officials about where the money was.
International Monetary Fund said on Wednesday that it would block Afghanistan’s access to about $460 million in emergency reserves. The decision followed pressure from the Biden administration to ensure that the reserves did not reach the Taliban.
Money from an agreement reached in November among more than 60 countries to send Afghanistan $12 billion over the next four years is also in doubt. Last week, Germany said it would not provide grants to Afghanistan if the Taliban took over and introduced Shariah law, and on Tuesday, the European Union said no payments were going to Afghanistan until officials “clarify the situation.”
The central bank money and international aid, essential to a poor country where three-quarters of public spending is financed by grants, are powerful leverage for Washington as world leaders consider if and when to recognize the Taliban takeover.
Mr. Ahmady, who fled Afghanistan on Sunday, said he believed the Taliban could get access to the central bank reserves only by negotiating with the U.S. government.
high-profile talks last month. But so far, China hasn’t shown an eagerness to increase its role in Afghanistan. The Taliban could try to take advantage of the country’s vast mineral resources through mining, or finance operations with money from the illegal opium trade. Afghanistan is the world’s largest grower of poppy used to produce heroin, according to data from the United Nations Office on Drugs and Crime.
But these alternatives are all “very tough,” Mr. Ahmady said. “Probably the only other way is to negotiate with the U.S. government.”
Afghanistan has about $700 million at the Bank for International Settlements, Mr. Ahmady said. The bank, which serves 63 central banks around the world, said on Wednesday that it “does not acknowledge or discuss banking relationships.”
On Wednesday, Mr. Ahmady wrote on Twitter that Afghanistan had relied on shipments of U.S. dollars every few weeks because it had a large current account deficit, a reflection of the fact that the value of its imports are about five times greater than its exports.
Those purchases of imports, often paid in dollars, could soon be squeezed.
“The amount of such cash remaining is close to zero due a stoppage of shipments as the security situation deteriorated, especially during the last few days,” Mr. Ahmady wrote.
He recalled receiving a call on Friday saying the country wouldn’t get further shipments of U.S. dollars. The next day, Afghan banks requested large amounts of dollars to keep up with customer withdrawals, but Mr. Ahmady said he had to limit their distribution to conserve the central bank’s supply. It was the first time he made such a move, he said.
Mr. Ahmady said that he had told President Ashraf Ghani about the cancellation of currency shipments, and that Mr. Ghani had then spoken with Secretary of State Antony J. Blinken. Though further shipments were approved “in principle,” Mr. Ahmady said, the next scheduled shipment, on Sunday, never arrived.
their origin story and their record as rulers.
Who are the Taliban leaders? These are the top leaders of the Taliban, men who have spent years on the run, in hiding, in jail and dodging American drones. They are emerging now from obscurity, but little is known about them or how they plan to govern.
The New York Fed provides safekeeping and payment services to foreign central banks so they can store international reserves securely, and to facilitate cross-border payments and other dollar-based transactions. International reserves often take the form of short-term Treasury bonds or gold. The New York Fed has been storing gold for foreign governments for nearly a century.
Though Mr. Ahmady has left the country, he said he believed that most members of the central bank’s staff were still in Afghanistan.
If the Taliban can’t gain access to the central bank’s reserves, it will probably have to further limit access to dollars, Mr. Ahmady said. This would help start a cycle in which the national currency will depreciate and inflation will rise rapidly and worsen poverty.
“They’re going to have to significantly reduce the amount that people can take out,” Mr. Ahmady said. “That’s going to hurt people’s living standards.”
The more than $400 million from the International Monetary Fund, which the Biden administration has sought to keep out of the Taliban’s hands, is Afghanistan’s share of a $650 billion allocation of currency reserves known as special drawing rights. It was approved this month as part of an effort to help developing countries cope with the coronavirus pandemic.
But the toppling of Afghanistan’s government and a lack of clarity about whether the Taliban will be recognized internationally put the I.M.F. in a difficult position.
“There is currently a lack of clarity within the international community regarding recognition of a government in Afghanistan, as a consequence of which the country cannot access S.D.R.s or other I.M.F. resources,” the organization said in a statement Wednesday. It added that its decisions were guided by the views of the international community.
Jake Sullivan, the White House’s national security adviser, said Tuesday that it was too soon to address whether the United States would recognize the Taliban as the legitimate power in Afghanistan.
“Ultimately, it’s going to be up to the Taliban to show the rest of the world who they are and how they intend to proceed,” Mr. Sullivan said. “The track record has not been good, but it’s premature to address that question at this point.”
The suits are returning to the office. In chinos. And sneakers. And ballet flats.
As Wall Street workers trickle back into their Manhattan offices this summer, they are noticeable for their casual attire. Men are reporting for duty in polo shirts. Women have stepped down from the high heels once considered de rigueur. Ties are nowhere to be found. Even the Lululemon logo has been spotted.
The changes are superficial, but they hint at a bigger cultural shift in an industry where well-cut suits and wingtips once symbolized swagger, memorialized in popular culture by Gordon Gekko in the movie “Wall Street” and Patrick Bateman in the film adaptation of Bret Easton Ellis’s novel “American Psycho.” Even as many corporate workplaces around the country relaxed their dress codes in recent years, Wall Street remained mostly buttoned up.
relax dress codes — including in 2019, when Goldman made suits and ties optional — banking had been one of the last bastions of formal work wear, alongside law firms. And in some quarters of Wall Street, such as hedge funds, the code has typically been more permissive.
But in banking, the strict hierarchies were embedded in unwritten fashion rules. Colleagues would ridicule those wearing outfits considered too flashy or too shabby for the wearer’s place in the corporate food chain. Superiors were style guides, but wearing something swankier than one’s boss was considered a faux pas. An expensive watch could be seen as a mark of success, an obnoxious flex, or both.
TV interview; Goldman’s boss, David Solomon, D.J.s in T-shirts on weekends; and Rich Handler, the head of Jefferies, posted a photo of himself sporting a henley tee on Twitter. At an event welcoming employees back to the office in July, Citigroup’s Jane Fraser — the only female boss of a major Wall Street bank — kept her signature look: a jewel-toned dress.
known for its leather-soled dress shoes for men and boys. “It’s going to continue to get more comfortable and casual, but people are still going to want to look nice.”
Now, 80 percent of the shoes his company designs are casual styles, Mr. Florsheim said, compared with 50 percent before the pandemic.
compete for recruits with technology companies — which are friendlier both to remote work and casual clothing — they are seeking to present a less stuffy image. Many banks are also trying to hire a more diverse cohort.
John C. Williams, president of the Federal Reserve Bank of New York and an avowed sneakerhead, said the Fed wanted people to bring their “authentic self” to work because personal style was an important part of valuing all forms of individuality and diversity.
He said he was looking forward to wearing new pairs from his sneaker collection in the office. “When people can be themselves, they do their best work,” he said.
bring staff back to offices. Most of the industry was targeting Labor Day for a full-scale return, although that may be complicated by surging coronavirus cases. Some Wall Street employees have been working out of their offices for months, but many returned only recently for the first time since the outbreak began.
It felt like the first day of school, some bankers said. They wanted to look good in front of colleagues, yet couldn’t bear the thought of wearing dress shoes or heels. Before going in, some checked with friends to see if their choices were in line with the crowd.
One item that has been popular among Wall Street men is Lululemon’s ABC pant, which the athleisure company markets as a wrinkle-resistant, stretchy polyester garment suitable for “all-day comfort.” (The company put its highly recognizable logo on a tab near the pocket to make the pants look less like workout gear.)
Untuckit, the maker of short-hemmed button-downs, saw a jump in sales as vaccination rates across the United States rose in April and May, said Chris Riccobono, the company’s founder. Customers have flocked to its two stores in Manhattan, seeking still-sharp shirts made from breathable fabric.
“What’s amazing is these guys were wearing suits in the middle of summer, walking the streets of New York, coming off the train” before the pandemic, Mr. Riccobono said. “It took corona for the guys who never wore anything but suits to realize, ‘Wait a second.’”
McDonald’s is raising wages at its company-owned restaurants. It is also helping its franchisees hang on to workers with funding for backup child care, elder care and tuition assistance. Pay is up at Chipotle, too, and Papa John’s and many of its franchisees are offering hiring and referral bonuses.
The reason? “In January, 8 percent of restaurant operators rated recruitment and retention of work force as their top challenge,” Hudson Riehle, senior vice president for research at the National Restaurant Association, said in an email. “By May, that number had risen to 72 percent.”
Restaurant workers — burger flippers and bussers, cooks and waiters — have emerged from the pandemic recession to find themselves in a position they could not have imagined a couple of years ago: They have options. They can afford to wait for a better deal.
In the first five months of the year, restaurants put out 61 percent more “workers wanted” posts for waiters and waitresses than they had in the same months of 2018 and 2019, before the coronavirus pandemic shut down bars and restaurants around the country, according to data from Burning Glass, a job market analytics firm.
replace their face-to-face workers with robots and software. Yet there are signs that the country’s low-wage labor force might be in for more lasting raises.
Even before the pandemic, wages of less-educated workers were rising at the fastest rate in over a decade, propelled by shrinking unemployment. And after the temporary expansion of unemployment insurance ends, with Covid-19 under control and children back at school, workers may be unwilling to accept the deals they accepted in the past.
Jed Kolko, chief economist at the job placement site Indeed, pointed to one bit of evidence: the increase in the reservation wage — the lowest wage that workers will accept to take a job.
According to data from the Federal Reserve Bank of New York, the average reservation wage is growing fastest for workers without a college degree, hitting $61,483 in March, 26 percent more than a year earlier. Aside from a dip at the start of the pandemic, it has been rising since November 2017.
“That suggests it is a deeper trend,” Mr. Kolko noted. “It’s not just about the recovery.”
Other trends could support higher wages at the bottom. The aging of the population, notably, is shrinking the pool of able-bodied workers and increasing demand for care workers, who toil for low pay but are vital to support a growing cohort of older Americans.
“There was a work force crisis in the home care industry before Covid,” said Kevin Smith, chief executive of Best of Care in Quincy, Mass., and president of the state industry association. “Covid really laid that bare and exacerbated the crisis.”
more families turning their backs on nursing homes, which were early hotbeds of coronavirus infections, Mr. Smith said, personal care aides and home health aides are in even shorter supply.
“The demand for services like ours has never been higher,” he said. “That’s never going back.”
And some of the changes brought about by the pandemic might create new transition opportunities that are not yet in the Brookings data. The accelerated shift to online shopping may be a dire development for retail workers, but it will probably fuel demand for warehouse workers and delivery truck drivers.
The coronavirus outbreak induced such an unusual recession that any predictions are risky. And yet, as Ms. Escobari of Brookings pointed out, the recovery may provide rare opportunities for those toiling for low wages.
“This time, people searching for jobs may have a lot of different options,” she said. “That is not typical.”
As Federal Reserve Chair Jerome H. Powell and Treasury Secretary Steven Mnuchin scrambled to save faltering markets at the start of the pandemic last year, America’s top economic officials were in near-constant contact with a Wall Street executive whose firm stood to benefit financially from the rescue.
Laurence D. Fink, the chief executive of BlackRock, the world’s largest asset manager, was in frequent touch with Mr. Mnuchin and Mr. Powell in the days before and after many of the Fed’s emergency rescue programs were announced in late March. Emails obtained by The New York Times through a records request, along with public releases, underscore the extent to which Mr. Fink planned alongside the government for parts of a financial rescue that his firm referred to in one message as “the project” that he and the Fed were “working on together.”
While some conversations were previously disclosed, the newly released emails, together with public calendar records, show the extent to which economic policymakers worked with a private company as they were drawing up a response to the financial meltdown and how intertwined BlackRock has become with the federal government.
60 recorded calls over the frantic Saturday and Sunday leading up to the Fed’s unveiling on Monday, March 23, of a policy package that included its first-ever program to buy corporate bonds, which were becoming nearly impossible to sell as investors sprinted to convert their holdings to cash. Mr. Mnuchin spoke to Mr. Fink five times that weekend, more than anyone other than the Fed chair, whom he spoke with nine times. Mr. Fink joined Mr. Mnuchin, Mr. Powell and Larry Kudlow, who was the White House National Economic Council director, for a brief call at 7:25 the evening before the Fed’s big announcement, based on Mr. Mnuchin’s calendars.
book on funds.
On March 24, 2020, the New York Fed announced that it had again hired BlackRock’s advisory arm, which operates separately from the company’s asset-management business but which Mr. Fink oversees, this time to carry out the Fed’s purchases of commercial mortgage-backed securities and corporate bonds.
BlackRock’s ability to directly profit from its regular contact with the government during rescue planning was limited. The firm signed a nondisclosure agreement with the New York Fed on March 22, restricting involved officials from sharing information about the coming programs.
were contracting and its business outlook hinged on what happened in certain markets.
While the Fed and Treasury consulted with many financial firms as they drew up their response — and practically all of Wall Street and much of Main Street benefited — no other company was as front and center.
Simply being in touch throughout the government’s planning was good for BlackRock, potentially burnishing its image over the longer run, Mr. Birdthistle said. BlackRock would have benefited through “tons of information, tons of secondary financial benefits,” he said.
Mr. Mnuchin could not be reached for comment. Asked whether top Fed officials discussed program details with Mr. Fink before his firm had signed the nondisclosure agreement, the Fed said Mr. Powell and Randal K. Quarles, a Fed vice chair who also appears in the emails, “have no recollection of discussing the terms of either facility with Mr. Fink.”
“Nor did they have any reason to do so because the Federal Reserve Bank of New York handled the process with great care and transparency,” the central bank added in its statement.
Brian Beades, a spokesman for BlackRock, highlighted that the firm had “stringent information barriers in place that ensure separation between BlackRock Financial Markets Advisory and the firm’s investment business.” He said it was “proud to have been in a position to assist the Federal Reserve in addressing the severe downturn in financial markets during the depths of the crisis.”
Daily Business Briefing
The disclosed emails between Fed and BlackRock officials — 11 in all across March and early April — do not make clear whether the company knew about any of the Fed and Treasury programs’ designs or whether they were simply providing market information.
Fed chair’s official schedule from that March. Those calendars generally track scheduled events, and may have missed meetings in early 2020 when staff members were frantically working on the market rescue and the Fed was shifting to work from home, a central bank spokesman said.
Mr. Powell’s calendars did show that he talked to Mr. Fink in March, April and May, and he has previously answered questions about those discussions.
“I can’t recall exactly what those conversations were, but they would have been about what he is seeing in the markets and things like that, to generally exchanging information,” Mr. Powell said at a July news conference, adding that it wasn’t “very many” conversations. “He’s typically trying to make sure that we are getting good service from the company that he founded and leads.”
BlackRock’s connections to Washington are not new. It was a critical player in the 2008 crisis response, when the New York Fed retained the firm’s advisory arm to manage the mortgage assets of the insurance giant American International Group and Bear Stearns.
Several former BlackRock employees have been named to top roles in President Biden’s administration, including Brian Deese, who heads the White House National Economic Council, and Wally Adeyemo, who was Mr. Fink’s chief of staff and is now the No. 2 official at the Treasury.
in early 2009 to $7.4 trillion in 2019. By the end of last year, they were $8.7 trillion.
As it expanded, it has stepped up its lobbying. In 2004, BlackRock Inc. registered two lobbyists and spent less than $200,000 on its efforts. By 2019 it had 20 lobbyists and spent nearly $2.5 million, though that declined slightly last year, based on OpenSecrets data. Campaign contributions tied to the firm also jumped, touching $1.7 million in 2020 (80 percent to Democrats, 20 percent to Republicans) from next to nothing as recently as 2004.
short-term debt markets that came under intense stress as people and companies rushed to move all of their holdings into cash. And problems were brewing in the corporate debt market, including in exchange-traded funds, which track bundles of corporate debt and other assets but trade like stocks. Corporate bonds were difficult to trade and near impossible to issue in mid-March 2020. Prices on some high-grade corporate debt E.T.F.s, including one of BlackRock’s, were out of whack relative to the values of the underlying assets, which is unusual.
People could still pull their money from E.T.F.s, which both the industry and several outside academics have heralded as a sign of their resiliency. But investors would have had to take a financial hit to do so, relative to the quoted value of the underlying bonds. That could have bruised the product’s reputation in the eyes of some retail savers.
fund recovery was nearly instant.
When the New York Fed retained BlackRock’s advisory arm to make the purchases, it rapidly disclosed details of those contracts to the public. The firm did the program cheaply for the government, waiving fees for exchange-traded fund buying and rebating fees from its own iShares E.T.F.s back to the New York Fed.
The Fed has explained the decision to hire the advisory side of the house in terms of practicality.
“We hired BlackRock for their expertise in these markets,” Mr. Powell has since said in defense of the rapid move. “It was done very quickly due to the urgency and need for their expertise.”
Treasury Secretary Janet L. Yellen said higher interest rates might be needed to keep the economy from overheating given the large investments that the Biden administration is proposing to rebuild the nation’s infrastructure and remake its labor force.
The comments, shown on Tuesday at an event sponsored by The Atlantic, come amid heightened concern from some economists and businesses that the United States is in for a period of higher inflation as stimulus money flows through the economy and consumers begin spending again. The Treasury secretary has no role in setting interest rate policies.
Jerome H. Powell, the Federal Reserve chair, said last month that the central bank is unlikely to raise interest rates this year and wants to see further healing in the American economy before officials will consider pulling back their support by slowing government-backed bond purchases and lifting interest rates.
While the Fed is watching for signs of inflation, Mr. Powell and other Fed officials have said they believe any price spikes will be temporary and will not be sustained. On Monday, John C. Williams, president of the Federal Reserve Bank of New York, said that while the economy is recovering, “The data and conditions we are seeing now are not nearly enough” for the Fed’s policy-setting committee “to shift its monetary policy stance.”
spending approximately $4 trillion over a decade and would pay for the investments with tax increases on companies and the rich.
By the middle of March 2020 a sense of anxiety pervaded the Federal Reserve. The fast-unfolding coronavirus pandemic was rippling through global markets in dangerous ways.
Trading in Treasurys — the government securities that are considered among the safest assets in the world, and the bedrock of the entire bond market — had become disjointed as panicked investors tried to sell everything they owned to raise cash. Buyers were scarce. The Treasury market had never broken down so badly, even in the depths of the 2008 financial crisis.
The Fed called an emergency meeting on March 15, a Sunday. Lorie Logan, who oversees the Federal Reserve Bank of New York’s asset portfolio, summarized the brewing crisis. She and her colleagues dialed into a conference from the fortresslike New York Fed headquarters, unable to travel to Washington given the meeting’s impromptu nature and the spreading virus. Regional bank presidents assembled across America stared back from the monitor. Washington-based governors were arrayed in a socially distanced ring around the Fed Board’s mahogany table.
Ms. Logan delivered a blunt assessment: While the Fed had been buying government-backed bonds the week before to soothe the volatile Treasury market, market contacts said it hadn’t been enough. To fix things, the Fed might need to buy much more. And fast.
announced an enormous purchase program, promising to make $500 billion in government bond purchases and to buy $200 billion in mortgage-backed debt.
It wasn’t the central bank’s first effort to stop the unfolding disaster, nor would it be the last. But it was a clear signal that the 2020 meltdown echoed the 2008 crisis in seriousness and complexity. Where the housing crisis and ensuing crash took years to unfold, the coronavirus panic had struck in weeks.
As March wore on, each hour incubating a new calamity, policymakers were forced to cross boundaries, break precedents and make new uses of the U.S. government’s vast powers to save domestic markets, keep cash flowing abroad and prevent a full-blown financial crisis from compounding a public health tragedy.
The rescue worked, so it is easy to forget the peril America’s investors and businesses faced a year ago. But the systemwide weaknesses that were exposed last March remain, and are now under the microscope of Washington policymakers.
cut interest rates to about 1 percent — its first emergency move since the 2008 financial crisis. Some analysts chided the Fed for overreacting, and others asked an obvious question: What could the Fed realistically do in the face of a public health threat?
“We do recognize that a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain,” Chair Jerome H. Powell said at a news conference, explaining that the Fed was doing what it could to keep credit cheap and available.
But the health disaster was quickly metastasizing into a market crisis.
Lockdowns in Italy deepened during the second week of March, and oil prices plummeted as a price war raged, sending tremors across stock, currency and commodity markets. Then, something weird started to happen: Instead of snapping up Treasury bonds, arguably the world’s safest investment, investors began trying to sell them.
The yield on 10-year Treasury debt — which usually drops when investors seek safe harbor — started to rise on March 10, suggesting investors didn’t want safe assets. They wanted cold, hard cash, and they were trying to sell anything and everything to get it.
officially declared the virus outbreak a pandemic, and the morning on which it was becoming clear that a sell-off had spiraled into a panic.
The Fed began to roll out measure after measure in a bid to soothe conditions, first offering huge temporary infusions of cash to banks, then accelerating plans to buy Treasury bonds as that market swung out of whack.
But by Friday, March 13, government bond markets were just one of many problems.
Investors had been pulling their cash from prime money market mutual funds, where they park it to earn a slightly higher return, for days. But those outflows began to accelerate, prompting the funds themselves to pull back sharply from short-term corporate debt markets as they raced to return money to investors. Banks that serve as market conduits were less willing than usual to buy and hold new securities, even just temporarily. That made it harder to sell everything, be it a company bond or Treasury debt.
The Fed’s announcement after its March 15 emergency meeting — that it would slash rates and buy bonds in the most critical markets — was an attempt to get things under control.
But Mr. Powell worried that the fix would fall short as short- and long-term debt of all kinds became hard to sell. He approached Andreas Lehnert, director of the Fed’s financial stability division, in the Washington boardroom after the meeting and asked him to prepare emergency lending programs, which the central bank had used in 2008 to serve as a support system to unraveling markets.
short-term corporate debt and another to keep funding flowing to key banks. Shortly before midnight on Wednesday, March 18, the Fed announced a program to rescue embattled money market funds by offering to effectively take hard-to-sell securities off their hands.
But by the end of that week, everything was a mess.Foreign central banks and corporations were offloading U.S. debt, partly to raise dollars companies needed to pay interest and other bills; hedge funds were nixing a highly leveraged trade that had broken down as the market went haywire, dumping Treasurys into the choked market. Corporate bond and commercial real estate debt markets looked dicey as companies faced credit rating downgrades and as hotels and malls saw business prospects tank.
The world’s most powerful central bank was throwing solutions at the markets as rapidly as it could, and it wasn’t enough.
How They Fixed It
hit newswires at 8 a.m., well before American markets opened. The Fed promised to buy an unlimited amount of Treasury debt and to purchase commercial mortgage-backed securities — efforts to save the most central markets.
serve as a lender of last resort to troubled banks. On March 23, it pledged to funnel help far beyond that financial core. The Fed said it would buy corporate debt and help to get loans to midsize businesses for the first time ever.
It finally worked. The dash for cash turned around starting that day.
The March 23 efforts took an approach that Mr. Lehnert referred to internally as “covering the waterfront.” Fed economists had discerned which capital markets were tied to huge numbers of jobs and made sure that every one of them had a Fed support program.
On April 9, officials put final pieces of the strategy into play. Backed by a huge pot of insurance money from a rescue package just passed by Congress — lawmakers had handed the Treasury up to $454 billion — they announced that they would expand already-announced efforts and set up another to help funnel credit to states and big cities.
The Fed’s 2008 rescue effort had been widely criticized as a bank bailout. The 2020 redux was to rescue everything.
The Fed, along with the Treasury, most likely saved the nation from a crippling financial crisis that would have made it harder for businesses to survive, rebound and rehire, intensifying the economic damage the coronavirus went on to inflict. Many of the programs have since ended or are scheduled to do so, and markets are functioning fine.
But there’s no guarantee that the calm will prove permanent.
“The financial system remains vulnerable” to a repeat of last March’s sweeping disaster as “the underlying structures and mechanisms that gave rise to the turmoil are still in place,” the Financial Stability Board, a global oversight body, wrote in a meltdown post-mortem.
Industry players are already mobilizing a lobbying effort, and they may find allies in resisting regulation, including among lawmakers.
“I would point out that money market funds have been remarkably stable and successful,” Senator Patrick J. Toomey, Republican of Pennsylvania, said during a Jan. 19 hearing.