March 17, 2020
Bill Priest, Founder, CEO and co-CIO of Epoch Investment Partners has put pen to paper to discuss the crisis currently influencing global economies and world markets – COVID-19. In this paper, Bill compares what was done to get through the GFC of 2008 and outlines his reasons for how this time, a different approach is required.
The Global Financial Crisis of 2008 was a gigantic worldwide liquidity crisis that morphed into a recession but was largely treatable by a monetary policy with fiscal support. Novel monetary and fiscal solutions, Quantitative Easing (QE) and the Targeted Asset Repurchase Program (TARP) in particular were put into place in the US.
QE was used initially to solve the overwhelming illiquidity issue of the moment. No free-market solution would have worked without untold misery of unemployment and bankruptcies. The banking system could not have survived. Our federal government purchased certain assets that were killing private sector holders because of their illiquidity and placed those securities on a balance sheet that possessed an infinite maturity—that of the federal government. These policies worked, and the US taxpayer even made a profit on TARP holdings.