March 23, 2020: The Day the US Economy Did Not Crash

The day when Fed Chairman Jerome Powell rode in to rescue financial markets to prevent their complete freezing up could have entered our history books as another global mega-crash.

Credit: Rob Crandall


  • The US financial system came to the brink of disaster on March 23. The consequences would have been a global financial crisis worse than 2008.
  • The crisis was averted because the US Fed rushed to the rescue -- and probably saved thousands of companies from going into bankruptcy.
  • The current US stock market upsurge and the accompanying GDP nosedive show in what altered states the US economy is currently operating.
  • The grotesque divergence between the US stock market and the country’s real economy shows how unequal the country has become.
  • This US is now a country where more than 50% of all households together own less than 1% of the nation’s wealth.

People who are investors in U.S. stock markets are cheering at their good fortune. Meanwhile, more than 75,000 of their fellow citizens have died because of the coronavirus.

And unemployment in the United States has skyrocketed. New figures show that, by the end of April, 20.5 million people were out of work and the jobless rate at 14.7% was the highest since the Depression era.

The US Fed’s stealthy rescue mission

The stock market’s surge in recent weeks is all the more astonishing given that the U.S. financial system came to the brink of disaster on March 23. The consequences would have been a global financial crisis that could have been worse than the crash of 2008.

The crisis was averted by unprecedented – and largely unsung – action by the U.S. Federal Reserve Board. It rushed to the rescue and probably saved thousands of companies from going into bankruptcy.

The Fed’s moves to pour vast sums of cash into the financial system have resulted in a stock market bonanza in the midst of the worst economic collapse since the Great Depression.

They used to call it the “Greenspan put”

As unemployment soars week after week, so does the U.S. stock market. These trends are likely to continue.

Fed Chairman Jerome Powell stated this week that the outlook for employment is grave, but he stressed that the Fed will continue to take extraordinary measures to support the (financial) economy.

Indeed, the Fed has just started direct purchases of securities in the markets to underpin corporate bonds and is thus seeking to reinforce the measures taken in recent weeks.

This leads to an ever bigger gap between the fortunes of working and middle class people in the United States and its income-rich, stock-owning professional class, never mind the United States’ plutocratic class.

Trump’s wealthy supporters cheer

The market gains will boost the spirits of Donald Trump’s wealthy supporters. It may even encourage them — and the President — to believe that his reelection is secured.

These folks simply do not care about whether most Americans — who are now struggling desperately because of the collapse of pretty much the entire U.S. economy — will benefit sufficiently from the Fed’s extraordinary market rescue operation.

Where are the Democrats?

This is hardly the policy response one would expect from the Democrats. Of course, they have big campaign donors too, whose material interests they are mindful of.

At least the Democrats can claim that the U.S. Congress has approved record-scale programs to counter the health and economic consequences of the COVID 19 pandemic. The cumulative volume of such rescue legislation now approaches $3,000 billion (Americans call this $3 trillion).

The insider game triumphs

Each day produces more news stories about how the Trump team has ensured that their friends running businesses are directly benefiting from the government’s cash.

But as important as the U.S. Treasury’s actions are, for each individual company now drinking at the Treasury’s bail-out funds, there are probably hundreds that have gained from the Fed’s actions.

Trump’s harassing the Fed pays off

Ironically, the Fed has become Trump’s hero. Trump appointed Jerome Powell to chair the Fed’s board, but swiftly soured on him for failing to boost the economy to the President’s satisfaction.

Rarely, if ever before, has a U.S. President so loudly and frequently lambasted a governor of the central bank. But, to quote the most famous of all American investors, Warren Buffett, when the crisis hit on March 23, then the champion was Powell.

What happened? Warren Buffett weighs in

As the U.S. stock market kept on falling as the pandemic spread in March, so corporations drew on their credit lines and the banks got worried.

Then, as Buffet told the annual meeting of his company, Berkshire Hathaway, a few days ago:

We got to the point where the U.S. Treasury market, the deepest of all markets, got somewhat disorganized. And when that happens, believe me, every bank and CFO (chief financial officer) in the country reacts with fear. And fear is the most contagious disease you can imagine; it makes the virus look like a piker.

Buffet noted that in 2012, to save the euro, Mario Draghi, then head of the European Central Bank, declared that the ECB would do “all it takes.” On March 23, 2020, the U.S. Fed moved to prevent the freeze-up on the markets and “it sort of did whatever it takes, squared, and we owe them a huge thank you,” added Buffet.

Dow gyrations

The crisis was due in part to many corporate chieftains going for greed over prudence in recent years. They took our financial system to the brink. But, first some numbers:

• The Dow Jones stock market index hit an all-time historic record of 29,551 on February 12, 2020.

• Then, the coronavirus emerged and on March 9 the DJIA took a dive of over 2,000 points and it continued to fall, down to 18,321 on March 23.

• That phenomenal decline in just a handful of weeks was when the Fed made its move and the result.

• The DJIA is currently at 23,247.

The Fed moved with extraordinary speed to provide cash to the credit markets, taking its balance sheet up 12.4% in the week to March 26 to total above $5 trillion for the first time in its history.

The weekly Fed report shows that by May 7 the balance sheet had expanded by more than $1.5 trillion since the end of March to now total $6.7 trillion.

Many analysts on Wall Street believe that the Fed will be willing to boost that balance sheet to $10 trillion this year, if that is what it takes to sustain the financial system. It will also enable U.S. corporations to borrow all they need to steer clear of bankruptcy.

Business wisdom…

This rescue action comes on top of an earlier, truly grotesque favor that Trump and his Republican Party friends in the Congress provided to business – the giant tax cuts in 2018.

A few business leaders took the money they saved on taxes and, like Buffet at Berkshire Hathaway, put it in their reserves just in case the upwardly mobile economy turned sour. Buffet told his shareholders that right now his company has cash reserves of around $124 billion.

vs. business greed

However, many U.S. corporate chiefs used the Trump tax cuts to raise their corporate dividend payments to their shareholders and to buy back their shares in the stock market.

Their calculus is simple: By reducing the number of their companies’ shares outstanding, they boost their corporate earnings-per-share, which supports the stock price — and hence the C-suite’s compensation.

That this good stock price performance is often unrelated to “real world causes” – such as sales and profit increases – does not matter. The U.S. corporate world has, for a long time already, heavily depended on financial engineering.

When stock repurchases come to haunt U.S. corporations

The problem, of course, is that the hyperactive and widespread practice of pursuing stock buy-backs (and borrowing cash in an era of very low interest rates to do so) can produce serious problems.

This happens when customer demand for goods and service suddenly collapses, the economy goes into a lockdown and banks start to worry about the prospective solvency of their corporate clients.

Will all Americans benefit from the Fed’s largesse?

The Fed’s actions have resulted in ensuring that the banking credit lines are now wide open. Corporations find they can access the bond markets big time. Boeing alone, which has a mountain of problems, recently raised $25 billion in the markets.

A crucial issue relates to how U.S. corporations will now use the cash they can access. Ideally, they will use the funds to maintain employment and so relieve most Americans of the economic anxiety that the pandemic has created.

One can only hope that many corporations will in fact act quite responsibly. One positive indication is that some major airlines, for example, have publicly announced programs to supporter their employees.

Bad apples remain

Alas, some corporations will assuredly buy-back more of their shares and find ways to boost their own incomes and those of their shareholders.

The U.S. media is watching. Over time, corporate bosses who take the latter course may well be hammered publicly.

To be sure, President Trump will not be among those critics. Instead, he will continue to boast, as he did after the vast tax cuts in 2018, that it was him (and not the Fed) who has made the rich richer.

Suffice it to say that playing such corporate insider games does not work in Europe. There, the Commission’s number two, Margrethe Vestager, has moved to block state aid if the money is used for dividend payments, stock buy-backs or executive bonuses.


The current U.S. stock market upsurge and the accompanying GDP nosedive show in what altered states the U.S. economy is currently operating. One would usually expect that these two economic forces move in tandem, not in opposite directions.

The almost grotesque divergence between the U.S. stock market and the country’s real economy underscore dramatically just how unequal the country has become.

This United States is now a country where, according to the Fed, more than 50% of all U.S. households together own less than 1% of the nation’s wealth.

Historical footnotes: The day that didn’t make the history books

We remember the crashes:

• “Black Thursday” on October 24, 1929 – the first of several days that produced the Wall Street Crash.

• The “Black Monday” of October 19, 1987, when the Dow Jones Industrial Average (DJIA) plunged 22.6%

• September 15, 2008 when Lehman Brothers filed for bankruptcy and so triggered what came to be known as the “Great Recession.”

• March 23, 2020 could have been such a day, but it wasn’t. Before long, we may all come to understand that this was the day when the Fed saved the global financial system.

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About Frank Vogl

Frank Vogl is co-founder of Transparency International and author of Waging War on Corruption: Inside the Movement Fighting the Abuse of Power. [Washington D.C., United States]

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