THE DETAILS To ensure that banks’ access to cash is not hampered by a raft of new client demands or market developments, the Fed has encouraged them to use the so-called “discount window,” its lending operation for big banks, and at least eight major financial institutions already have.
As part of the stimulus package, banks can opt out of observing new federal accounting standards for estimating future credit losses during the period covered by the law, a rule known as Current Expected Credit Losses, or CECL. In addition, banks who lend to companies and individuals during the period covered by the legislation will not see their obligations to maintain specified levels of cash or other capital rise as a result of what regulators would normally view as increased financial risks. And the bill revives a crisis-era program to guarantee all bank debt, a move that once again puts taxpayers on the hook if a bank runs into trouble.
THE CONTEXT Thanks to the Dodd-Frank act of 2010 and new regulatory requirements that have been placed on major market participants, the U.S. financial system is in a far better position than it was in 2008.
Because of their strengthened position, banks are now expected to step up and assist taxpayers and employers with credit and relaxed expectations toward debt repayment in the coming weeks and months. But the backstops the government is providing to troubled borrowers could benefit the banks too. And the resumption of a government backstop for bank debt suggests there is lingering concern about the stability of banks the longer the crisis persists, in part because some of the post-crisis rules have already been weakened over the past three years.
The Aid Plan
Energy companies were largely left out.
The coronavirus outbreak has walloped much of the energy industry by driving down oil prices and making it harder to finance new renewable energy projects, which is why some industry executives were hopeful lawmakers would led them a hand. But the Senate bill does not do much for the industry.
THE DETAILS The legislation did not include $3 billion the Trump administration had requested to buy crude oil for the Strategic Petroleum Reserve. Such a purchase could have helped lift demand for oil somewhat, and thus its price, which in the United States has tumbled to less than $25 a barrel in recent weeks. And solar and wind businesses were upset that lawmakers did not make it easier for them to benefit from tax credits for renewable energy.
THE RESPONSE Industry representatives held out hope that their needs would be addressed in a future stimulus package. Frank Macchiarola, a senior vice president at the American Petroleum Institute, said the group had not sought “industry-specific relief” from Congress in this bill. “The fact that members of both parties have come together to address this public health crisis, support workers in need and provide broader, economywide relief sends an important signal during these challenging times,” Mr. Macchiarola said.