Economic Update: Government Response and Other Resources

The full economic impact of COVID-19 and the extraordinary measures taken to keep our society safe may not be known for several weeks or even months. The market sell-off is a good indicator of the expectations of the investment community and we’ll be keeping a close eye on that activity, as well as any resulting opportunities.

In response to and anticipation of this new reality, the US government has begun to offer some relief programs to mitigate the long-term impacts on our domestic economy. The full scope of the package has yet to be revealed, but to date, here are some of the details from the packages that we believe may impact you the most:

• US Small Business Administration’s Disaster Loan Assistance: This SBA program offers up to $2M in assistance to small businesses to overcome a temporary loss of income. Visit their website for benefit details, eligibility requirements, and to apply directly from their site. Some of the qualifying loan terms include…
• Eligible borrowers: Employers with 500 employees or less (phased out)
• Loan amounts: 100% of 6 weeks of payroll, capped at $1,540 per week per employee (approximately $80,000 annualized)
• Borrower requirement: Employee compensation must be sustained for all employees for 8 weeks from the date the loan is disbursed
• Lender: US financial institutions
• Streamlined underwriting process: Lender verifies the previous 6-week payroll amount and later verifies that the borrower has paid 8 weeks of payroll from date of disbursement
• Authority for the Treasury Department to issue regulations establishing appropriate interest rate, loan maturity, and other relevant terms and conditions
• Support payments from IRS and Bureau of Fiscal Service: Proposed direct payments from these two services would appropriate funds for two rounds of payments directly to individual taxpayers ($250B starting April 16, and $250B beginning on May 18). Details are still being determined, but payments appear to be tiered based on income level, and early reports show a range of $1,000 - $2,000. Modeling is still under construction by the US Treasury.
• Stabilization of Money Market Mutual Funds: Though many in the industry believe these efforts are not yet necessary, this blanket guarantee could be the action to stop runs on the money market funds, preventing such actions from “breaking the buck” as they did during the 2008 financial crisis. In that instance, the share price fell below the stable $1 promised to customers, and investors began scrambling out of most money market funds.
• Tax deadline extension: Due to the stress the coronavirus crisis is putting on our economic system, American taxpayers have been granted an additional 90 days to file and pay their taxes – the deadline is now July 15. The payment extension was granted earlier this week, however, the filing extension was provided just this morning. There could be some caveats to this extension (such as taxpayers owing $1M or more), and individual states are still sorting through their criteria. Please consult your tax professional for specifics to your situation.
• Expanded benefits for family and medical leave: FMLA and EFMLEA are now providing up to 10 weeks of paid leave to eligible employees for coronavirus-related reasons. There are many details regarding this new law, and one well-written article we’ve seen detailing the eligibility requirements was written by Forbes magazine. Some of the primary requirements for eligibility include…
• Staying home from work because of coronavirus
• Caring for a close family member under quarantine (or isolation)
• Caring for a minor child who cannot go to school due to a public health emergency
• Industry-specific aid: there have been several proposals brought forward to aid specific industries (such as airlines). This is a hotly debated political issue and final results have yet to be determined.

For additional resources to help you stay informed on virus-related matters that may impact your investment portfolios, businesses, and personal health and well-being, we’ve created a resource dashboard on our website with your interests in mind. The page includes an on-going collection of our emails related to the virus’s impact on the markets, plus links to other sites you may find of interest.