They didn't use them before because it would have been illegal. The Fed has mandated a 10% liquidity for all major banks.
See: https://www.federalreserve.gov/monetarypolicy/reservereq.htm
See: https://www.federalreserve.gov/monetarypolicy/reservereq.htm
If you’re shooting for something like “TARP for Main Street”, this is a suboptimal path based on the incentives and historical behaviors of these regulated entities. Get the money velocity back up to speed ASAP.
Edit: We could’ve had the infra in place to plug into banking, credit, and IRS data for companies, to enable rapid analysis, decisioning, and funding of operating accounts in times of crisis as part of the US Treasury Dept. Perhaps next time.
If you are a bank in fractional reserve banking, who had a 10% capital requirement that is now lifted, you just got 10% more money to use to make money when it is getting increasingly hard for everyone to make money. And you think banks are gonna say, "nah, we wanna stay safe, we'll just sit on our hands"?
I agree with you that monetary policy is not enough, we also need fiscal policy. That said we can't say the Fed isn't trying to do their part.
Banks want (mostly) safe returns. “Borrow at 3, lend at 6, at the golf course by 3”, as the saying goes. You need action by an institution that prioritizes rapid injections of cash to accelerate monetary velocity over conservative lending practices, and where saving the economy (and we are clearly at the precipice as indicated by how fast the Fed is moving) takes precedence over appeasing shareholders.
Disclaimer: My opinions are my own, and in no way, shape, or form that of any employer past, present, or future.
[1] https://www.pnc.com/insights/corporate-institutional/gain-ma...
> Sheila Bair, a top U.S. banking regulator during the 2007-’08 global financial crisis, said the Federal Reserve needs to quickly shift its focus to getting credit flowing to U.S. businesses crippled by the spreading coronavirus and workers losing their jobs.
> “They are throwing money in the wrong place,” Bair said of an unprecedented move by the Fed on Sunday to slash benchmark rates to zero and start a $700 billion Treasury- and mortgage-bond buying program.
> “This isn’t a financial crisis — at least not yet,” she told MarketWatch on Sunday evening following the Fed’s announcement, which drops the target U.S. benchmark rate to zero and aims to shore up liquidity for banks and investors in the $15.6 trillion Treasury and $8.5 trillion agency mortgage bonds markets.
> “Lowering interest rates to zero doesn’t help if businesses can’t pay their loans back and they don’t have cash flow,” she said. “We need to get help out there, especially to small businesses and people already losing their jobs.”
https://www.marketwatch.com/story/exclusive-fed-is-throwing-...
https://www.linkedin.com/pulse/implications-hitting-hard-0-i...