Stock Markets in Asia Climb After U.S. Rally: Live Updates

With the Federal Reserve’s help, the government plans to turn a $454 billion spending package working its way through Congress into more than $4 trillion booster shot for the United States economy.

How, you might ask, does that add up?

The answer lies in the central bank’s emergency lending authorities, given to it by the Federal Reserve Act. When the Fed declares that circumstances are unusual and exigent, and Treasury Secretary Steven Mnuchin signs off, it can set up special programs that essentially buy debt from — or extend loans to — businesses large and small.

The Fed could simply print the money to back that lending, but it avoids taking on credit risk, so it asks for Treasury funding to insure against losses. But those taxpayer dollars can be leveraged: Because the Fed expects most borrowers to pay back, it does not need one-for-one support. As a result, a mere $10 billion from Treasury can prop up $100 billion in Fed lending. And voilà — the money Congress dedicates to Fed programs can be multiplied many times.

Article source: https://www.nytimes.com/2020/03/27/business/stock-market-today-coronavirus.html