Next City, March 31, 2020: The Fed’s Secret Superpowers to Support Cities Through COVID-19 and Beyond
New York City Council Speaker Corey Johnson has proposed a $12 billion relief plan to help businesses and workers affected by the COVID-19 pandemic. The city council estimates over 500,000 workers and more than 40,000 businesses are in the industries hardest hit during the COVID-19 crisis, businesses that generated $40 billion in taxable sales last year.
Johnson wants the federal government to pay for the plan, but if it fails to step up right away or with enough help, he said the city should borrow money through the municipal bond market to pay for it until any federal money comes in. It’s what the city did after 9/11. “It was the boost the city needed while we waited on federal aid to come through and was integral to our ability to immediately begin the cleanup and recovery,” said the statement from Johnson’s office.
Jesse Van Tol is CEO at the National Community Reinvestment Coalition, a nationwide network of bank watchdog and community development groups. His was one of many groups that called on the Fed to restructure mortgages it came to own ten years ago during the last financial crisis. That could have reduced monthly mortgage payments for millions of struggling homeowners during the Great Recession. This time around, Van Tol wants the Fed to temporarily cancel payments automatically on all the mortgages it owns and is soon to own.
“I’ve seen no indication so far that they’ve thought about their role in owning those securities as anything other than monetary policy, but it’s my belief that they have the power to do that kind of thing,” Van Tol says.