As 98,000 Businesses Permanently Closed, the Fed and Treasury Have Sat on $340 Billion of Untapped Money from the CARES Act

by Pam Martens and Russ Martens
Wall Street on Parade

When both parties in Congress came together in March to pass the CARES Act, which was signed into law by President Trump on March 27, the clear intention of the legislation was for the U.S. Treasury to hand over $454 billion of taxpayers’ money to the Federal Reserve. The Fed, in turn, was to leverage the money by 10 times to approximately $4.54 trillion to deploy to keep the economy moving, credit flowing, workers employed and businesses alive until the pandemic had been brought under control.

Fed Chairman Jerome Powell made an unprecedented appearance on the Today show on March 26 and explained the plan like this:

“In certain circumstances like the present, we do have the ability to essentially use our emergency lending authorities and the only limit on that will be how much backstop we get from the Treasury Department. We’re required to get full security for our loans so that we don’t lose money. So the Treasury puts up money as we estimate what the losses might be…Effectively $1 of loss absorption of backstop from Treasury is enough to support $10 of loans.”

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