Who can save the economy?

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Throw out the playbook, said Dennis Kelleher at MarketWatch. Saving the economy from ruin will require more than the tools used in the 2008 financial crisis. It's time to think about the coronavirus pandemic as "a CAT 5 hurricane" that may cause "nationwide destruction and cripple the financial system and the U.S. economy." Economists say that the epidemic could make 3 million jobs disappear by June. The crisis will require $1 trillion in spending to cover supply-chain shortages, health-care expenditures, and "the basic necessities for everyone who loses their job or income." The Federal Reserve is already doing "whatever it takes," said Neil Irwin at The New York Times. The central bank has slashed rates to zero, offered more generous terms at the "discount window" for banks to borrow, and pledged $700 billion in bond purchases. It's applying almost all "extraordinary policies used to combat the global financial crisis" in 2008. Instead of rolling them out over 16 months, "it announced versions of them in a single weekend." Yet the stock market continued to plummet early this week.

"The Fed is officially spent," said Greg Ip at The Wall Street Journal. It has ruled out cutting interest rates to below zero, and giving banks cheap loans doesn't allay their worry "that their customers may go out of business." Putting out the fire is now "up to someone else." That someone may have to be a hitherto unlikely candidate, said Gina Chon at Breaking Views: Treasury Secretary Steven Mnuchin. Mnuchin doesn't have the stature of Hank Paulson, who "led the response to the 2008 financial meltdown," but he has been "an unexpectedly steady hand in a chaotic White House." It was Mnuchin who advanced the idea of a stimulus check that would "send at least $1,000 each to average Americans." The Treasury secretary has survived in the White House by "defending the president at every turn." That has bought him influence that he can right now use to pilot the economy through the crisis.

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In the financial markets, "confidence is already on the floor," said John Authers at Bloomberg, and it's worth considering whether we should close the stock market. "Any attempt to put a price on stocks right now is pure guesswork," and investors are panicking. Circuit breakers that halt trading have already been tripped four times in two weeks. The market paused for four days after 9/11, "by which time the scale of the damage and the government's response was much clearer." By Oct. 11, the S&P 500 was back at its pre-attack level.

The Fed can still do more to restore confidence, said Kevin Warsh at The Wall Street Journal. After the last financial crisis, policymakers should have thought of how an event like this could affect the economy. They didn't, and now they need to come up with tools to "respond to a new kind of economic shock." The most powerful weapon the Fed can bring to bear is "an emergency lending program" that will keep businesses from going under and households from going broke "as long as the virus is affecting the economy." The economy "was fundamentally strong" before the pandemic, and it can bounce back if the Fed doesn't let this "turn into a solvency crisis."

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