Money and Markets

American central bankers are emerging as vocal critics of the US pandemic response

Business Insider US

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  • Presidents of Federal Reserve Banks in major American cities are speaking out about the poor US federal response to the pandemic, saying that it eliminates any potential of a quick economic recovery.
  • The president of the San Francisco Federal Reserve said on Wednesday that the American economy may never recover from the pandemic.
  • On the same day, the president of the Boston Federal Reserve said the US response to the virus has been "inconsistent" and that economic activity likely won't spike upwards until Americans no longer feel threatened by the virus.
  • Similarly, the president of the Dallas Federal Reserve said people must follow "protocols like wearing masks" because the virus' resurgence this summer has led to a "muted" economic recovery.
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The coronavirus pandemic has decimated the US economy in just a few months. More than 56 million Americans have filed for unemployment over the last 21 weeks.

The road to economic recovery is expected to take years — and now the country's central bankers are starting to speak out about how that recovery has been further hindered by the federal coronavirus response.

Most recently, the US congress failed to replace the stimulus package that lapsed at the end of July. With negotiations seemingly deadlocked, American President Donald Trump filed a series of executive actions of questionable legality to temporarily extend certain stimulus provisions. 

Mary Daly, the president of the Federal Reserve Bank of San Francisco, told reporters on Wednesday that congress needs to agree on a new stimulus package as the US economy may flat out never recover from the pandemic, according to the Financial Times.

"It's certainly possible that we don't come back, at least in certain sectors in the same way as before," she said. "That will mean a large number of workers are not able to go back to the same jobs they had before the pandemic."

Central bankers in other major US cities have echoed Daly's statements.

Eric Rosengren, the president of the Federal Reserve Bank of Boston, slammed the country's coronavirus pandemic response in a Wednesday virtual meeting with the South Shore Chamber of Commerce in Massachusetts, according to The Wall Street Journal.

"Limited or inconsistent efforts by states to control the virus based on public health guidance are not only placing citizens at unnecessary risk of severe illness and possible death, but are also likely to prolong the economic downturn," he said.

He noted that as long as the virus "poses significant threats to public health," economic activity will not tick up as individuals will "voluntarily avoid activities that place their health at risk." He stated that tighter restrictions on economic activity in Europe at the height of the virus in the spring allowed for successful retail and recreational reopenings and a fast economic recovery period.

Daly also pointed to the US government letting unemployment lapse on July 31 as an example of the inconsistent response that is ultimately further hobbling the economy. Letting the $600 unemployment benefit expire "creates the potential for a little bit of a hole in consumer spending," she said. As congress debates the next round of stimulus, millions of Americans are struggling to make ends meet — let alone increase consumer spending by the amount needed to prop up the economy.

Robert Kaplan, the president of the Federal Reserve Bank of Dallas, said that the recent resurgence of the coronavirus has "muted" the economic recovery in virtual remarks to the Lubbock Chamber of Commerce on Wednesday. Bolstering the recovery "requires adherence to protocols, particularly wearing masks," he said. "If we don't follow that, while people may feel freer, the economy will grow slower."