The Fed Fulfilling Its Mandate to Maximize Employment Amid the COVID-19 Pandemic

DBRS, Inc. (DBRS Morningstar) published a commentary reviewing the Federal Reserve’s actions in response to the Coronavirus Disease (COIVD-19) pandemic. The Federal Reserve has acted quickly, cutting interest rates to zero and launching numerous programs to alleviate funding pressures. While DBRS Morningstar views these actions as constructive, the scale of today’s economic shock also requires a large amount of fiscal stimulus globally to lessen the potential adverse impact of the pandemic.

Key highlights include:

-- DBRS Morningstar views U.S-rated banks as well positioned to cope with the rapidly deteriorating economic environment stemming from the Coronavirus Disease (COVID-19) pandemic, given their strong levels of capital and liquidity.
-- Stress testing and banks' ability to respond to adverse environments have been enhanced.
-- The Fed, financial regulatory agencies and other federal entities have been able to move quickly, enacting multiple programs to increase market confidence and keep liquidity flowing.
-- Already, the actions of the Fed and other financial authorities have exceeded what was done during the Financial Crisis.

“While the pain of the last Financial Crisis that started in 2008 is still permanently ingrained in many of our minds, the crisis did result in some benefits to deal with the current coronavirus pandemic. First and foremost, banking regulation was dramatically enhanced resulting in today’s strong bank balance sheets. In particular, stress testing and banks' ability to respond to adverse environments have been enhanced. Also, through trial and error at the start of the last Financial Crisis, the Fed was able to develop an effective playbook to prevent the financial markets and the economy from grinding to a halt,” said Michael Driscoll, Managing Director and Head of North American FIG.

Notes:
The commentary titled “The Fed Fulfilling Its Mandate to Maximize Employment Amid the COVID-19 Pandemic” is available at www.dbrsmorningstar.com.

For more information, visit www.dbrsmorningstar.com or contact us at [email protected].

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