The Fed’s Response to COVID-19 Is Impressive — and Alarming

Earlier this week, congressional Democrats and Republicans were locked in contentious negotiations over what the American public should ask of corporations before bailing them out. Conservatives contended that Uncle Sam should not interfere with these private enterprises’ internal affairs. After all, airlines, hotels, fast-food chains, and retailers didn’t create the economic crisis that now threatens to bankrupt them. Rather, the government’s failure to prepare for the COVID-19 pandemic — and the heavy-handed social distancing measures that its under-preparation necessitated — robbed these companies of expected revenue. Thus, the state had an obligation to extend cheap credit to corporate America, no strings attached.

Progressives saw things differently. In their view, all corporations are, fundamentally, creations of the state. After all, it was our democratically enacted laws of limited liability that brought these institutions into being, and our publicly funded infrastructure, technology, education, and social services that undergird their profits. In recent decades, our corporate-funded political class had rewritten the rules of our market economy in a manner that redounded to the benefit of corporate executives and well-heeled shareholders — thereby enabling the rich to commandeer the gains of economic growth. Now, in a context of neo-feudal levels of wealth inequality, the American people shouldn’t be asked to stem the capitalist class’s losses unless we get something in return: Bailed-out corporations should have to provide their workers with job security, collective-bargaining rights, board representation, and higher wages, and provide the broader public with voting shares.

And then — while these factions were still arguing — the Federal Reserve went ahead and started lending money directly to private corporations with no significant conditions.


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