Recent Developments in COVID-19 Related Policy

Recent policy action on the coronavirus front:

(1) LENDING: On Monday June 15, 2020, the Federal Reserve opened the Main Street lending program initiated in March in the CARES Act.

(2) TESTING: Senator Ted Cruz introduced a bill to provide tax incentives to businesses that test workers for Covid-19.

(3) OVERSIGHT: On Monday June 15, 2020, it was revealed that the inspectors general designated by the CARES Act to monitor spending — the Pandemic Response Accountable Committee — wrote to key Congressional committee chairs last week expressing concern that the administration’s recent legal rulings were blocking their ability to provide oversight of the spending programs.

(4) LIABILITY: States explore limiting liability for COVID-19 related claims, including Iowa legislation signed by the governor on June 18 that limits liability retroactive to January 1, 2020 and North Carolina’s limited liability bill that passed the senate.

(5) PRIVACY: The most recent round of proposed federal legislation aimed at protecting privacy in COVID-19 contact tracing apps, follows on the heels of earlier proposals as well as state level action on the privacy front (see e.g. California bill; Minnesota bill). Around the globe, countries have introduced contact tracing apps — including Japan’s introduction today (June 19, 2020) of its national tracing app.

European Central Bank Announces New Monetary Policy Measures in the Face of COVID-19

On April 30, 2020, Christine Lagarde, President of the European Central Bank (ECB), announced new monetary policy measures in response to the economic crisis triggered by the COVID-19 pandemic. At an ECB press conference, Largarde first set the stage for further action, observing (at 8:30 minutes in): “The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime. Measures to contain the spread of the coronavirus (COVID-19) have largely halted economic activity in all the countries of the euro area and across the globe.”

After reviewing prior ECB action, Lagarde outlined (at 10:30 minutes in) new ECB steps including new incentives for bank lending: “Specifically, we decided to reduce the interest rate on TLTRO III [targeted longer-term refinancing] operations during the period from June 2020 to June 2021 to 50 basis points below the average interest rate on the Eurosystem’s main refinancing operations prevailing over the same period. Moreover, for counterparties whose eligible net lending reaches the lending performance threshold, the interest rate over the period from June 2020 to June 2021 will now be 50 basis points below the average deposit facility rate prevailing over the same period.” (See also Largarde’s written statement).

Developing Countries’ Debt Crisis in a COVID-19 World: Calls for Action

Estimates suggest that “[e]merging markets and developing countries have about $11 trillion in external debt and about $3.9 trillion in debt service due in 2020.” A Brookings Institution posting highlighting these numbers argued that the debt problem is not limited to a few countries: “One indication that the problem is widespread is that already 90 countries have approached the IMF to access emergency financing instruments. It seems clear that this is not just a low-income or an African country problem.” The posting advocates immediate, comprehensive and coordinated action. The major global financial players share similar concerns. At their April 15, 2020 virtual meeting, G20 Finance Ministers and Central Bank Governors agreed, among other actions, to suspend debt service for the poorest countries. The World Bank and IMF have announced their own relief actions. Others have advocated stronger relief measures including cancellation, not merely suspension of certain debt payments.

OECD Releases Report on Countries’ Tax and Fiscal Policy Responses to COVID-19

The OECD has released a report tracking and reviewing countries’ tax and fiscal responses to the COVID-19 crisis. In this April 15, 2020 report, the OECD makes a series of observations and recommendations for the future, noting that “some are already suggesting the need for a new kind of ‘Marshal Plan’ to support the poorest countries.”

U.S. to Take Equity Stakes in Airlines?

Mnuchin Indicates U.S. to Take Stakes in Airlines in Exchange for Grants, (WSJ, Mar. 26, 2020)

Previously and Elsewhere:
Boeing CEO: No Government Equity Stake for Taxpayer Aid (WSJ, Mar, 24, 2020)
Trump says he would consider government equity stakes in companies seeking bailouts (CNBC, Mar. 19, 2020)
UK government draws up plans to buy into airlines (FT, Mar. 19, 2020)

The IMF and COVID-19

Latest information about the IMF’s work to address the Coronavirus crisis
Including:
Statement by the International Monetary and Financial Committee on the Coronavirus (Mar. 4, 2020)
Policy Action for a Healthy Global Economy (Mar. 16, 2020)
IMF Policy Recommendations: Policy Steps to Address the Coronavirus Crisis (Mar. 16, 2020)
Blunting the Impact and Hard Choices: Early Lessons from China (Mar. 20, 2020)
Coronavirus Economic Planning: Hoping for the Best, Prepared for the Worst (Mar. 12, 2020)
Monetary and Financial Stability During the Coronavirus Outbreak (Mar. 11, 2020)
Limiting the Economic Fallout of the Coronavirus with Large Targeted Policies (Mar. 9, 2020)
Fiscal Policies to Protect People During the Coronavirus Outbreak (Mar. 5, 2020)

Restaurant Dining Bonds Initiative

Dining Bonds Initiative by Restaurant Industry Professionals (Mar, 16, 2020) (“Due to the impact that the coronavirus COVID-19 has had on the restaurant community, a collective of restaurant industry professionals have set a global initiative in motion to get funds into the hands of restaurants NOW, even if they are temporarily closed…A Dining Bond works like a savings bond, where you can purchase a “bond” at a value rate to be redeemed for face value at a future date.”)

OECD: Policy Responses for Tackling the coronavirus (COVID-19)

OECD Platform: Tackling the coronavirus (COVID-19)
Tax Policy: Emergency Tax Policy Responses to the COVID-19 Pandemic (Mar. 20, 2020)
Tax Administration: Tax Administration Responses to COVID-19: Support for Taxpayers (Mar. 16, 2020)
Employment and Social Policy: Supporting people and companies to deal with the Covid-19 virus: Options for an immediate employment and social-policy response (Mar. 20, 2020)
Small and Medium Sized Businesses: SME Policy Responses (Mar. 16, 2020)