18 Months of Rolling Shutdowns Likely: Fed’s Kashkari

While remaining optimistic about relief efforts made by Congress, he says it’s not yet clear “if this support is going to be long enough.” If there are “different phases of shutdowns for the next several months or until we have a therapy or vaccine, they’re going to need more help than that,” Kashkari explained. 

With more economic distress likely until there’s a vaccine, “it’s going to be up to Congress to keep coming back to provide support to the American people,” he added. 

Economic Restart, Bank Health

“We can’t shut down the economy for 18 months, but we need to find ways of getting the people who are healthy, who are at lower risk back to work, and then providing assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future,” Kashkari said. “That’s a real challenge for all of us.”

As for massive testing for the virus, Kashkari says he’s spoken with some health care experts “who say that it’s a fantasy … [and] that there simply is not the equipment, there’s not the supply chain. I hope they’re wrong.”

The U.S. needs “to be smart about how we start to reopen parts of the economy with those who are at lowest risk until that capacity and that testing and those vaccines and therapies come online,” he explained. “I think we need an all-of-the-above approach, because we don’t know where we’re gonna have the breakthrough.”

As the crisis drags on, problems “roll up into the banking sector,” he said, if rents and then mortgages can’t be paid.

The banks are well-capitalized today vs. 2006, Kashkari points out. 

“But if this goes on long enough, it could produce strains in the banking sector. And then the Fed and Congress and Treasury would have to step in to make sure that the banks are sound.”