At the time of this discussion, Congress has passed three stimulus packages to combat the severe effects of the global COVID-19 pandemic. In the second of a three-part series on how COVID-19 is impacting the financial markets, Ken Bentsen, SIFMA President and CEO sits down with Jamie Wall and Mark Schuermann from SIFMA’s advocacy team to explain each of the three phases of the stimulus, what matters most for the financial markets, and what might lie ahead.

SIFMA’s team continues to closely monitor the novel coronavirus (COVID-19) and its impact on our industry and the markets; guidance and resources for the industry are available at www.sifma.org/bcp.

Transcript

Edited for clarity

Ken Bentsen: Welcome to The SIFMA Podcast. I’m Ken Bentsen, President and CEO of SIFMA. Our team at SIFMA is closely monitoring the global COVID-19 pandemic, and its effect on our industry and the markets. In just a few short weeks, we have seen severe shocks to the economy and impact on our capital markets. The Federal Reserve has undertaken unprecedented action in entering into the market to help unclog pipes in the financial system and increase its capacity. Congress has also taken swift action, passing now three phases of stimulus packages as of the time of this discussion.

With us today are Jamie Wall, SIFMA’s Executive Vice President for Advocacy and Mark Schuermann, head of Federal Government Relations and International Relations. They make up a key component of SIFMA’s policy team. They’ve each been closely involved with each phase of the stimulus packages as they’re going through particularly with respect to Congress and they are here to explain, from the top, what is included in each and what matters most for the financial markets. Jamie and Mark, thanks for joining us.

So let’s get started at the beginning. On March 6, Congress agreed to an $8.3 billion package. What did that include?

Mark Schuermann: Thanks, Ken. As you said, this was the first of three COVID relief packages enacted by Congress and signed by President Trump. The bill provided emergency funding with the goal of preventing widespread transmission and effects of the COVID-19 virus. It also provided funding to make COVID-19 testing more widely available, to support treatment of the virus and to provide $20 billion to the Small Business Administration for disaster loans.  

Ken: And then on March 18, another package was signed into law. What did that address?

Mark: Phase 2, which was called the Families First Corona Virus Response Act had two major provisions: first it provided for paid sick leave and to give agencies funding to implement free coronavirus testing, and second it expanded unemployment benefits and food assistance.

Ken: And then finally, on March 27, Congress passed phase three of the stimulus packages and it was quickly signed into law by President Trump. What was in that? 

Jamie Wall: Yes, Ken – Phase 3 is the Coronavirus Aid Relief and Economic Security Act or more simply the CARES Act. The CARES Act was a bipartisan package negotiated to the tune of about $2 trillion and was overwhelmingly passed, and in fact did not have any dissenting votes. The package itself is directly aimed at getting cash into the system, meaning the economy, individuals and employers alike. The bill calls for an immediate cash payment direct to individuals through direct deposit from the Treasury and those should be going out in the next couple of weeks. There is also some small business program relief through a Paycheck Protection Program (PPP) that was created as the SBA utilizing their existing 7A loan program in concert with the U.S. Treasury. That is an allocation of $350 billion that will be facilitated by lenders of all sizes across the country and actually was stood up today, April 3, and we will see it play out until the funds were exhausted although it’s very possible that more will be allocated down the road. 

Included in the package besides the individual and small business provisions are also some emergency public health appropriations to support the finances of local hospitals and front line responders. 

Lastly, there’s also the lending facility to the Federal Reserve to support middle-sized companies but the details on that are still to come.

Ken: Separately, there is $454 billion set aside – part of what you were talking about in lending to middle-market companies. What else is in that with respect to Federal Reserve facilities to purchase obligations from issuers in the secondary market? 

Jamie: Yes. This is a very important part of the legislation and is important to SIFMA members. The Treasury Secretary is authorized to implement a new program or a credit facility that would provide liquidity to support lending to state and municipal governments, and their instrumentalities. This would include the ability to purchase obligations from instrumentalities including hospitals, transit systems and other related entities. 

Ken: The legislation also includes tax provisions important to retirement savers and retirees. What about those? 

Jamie: You’re right, it does. In fact, there is an important provision for people who are experiencing hardship and this is something that the Federal government has allowed in the past but they’ve made very clear in the CARES Act that they will waive the 10% early withdrawal fee for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1 so backdating to the beginning of this year and that runs the entirety of the year. I think that the legislation was written in a way so that coronavirus-related purposes can be broadly applied to any kind of hardship you have been experiencing economically. 

Likewise, they also waived the required minimum distribution rules for defined contribution plans and IRAs in calendar year 2020. So, where you used to be forced to take a distribution above a certain age, which I believe is 70 and a half, you now are no longer required to do that in 2020. You can keep your funds in those accounts for the time being.

Ken: This last stimulus package was obviously quite large, approximately $2 trillion, maybe the largest federal expenditure ever. Where do we go from here? Is this the end of the road? 

Mark: Not quite yet, Ken. We are thinking about next steps in two buckets:

The first is the implementation of the CARES Act which Jamie just discussed and that is a significant undertaking in and of itself. That includes standing up small business lending programs as Jamie was just describing. The Federal Reserve and Treasury will need to stand up the various lending facilities that Congress authorized for them Finally, they’ll need to implement tax provisions under the Treasury Department and IRS.

The second bucket that we are thinking about is phase four, which is being developed by Speaker Pelosi. It’s in the early stages of being written right now. The Speaker has indicated that it will be focused on individual assistance. I’ll turn it over to you Jamie to talk about the rest of what we’re anticipating for phase four.

Jamie: I think that it’s important to know that Congress continues to look at all the facets of the economy that they believe are in need of federal legislation. I think some are areas like public pensions, state and local government finances, hospitals continue to be under tremendous strain financially and will continue to be so as they serve the communities that are falling ill. There are a lot of discussions about possibly including infrastructure. How can we get money out into this space? Maybe through a means of investment in roads and bridges and other critical infrastructure that is also supporting the response to this COVID-19 disease. I think that we will have to wait to see where Speaker Pelosi puts her pen down on paper in terms of what she’d like to see included and then I think beyond that it will be negotiated with Republicans to a bipartisan agreement that ultimately will have to pass the Senate and then be signed into law by President Trump. 

We will be focusing on pretty much all of the areas described with the exception of the health provisions and in particular taking a look at where we might be able to propose policy ideas in the infrastructure finance space that could help support and move local government.

Ken: Thank you for that and more to come in that area. From a SIFMA perspective, we’re working closely with our members and various committees with all areas affecting the markets whether it’s in the BCP space, whether it’s engaging with the regulators on market operations, making sure that we’re keeping arkets remain open and well functioning through this period of time.

We’ve already done one earlier podcast talking bout the various BCP plans and issues around that. We’ll have another podcast looking at some of the other actions by the Federal Reserve and Treasury as it affects markets. Please stay tuned and go to sifma.org. In particular, we have a special COVID-19 webpage where a number of resources and references to SIFMA activities and information for member firms are available. So thank you very much for listening and thank you, Jamie and Mark, for joining us today.

Mark: Thanks, Ken.

Jamie: Thanks, Ken.

Kenneth E. Bentsen, Jr. is president and CEO of SIFMA, the voice of the nation’s securities industry. Jamie Wall is Executive Vice President, Advocacy for SIFMA. Mark Schuermann is Managing Director, Head of Public Affairs for HSBC.

BCP and COVID-19

• Podcast: COVID-19 and Operational Reslience

  Part 1 in our series on COVID-19 explores the financial industry's business continuity plans for the global COVID-19 pandemic.

• Industry Guidance and Resources

  Guidance and resources for the industry to maintain operational resiliency.