DAVID GREENE, HOST:
The Federal Reserve is going big to try and help an economy that's been battered by this coronavirus outbreak. It expanded its emergency lending programs yesterday to provide up to $2.3 trillion to businesses and cash-strapped state and local governments. Fed Chair Jerome Powell did an interview with David Wessel of The Brookings Institution, and we have David with us to tell us about it. Hi, David.
DAVID WESSEL, BYLINE: Good morning.
GREENE: So we're seeing a lot of acronyms for different emergency lending programs coming out. It can be hard to keep track of. I mean, can you kind of summarize what the Fed is really trying to do to help here?
WESSEL: Look - the flow of credit from savers and investors to borrowers is the circulatory system of the modern economy. And the Fed is trying to make sure that that credit keeps slowing while the economy has been put into this medically induced coma. Here's how chair Jay Powell described it yesterday.
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JAY POWELL: As a result of the economic dislocations caused by the virus, some essential financial markets had begun to sink into dysfunction. And many channels that households, businesses and state and local governments rely on for credit had simply stopped working. We acted forcefully to get our markets working again. And as a result, market conditions have generally improved.
WESSEL: Basically, the Fed is saying to the banks and the markets that in this extraordinary emergency, don't hoard your cash; don't pull back your lending. We'll lend you as much money as you need so you can keep lending to businesses, big and small, and consumers who are using their credit cards or maybe even buying a car.
And because the Fed is supposed to lend money only when it's sure it can get paid back, Congress has given the Fed half a trillion dollars to cover any losses. And the Fed has set aside about 40% of that for the lending programs it's launched so far, so it has a lot of room to expand its lending if it needs to.
GREENE: I mean, you said the economy, and you use the word coma. I mean, it sounds like this could be pretty bad here, as we've already seen. Could all of this that the Fed is doing help us avoid a really deep recession?
WESSEL: No. Look - the Fed has two goals. One is to make the COVID-19 recession less horrible than it otherwise would be, in part by making it easier for state and local governments to borrow so they don't have to cut their spending right now. And the second is to keep businesses on life support to make sure they don't run out of cash so that when the virus recedes, we can easily - or more easily - restart the economy and begin to get back to normal.
GREENE: I mean, the data we're already seeing, like all the increase in applications for unemployment insurance, are telling us about the implications of all of this. The second quarter - April, May, June - going to be pretty bad. What about beyond that? How quickly could we see a recovery?
WESSEL: Yeah, the second quarter is going to be horrible, probably the sharpest decline in output in a single quarter we've ever seen since we began keeping track. A lot of forecasters are saying that we'll rebound in the second half of the year - in July, August, September. And here's what Chair Powell said about that yesterday.
(SOUNDBITE OF PRESS CONFERENCE)
POWELL: When the virus does run its course and it's safe to go back to work and safe for business to open, then we would expect there to be a fairly quick rebound as people do go back to work and start resuming normal levels of economic activity. I think most people expect that to happen in the second half of this year - after the second quarter, which of course ends on June 30. To try to be precise about where that would be, I don't think that would be appropriate.
WESSEL: He said, though, that he expects a recovery, when it occurs, will be - in his words - robust.
GREENE: All right. David Wessel of the Hutchins Center at Brookings. Thanks for always being here for us, David.
WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.