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Congress Takes on Triple Threat With $2.2 Trillion Stimulus: The Week Ahead

The $2.2 trillion emergency aid package to both corporate America and Americans is on its way.

The U.S. House of Representatives on Friday passed the $2.2 trillion emergency aid bill that the Senate approved earlier in the week. President Trump quickly signed the bipartisan measure.

The purpose of the emergency aid package is two-fold in nature. It helps companies impacted by operational shutdown as the country deals with shelter-in-place orders to combat the spread of the coronavirus and it provides benefits to Americans who are displaced by temporary job loss.

Members of Congress are likely already thinking about additional measures for an economic stimulus to help spur the U.S. economy once the country gets past the public health crisis and companies can ramp up operations again.

S&P Global Ratings in February had a U.S. growth rate forecast close to 2 percent for 2020. More recent forecasts pegged growth at near zero in light of current events. While the current numbers seem dire looking ahead, huge fiscal stimulus packages that are in the works could mute those forecasts and provide a buffer for the U.S. economy.

“I don’t see a Great Depression scenario that some economists are forecasting,” Beth Ann Bovina, U.S. chief economist for S&P Global Ratings, said during an S&P economic webinar on Tuesday. “The concern we have is people aren’t spending. Consumer spending is a real drag on the economy. Spending is two-thirds of U.S. activity.”

The pandemic has sapped the U.S. economy in more ways than one. “Any new activity is shut down. Companies are drawing down on revolving credit facilities [as some] industries are expected to get hit harder than others,” Matthew Cannan, managing director and head of debt credit markets at Fifth Third Bank, said. He joined Bovina on the webinar, representing the lending perspective.

While Cannan said banks are expecting a lot of waiver activity due to missed minimum requirement thresholds in certain loan covenants, the situation is different from back in 2008 at the start of the Great Recession. Banks today are better capitalized and the middle market firms that are drawing down on their lines are being “more defensive than anything at this point.”

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Congress is dealing with three crises all at once: the pandemic health crisis, the breakdown in the financial markets and the threat of widespread business failures.

“Many think it will create mass bankruptcies across the country and across industries and leaving many Americans jobless. The hope is that you can stave that off once the health crisis is contained. Congress is trying to stave off that,” Eric Cantor, former House Majority Leader (R-Vir.) and now vice chairman at Moelis & Co., said on the webinar. He is expecting a stimulus package from Congress to “help us get through the crisis.”