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The U.S. government should apply the lessons learned in the 2009 financial bailout and scale them up for the current crisis — but with stricter terms for the largest, healthiest companies, according to members of the team that led the last industry bailout, Bloomberg News reported. President Donald Trump said yesterday he’d support the U.S. taking an equity stake in companies that receive coronavirus-related aid from taxpayers and prohibiting firms from increasing executive bonuses and stock buybacks. Hours later, Senate Majority Leader Mitch McConnell unveiled a massive stimulus plan that provides as much as $208 billion in loans or loan guarantees to businesses hurt by the coronavirus. It would permit the federal government to take an equity stake in companies that receive loan assistance, “contingent on the financial success of the eligible business.” His proposal was met with skepticism by congressional Democrats. In 2009, the U.S. allocated $700 billion to bail out banks and automakers as the collapse of high-risk mortgages rippled through the American economy. “The government is going to need to provide capital to these companies because you don’t want them to simply shut down and liquidate because you’ll never get them put back together again when we get to the other side of this,” said Steve Rattner, who was the so-called czar for the Obama administration’s $50 billion auto industry bailout.

The Trump administration and congressional leaders rushed on Wednesday to assemble a massive stimulus package aimed at preventing the U.S. economy from plummeting into its worst collapse since the Great Depression, as fears about the coronavirus pandemic brought much of American life to a standstill, the Washington Post reported. The administration’s $1 trillion proposed rescue plan, which forms the basis for fast-moving negotiations on Capitol Hill, includes sending two large checks to many Americans and devoting $300 billion toward helping small businesses avoid mass layoffs. Priorities laid out in a two-page Treasury Department document also include $50 billion to help rescue the airline industry and $150 billion to prop up other sectors, which could include hotels. The White House is vetting these proposals with Senate GOP leaders before engaging more fully with Democrats, so the package is certain to evolve in coming days. Democrats, meanwhile, are eyeing their own priorities, largely aiming to shore up safety-net programs and the public health infrastructure, as well as send money directly to American taxpayers, while shunning corporate bailouts. Rep. Maxine Waters (D-Calif.) proposed on Wednesday having the Federal Reserve send $2,000 to every American adult and $1,000 to every American child until the crisis ends.

The coronavirus emergency relief package, which became law yesterday, gives many American workers paid leave if they need to take time off work because of the coronavirus, the New York Times reported. It is the first time the U.S. has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of coronavirus. Most workers at small and midsize companies can get the paid leave, as can government employees, as long as they’ve been employed at least 30 days.

Prof. Ted Janger of Brooklyn Law School sent Prof. Bob Lawless of the University of Illinois College of Law a proposal for a small change to the Bankruptcy Code that might significantly help small businesses affected by the COVID-19 pandemic, according a post by Lawless in the Credit Slips blog. His idea merits consideration: "In the wake of COVID-19, Congress should raise the debt ceiling [currently within the new Small Business Reorganization Act] to $10 million to help more small businesses and soften the inevitable fallout that will come from COVID-19 related business disruptions," according to Janger. Janger's proposal highlights that COVID-19 bankruptcies are likely to be different from the most recent crop of media and manufacturing bankruptcies. "[COVID-19 bankruptcies] will result from a temporary but brutal cash flow hit on otherwise viable businesses. This is precisely the situation chapter 11 handles best — recapitalization of a viable, but financially distressed business," Janger writes to Lawless. Prof. Lawless said that he calculated that a $10 million threshold will raise eligibility from 42% to 59% of all cases. "Congress might even consider a temporary increase that is even higher until the crisis passes," Lawless writes.

The House overwhelmingly passed an economic relief bill on Saturday for the coronavirus, dedicating tens of billions of dollars for paid sick leave, unemployment insurance, free testing and other measures to help Americans impacted by the crisis, the Washington Post reported. The 363-40 vote capped two days of volatile negotiations between House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin that threatened to fall apart entirely for hours Friday amid GOP misgivings. The House vote sends the legislation to the Senate, which is expected to pass it this week after Majority Leader Mitch McConnell (R-Ky.) canceled a planned recess so senators could act on the issue. The agreement reached Friday is primarily aimed at expanding the safety net to cope with the potentially catastrophic economic impact of the coronavirus. In addition to ensuring free coronavirus testing, the plan would dramatically increase several benefits, particularly family medical leave and paid sick leave, while also bolstering unemployment insurance; spending on health insurance for the poor; and food programs for children and the elderly. One of the biggest changes is a new paid sick leave guarantee for those impacted by the coronavirus, and reaching agreement on this issue was one of the final sticking points to a deal. Under the agreement, employers would be required to provide 14 days of paid sick leave at “not less” than two-thirds their regular rate. They would qualify for the benefit if they are sick and have to be quarantined or treated for coronavirus, or if they have to leave their jobs to take care of a family member who has coronavirus.

Financial markets plunged yesterday in the biggest one-day drop since the Black Monday stock market crash of 1987, and Congress neared a deal with the White House on a sweeping economic rescue package to respond to the colossal effect of the coronavirus pandemic, the New York Times reported. After a day of intense negotiations between Speaker Nancy Pelosi of California and the Treasury secretary, Steven Mnuchin, Pelosi told reporters that “we’ve resolved most of our differences” and the House would vote today on the measure “one way or another.” It would then go to the Senate, which called off a recess that had been scheduled for next week in anticipation of a compromise. The legislation, according to a letter sent to her members, will include enhanced unemployment benefits, free virus testing, aid for food assistance programs and federal funds for Medicaid. The package also ensures 14 days of paid sick leave, as well as tax credits to help small- and medium-size businesses fulfill that mandate. Language was still being drafted for provisions related to family and medical leave, according to a Democratic aide, as staff members worked through the night to prepare the bill. Read more. 

In related news, President Donald Trump’s top aides are racing to design a wide-ranging government rescue of major sectors of the economy — such as airlines, hospitality and other service industries — amid a collapsing stock market and cascading shutdowns of major sports events, Broadway shows, museums and amusement parks, Politico reported. Behind the scenes, the Treasury Department and top economic officials are exploring ways to help out industries struggling financially from a rapid shutdown. They’re leaning toward some type of tax relief or deferring tax payments to provide an initial cushion — hoping to avoid a full-fledged bailout akin to the 2008 banking rescue that could prove difficult to clear past the Republican base. The discussions about saving U.S. businesses are separate from an ongoing debate among lawmakers and Trump officials about a stimulus program that would directly aid American workers. Read more. 

Senate Democrats, joined by a handful of Republicans, voted on Wednesday to reverse a Department of Education rule they say reduces protections for student borrowers, The Hill reported. Senators voted 53-42 to block the rule, which was crafted by Education Secretary Betsy DeVos. The bill has already passed the House, sending it to President Trump’s desk. The White House has warned that they will recommend he veto the bill. The rule would put restrictions on an Obama-era "borrower defense" rule that was meant to regulate the for-profit sector and protect students who had been misled by colleges. DeVos has argued that students should have to prove they were financially harmed. The more restrictive rule would give full relief only to students who earn much less than students in similar programs. Under the new formula, the remaining students would have no more than 75 percent of their loans forgiven. “DeVos has decided to change the way that students have to go through proving up their losses, and that’s why we’re here today,” Sen. Dick Durbin (D-Ill.) said on the Senate floor. Republicans largely supported the Trump administration rule, arguing the changes helped protect against potential abuse of taxpayer dollars. "I don't have any doubt about the intent of the law and that the intention is good, but the concept is far too broad ... [and] is ripe for abuse," said Sen. John Cornyn (R-Texas). Because Democrats are forcing the vote under the Congressional Review Act, which allows Congress to try to strike down executive regulations, they only need a simple majority rather than the 60 votes normally required by the Senate.