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Third Weekly Commentary: COVID-19 Response

April 3rd, 2020

Market Views

“Success is not final, failure is not fatal: it is the courage to continue that counts.”
– Winston Churchill

 

Living History

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on Friday March 27, on the heels of the $350 billion Families First Coronavirus Response Act enacted just ten days earlier.  The largest economic aid package in U.S. history, CARES aims to provide relief to individuals, businesses, state & local governments, and public health (Figure 1) through a variety of forms, including direct cash stimulus and expanded unemployment benefits.

 

Figure 1: CARES Allocation by Group (Source: CARES Act, rounded)

 

Figure 2: Allocation to Individuals/Families (Source: CARES ACT, rounded)

 

Individuals & Families:  To mitigate the economic impact of a spike in unemployment, CARES allocated approximately $600 billion to “Individuals and Families” broken out among the categories shown in Figure 2 and detailed below:

  • Direct Cash
    • Up to $1,200 for individuals and $2,400 for couples, with $500 added for every child. A family of 4 with a household income of $150k would receive $3,400
    • Eligibility based on earnings, with caps at $99k (individual) and $198k (joint) (per Figure 3)
    • Delivered by U.S. Treasury the week of April 4 and April 11 via direct deposit / checks

 

Figure 3: Who Gets the Direct Cash? (Source: CARES Act, NPR)

 

  • Unemployment Benefits
    • Unemployment benefit increased to about $4,200/month for 4 months, up from $1,600
    • Eligibility criteria expanded to include those terminated and those with work hours reduced
    • Delivered within 10 days to 4 weeks, depending on state
  • Student Loan Suspension
    • Principal and interest obligations through September 30 are deferred for undergraduate and graduate students with Federal student debt
    • Additional relief provided through work-study funds and other programs

Small Business: The $377 billion allocated to small businesses includes emergency grants ($10 billion), a forgivable loan program ($350 billion) for companies with 500 or fewer employees, and relief from existing SBA (Small Business Administration) loan programs ($17 billion).  FinTech lenders and marketplaces are likely to participate as originators of the SBA’s loan program.

The stimulus packages being enacted, paired with the loan assistance programs rolled out by HCG’s platform partners, should provide a meaningful economic bridge to individuals and small businesses impacted by Covid-19.   We will continue to watch the data and share our insights with you.

 

DISCLAIMERS AND OTHER IMPORTANT INFORMATION
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