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March 30, 2020 at 09:37 AM
The $2.2 trillion economic emergency legislation that was signed into law late last week is likely not big enough to stabilize the biggest economy in the world, according to Larry Fink, the CEO of BlackRock, the world’s largest asset manager.
Another stimulus package of $1 trillion is probably required, said Fink, who spoke on a teleconference with institutional investors and others on Thursday.
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) includes more than $550 billion in benefits for workers and households; $500 billion for big businesses, most of which will be funneled through the Federal Reserve as lending facilities; $400 billion for small and medium-size businesses; plus another $280 billion for corporate tax relief, $180 billion for the health care system and $175 billion for emergency aid for state and local businesses. More than $100 billion will go to the Federal Emergency Management Agency, local schools and colleges, mass transit and foods stamps.
Many households will receive $1,200 for each adult and $500 per child, and unemployment insurance will be expanded and include benefits for freelancers and contractors.
“If we look at the course of the coronavirus in the U.S., most people believe there will have to be another package moving forward,” Fink said. That package may also include “adjustments” to the latest emergency aid package to address the “big challenge” of delivering its benefits to households and businesses.
When it comes to delivery of benefits, “the devil will be in the details,” Fink said, adding he hasn’t heard how the government will connect with independent contractors or hourly workers, for example.
He noted that about $450 billion in aid for businesses included in the latest economic emergency bill will be funneled through the loans controlled by the Federal Reserve, which could potentially leverage that amount, creating as much as several trillion dollars in aid.
BlackRock has been tapped to administer two emergency lending facilities recently initiated by the Fed: one to new investment-grade bonds and another to buy investment-grade bond ETFs. BlackRock will also be buying commercial mortgage-backed securities as part of the Fed’s new, revised quantitative easing program.
Like many others on Wall Street, Fink said the path of the economy will depend on the path of the virus and governments’ response to both.
