Congress is gearing up to pass another round of fiscal support. This creates an opportunity to draw on the lessons learned since the CARES Act was passed in March and correct shortcomings in that legislation, according to commentary from Forbes. One key reform: Congress should allow the Federal Reserve to loan money to bankrupt companies. Although it may seem counterintuitive, such a move would help protect businesses and their employees — just what Congress wanted when it passed the CARES Act. Congress’s decision to give the Fed and the Treasury the authority to determine which businesses to aid and on what terms made the passage of the CARES Act possible. The COVID-19 crisis was moving at an unprecedented pace, and Congress rightfully wanted to move quickly to provide support to those in need. Delegating difficult decisions to the Fed and the Treasury allowed Congress to reach rapid agreement. And by requiring that any loans meet the substantive and procedural limitations embodied in Section 13(3), Congress was also able to readily impose some checks on the breadth of the discretion it was granting. Not surprisingly, however, Congress’s decision to use an off-the-shelf tool to deal with the crisis had some drawbacks. The tool was not a perfect fit for addressing the needs of companies or the broader economy. Although some of these shortcomings are not easily corrected, and may be reason for a different approach when the next crisis strikes, others can be remedied. Most importantly, Congress should authorize the Fed to make loans to bankrupt companies.
