FT News Briefing Friday, March 20
Mar 20, 2020
Republicans propose over $1 trillion in fiscal stimulus to combat the economic fallout from the coronavirus outbreak. Sir Paul Tucker warns that policymakers must brace for wartime conditions if the situation worsens. Central banks are highlighted for their vital role in stabilizing markets, while ethical concerns arise over the skyrocketing prices of potential COVID-19 treatments. The discussion also touches on the risks of shadow banking and the pressing need to prioritize economic demand.
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Central Bank Actions
- Central banks must keep the financial system operating during crises.
- They should use discount windows, support repo markets, and potentially become market makers.
Market Maker of Last Resort
- Central banks should act as market makers of last resort, setting bid-offer spreads.
- They should consider moving stock markets to daily auctions for certain securities.
Wartime Banking Measures
- Banks should suspend equity buybacks, dividends, and bonuses for senior staff.
- Governments and regulators should enforce this wartime footing.