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Why the coronavirus crisis is different than 2008: Fmr. Treasury Official

Mary Miller, Former Treasury Under Secretary & Candidate for Mayor of Baltimore, joins Yahoo Finance's Seana Smith to discuss what the recent $2 trillion COVID-19 economic stimulus bill means for Americans at the federal, state and local levels.

Video Transcript

SEANA SMITH: At this point. We have a $2 trillion aid package that was just passed by the House, is expected to save jobs and also bail out companies in need. State and local governments, of course, are also implementing their own measures. So here to talk more about this we have Mary Miller, former Treasury Undersecretary for Domestic Finance. And Mary, take a look at what, I guess, let's start with the federal government's response so far. I know you helped lead the country's response from the Great Recession. You also worked through the Ebola crisis. What do you think of the Trump administration's response so far?

MARY MILLER: Well, I think on the public health side it's been a bit of a laggard. We came late to this event, and I think we're catching up. I'd say on the financial side, this is a very different crisis than the financial crisis in 2008. It's hitting with just much more speed, and it's much broader across the economy. And I think if I learned anything from my years in the federal government, is the importance of being bold, being very decisive, and then being quick.

And I'd say that bold, I'd give them high marks. This is a big project, $2.2 trillion. Decisive, took a few days, but we got it done. I think the hard part here is going to be speed. Getting these dollars to the local level. And now I'm looking at it from the local level. I'm in Baltimore. But getting these dollars to the people that need them quickly is going to be hard. It is hard for the federal government to face individuals. So I think it's going to take weeks and months in many cases. And we need a strong local response and a state response to try to bridge that period.

SEANA SMITH: Yeah, Mary, I want to go off now just in terms of the state and the local response, because we have budget officials come out and they have said that they have little sense, just in terms of how deep of a hole they might be in because of this Coronavirus, talking from an economic perspective. So how do states and how do cities best prepare for the unknown when they're put in this type of situation?

MARY MILLER: It's really hard. And I think we can't really fathom how deep this is going to be. In the last few days, I've seen forecasts from Johns Hopkins University. We're very fortunate to have that medical institution in our city. But they're now saying that in Maryland, the cases may peak in early July. That's probably further out than people were mentally anticipating. An economic impact of that is going to be really hard, if that's, in fact, the case. These are just forecasts.

So I think the state and the cities are really playing catch-up to try to understand what the financial hit is to their populations, and how they can use resources on hand to help. There's a lot of loan forbearance going on across this city, with banks, with nonprofit lenders just saying, we're going to give you a break here, because we know we need a bridge. The federal aid is coming, and it will get here, but it's going to take time. And I think in the short term, we know that small businesses can't survive.

There was a survey done last week across the country that said 20% of small businesses can't last a month. Another 30% not three months. So we need to fashion these fixes at the local level that can be the bridge. The state of Maryland, for example, has created emergency Coronavirus grant and loan programs. $50 million in grants, $75 million in loans.

They are already oversubscribed. The Small Business Administration created an emergency loan for small businesses, made that available. Their website is crashing daily. So I think the systems are overwhelmed. Our understanding of the true financial impact is still not perfect. And we certainly don't know the duration and severity of the virus. So this is complicated. We're fighting two battles at once. The health care crisis and the economic crisis.

SEANA SMITH: Mary, I want to get your thoughts just in terms of, I was reading your past accomplishments, what you did when you were Treasury Undersecretary. One of the things that, one of the jobs that you had was you helped implement the Dodd-Frank financial reform legislation. So far, in the Trump administration, they started to relax some of those post crisis regulations that were put in place.

And I know that the situation that we are in now is extremely different than the situation that we were in back in 2007 and in 2008. But from your perspective, from an economic perspective is that something that's a little bit alarming to you. I mean, could it put the banks a little bit more at risk than maybe what they have been if some of these regulations had not been rolled back?

MARY MILLER: Well, I think what the Fed and other regulators are trying to do, is take the position that the banks today thankfully, are very well capitalized, and that was an outcome of Dodd-Frank. And now they're saying, let out the seams a little bit to help the real economy, because you can. And I can hope that this isn't a permanent state of affairs. I hope it is a temporary state of affairs.

But they're saying if you are in excess of your capital requirements, now's the time that you could provide some relief across the country and help the macro economy. In general, I'm not a fan of relaxing financial regulations, but I do think we are in quite a crisis moment. And if there is spare capacity in the financial system to help, I think that's probably a good idea.

SEANA SMITH: Mary, you are also running for mayor of Baltimore. And Baltimore, I'm reading through some of the stats here. Fourth of Baltimore's residents live below the poverty line. 6% are unbanked. In a situation like this, how do you help the population of Baltimore?

MARY MILLER: Well, I'm calling for the city to actually use some of its own budget stabilization reserves, a rainy day fund, in effect. Again, to build this bridge assistance, because we are a city that's very vulnerable. And we have people that live either below the poverty line, paycheck to paycheck. I was very glad to see in the federal legislation that there is the ability for the self-employed to get unemployment insurance, because that's a big part of our employment base here.

But I think that the city needs to step up and help the nonprofits that are serving the homeless, that are serving some of the most vulnerable people. Again, with temporary relief, that I believe will be replenished when the federal assistance gets down to the local level. But we just can't wait here. It's a pretty dire situation. I'm talking to servers every day who are facing some pretty incredible circumstances with people that are in need. And we saw just this week that unemployment claims rose by five times the amount of last week. So it's hitting home very quickly.

SEANA SMITH: All right, Mary Miller, former Treasury Undersecretary and candidate for mayor of Baltimore. Thanks so much for joining me today.

MARY MILLER: Thanks so much.

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