The pandemic has actually forced the entire global economy to come crashing down. With businesses closing their doors and people losing their job, the entire situation was nothing short than a complete mess. Therefore, it is really important for the government to take the front seat and work out some magic to get the country’s economy back on track.
The USA Government did everything possible in its hand to help people survive during this crucial time. That’s why they introduced the CARES Act, whose main purpose is to protect people financially from the coronavirus. Economic stabilization was the main goal and William D King is here to share some points in this category for your use.
The Value of Economic Stabilization – William D King:
For providing liquidity to some of the hardest hit businesses and industries, the COVID Stimulus Plan ended up by allocating around $500 billion for the guarantees and the economic stabilization loans.
- This section mainly included around $25 billion covering the passenger airlines, $4 billion for the air cargo carriers and somewhat around $17 billion for the businesses critical to national security.
- All these amounts were to be placed and administered by none other than the secretary of the Treasury. The main goal over here is to check that the money is used for the right reasons and to keep misuse at bay.
- The remaining of the $454 billion was then allocated towards multiple programs and the much needed lending facilities, which got operated by the Federal Reserve. The main goal of these programs is to support other states, businesses and the municipalities.
The Loans and Their Conditions:
On the other hand, all these loans as made by the Treasury under plan came with certain conditions. Dividend payments, stock buybacks and the labor force cuts of over 10% were banned from getting any help through this source.
- All the loans as issued by the Treasury were to include the senior and equity debt from the borrowers. Unlike any small business interruption loans, these economic stabilization loans were not even forgivable.
- Even the compensation for the employees, which are earning over $425,000 annually, was then capped at present levels and the severance packages were capped at a compensation of 2 years.
- Moreover, the compensation for the employees who are earing over $3 million annually was then capped at $3 million plus one half of any amount over $3 million of compensation in 2019.
This plan further authorized the Treasury to reactive the current use of the Exchange Stabilization Fund. The main goal over here is to provide that emergency liquidity to the money market based mutual funds. It further relaxed some chosen capital needs for the credit unions and banks.
Help For the Airlines and The Mid-Sized Businesses:
Any firm owned or controlled by the Congress president, VP or members were ineligible for the loans. These airlines received loans to maintain the service to the current destinations and routes. The air travel and fuel taxes were suspended for all of 2020. Apart from that there have been $32 billion earmarked for payroll assistance for contractors and airlines.