Mnuchin Wants More Emergency Tools But Doesn’t See Recession

(Bloomberg) -- Steven Mnuchin said he doesn’t expect the coronavirus pandemic to tip the U.S. economy into recession, even though growth will inevitably slow as many businesses shut down operations for a time.

The U.S. Treasury Secretary also said Sunday he wants to reinstate certain powers used during the 2008 financial crisis to help buttress the economy from the economic shock now on the way.

“Later in the year, obviously the economic activity will pick up as we confront this virus,” Mnuchin said Sunday on ABC’s “This Week,” one of two interviews on Sunday-morning talk shows.

“I expect we’ll have a big rebound later in the year,” he said on “Fox News Sunday.”

Mnuchin spoke as many businesses in the U.S. and around the world grind to a halt in response to the fast-spreading virus.

U.S. economic growth is forecast to nearly halt in the second quarter and recession odds have jumped, Bloomberg’s March 6-12 survey of economists shows.

Growth was seen slumping to a 0.1% annualized pace in the April-June period, while the economy now faces a 45% chance of a recession over the next 12 months -- the greatest odds since February 2009, when the economy was still in the midst of the previous recession.

Sweeping Response

The country’s biggest cruise lines are suspending operations for a month, marking the most sweeping response yet by the industry after a series of coronavirus outbreaks at sea. Hotels occupancy is dropping, Broadway has fallen dark, and airlines have idled planes amid travel bans globally.

“This is a unique circumstance,” Mnuchin said at a Saturday press conference at the White House. “There’s no question, because of the things that we’re requesting to do, there are parts of the economy shutting down or slowing down dramatically.”

He said an $8 billion emergency spending bill and a House-passed economic relief plan are only the first two innings of a nine-inning baseball game.

“We have a lot more we need to do with Congress,” Mnuchin said. “We will make sure the economy recovers.”

Mnuchin said on ABC that he would look to reinstate “certain tools that were taken away that I’m going to go back to Congress and ask for.”

‘Not a Bailout’

On “Fox News Sunday,” Mnuchin said the “good news” was that banks have “extraordinary conditions in both capital and liquidity.”

This distinguishes the current situation from 2008-09, he said, adding that “bailout” shouldn’t be used to describe actions that are likely to be taken over the coming days and weeks.

“If you’re providing liquidity to good businesses that just need liquidity for three to six months -- where you’re taking collateral, and you have security -- that’s not a bailout,” said Mnuchin.

Officials and regulators around the world are struggling to soothe markets with few tools available. Economies are tipping toward -- or may already be in the midst of -- recessions.

Major stock indexes have entered a bear market, ending an 11-year run that began under Trump’s predecessor, President Barack Obama. The $17 trillion U.S. Treasury market is struggling with a lack of liquidity.

Mnuchin and Federal Reserve Chairman Jerome Powell, who’s been frequently attacked by Trump, are under pressure to ease investor concerns and bolster the economy.

“I speak to Jay Powell now almost every single day,” Mnuchin said on ABC.

Trump, whose re-election campaign relies heavily on the economy, is keenly focused on the stock market as a proxy for his administration’s performance.

In a Saturday press conference giving an overview of the government’s response, Trump pointed out that stocks saw a record daily jump as he declared a national emergency on Friday. He stayed silent on the steep losses experienced in the past days and weeks.

“The president is focused on the stock market because it’s just one indication of the economy that gives people confidence,” Mnuchin said Sunday on ABC.

--With assistance from Jeff Kearns.

To contact the reporters on this story: Ros Krasny in Washington at rkrasny1@bloomberg.net;Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: James Ludden at jludden@bloomberg.net, Ros Krasny

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