Free Trial

MNI POLICY: Mnuchin Proposes USD1 Trillion Stimulus

By Evan Ryser
     WASHINGTON (MNI) - U.S. Treasury Secretary Steven Mnuchin said the Trump
administration's proposals to counter the coronavirus are worth USD 1 trillion,
cementing a day when G7 leaders backed promises of coordinated fiscal action to
fend of a global recession. 
     "We have put a proposal on the table that would inject USD1 trillion into
the economy," Mnuchin told reporters Tuesday after meeting with Republican
senators. "Let me just say this is a combination of loans. This is a combination
of direct checks to individuals. This is combination of creating liquidity for
small businesses." 
     President Donald Trump told reporters earlier that the stimulus "is going
to be big, and it's going to be bold." 
     The Fed Tuesday morning announced a bank-crisis era emergency commercial
paper funding facility to prop up dysfunctional financial markets, and said it
will be doing USD1 trillion a day in overnight repo operations this week. 
     Fed Chair Jerome Powell briefed Speaker Nancy Pelosi for 25 minutes Tuesday
to discuss the emergency measures. The Speaker noted that with nearly zero
interest rates Congress is enabled to think big fiscally. Pelosi also urged
Powell to explore ways to use the Fed's authority to assist the most affected
state and local governments, according to a senior Democratic aide.
     The U.S. is stepping up after Trump's call with G7 leaders Monday pledged
to pull out all the stops to restore durable economic growth, and came on a day
when the U.K. introduced a package worth 15% of GDP and Spain offered 20%, while
Canada has promised a major package Wednesday. Markets plunged in recent days
after a previous G7 call pledged coordinated action that failed to generate big
spending or a coordinated rate cut as seen in the global banking crisis.
     With the Fed, ECB and BOJ already at zero or negative rates, fiscal action
is now the main tool for heading off a global recession as businesses are forced
to close by health authorities and consumers are asked to stay home throughout
much of the western world.
     China, the world's second-largest economy, has also offered stimulus and is
moving to re-open business after closing many cities after the virus began in
that country. 
     On Tuesday the World Bank increased to USD 14 billion the amount of
fast-track financing available to members to respond to the coronavirus
     The Treasury market has been squeezed and stock exchanges fell into bear
markets in recent days as investors rejected weaker earlier commitments from the
G7 and elsewhere to sustain demand, as officials focused on the idea the virus
was more of a temporary disruption to supply. 
     Secretary Mnuchin has won approval from Trump for a tax deferral worth USD
300 billion, and has already agreed to two smaller legislative packages with
Democratic Speaker Pelosi - the first already signed into law and worth USD 8.3
     The second package has been resisted by Senate Republicans due to labor
payouts that were divisive in an election year. But Senate Majority Leader Mitch
McConnell said Tuesday he will seek to pass a House of Representatives
coronavirus package as soon as possible and Republicans who disagree "should
gag," and vote for it anyway.  
     Though an official cost estimate is not yet available, Goldman Sachs
analysts note the House bill could amount to USD 100 billion, or roughly 0.5% of
     McConnell said the Senate will be working on the third stimulus package
that will be "of much larger proportions" and he urged his colleagues to prepare
to stay in Washington until it is passed into law. 
--MNI Washington Bureau; +1 202 371 2121; email:
[TOPICS: M$E$$$,M$U$$$,MC$$$$,MI$$$$,MT$$$$,MFU$$$,MGU$$$]

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.