The US President has been criticised for his response to coronavirus. Photo / File
The US President has been criticised for his response to coronavirus. Photo / File
At the White House this week, Donald Trump told us that he had assembled "the greatest bankers in the world" to discuss the coronavirus and the economy.
They notably did not include JPMorgan's Jamie Dimon, who was recuperating from emergency heart surgery or Morgan Stanley's James Gorman. Nor did theyinclude any non-American bankers, many of whom, hours later, would be barred from the country altogether.
Not all of them were even bankers. Steve Schwarzman, the head of private equity group Blackstone, was on hand to say the financial system was in "great shape", even as, back in New York, his colleagues were busy ordering portfolio companies to max out their credit lines in preparation for recession.
But even if you quibble with Mr Trump's "greatest bankers" superlative, the assembled executives did have plenty of experience. David Solomon at Goldman Sachs might lack the stature of Lloyd Blankfein, his predecessor during the 2008-09 crisis, but the bigger worry is on the policymaking side.
In 2009, the Treasury secretary was Tim Geithner, former president of the New York Fed. Now it's Steve Mnuchin, former executive producer of the Lego Movie. To be fair, Mr Mnuchin has done other things, including flipping failed banks, if it comes to that.
But it probably won't, largely thanks to another absentee from the meeting. For months now, Mr Trump has treated Jay Powell, the Federal Reserve chairman, like a punching bag. But it was the Fed that has forced US banks to strengthen their balance sheets over the past 10 years to the point where there is little doubt over their ability to survive even a bleak recession.
It is the Fed that has acted decisively to cut rates and pump trillions of dollars into short-term funding markets to ease conditions in US financial markets. And it is the Fed that will almost certainly act again at its meeting next week.
During this week's White House meeting, Ken Griffin, the boss of trading house Citadel, weirdly praised Mr Trump's handling of the outbreak as a "fantastic job". But his real praise was directed at the Fed's actions, noting that they gave Americans "the opportunity to buy their first house — or a new house for their growing families". Mr Griffin is experienced in this area. Last year he bought a £95m mansion in London and a $238m penthouse by Central Park. Rate cuts must really help the mortgage bills.
Brian Moynihan of Bank of America also indirectly highlighted the efforts of the Fed. He referred four times to being well capitalised. Undoubtedly true: but is it the Fed that has forced BofA and other large banks to bolster their balance sheets against disaster over the past decade, conducting rigorous stress tests.
VirusFacts2
There are limitations to the Fed's power. It might be able to ease credit sufficiently to stop some indebted companies collapsing but it cannot prevent the economy from slipping into recession.
On the economic prospects, the bankers' happy noises sounded off-key. "We're still seeing people spend money," said Mr Moynihan. "We're still seeing people go out. Small-business loans are continuing to grow. Auto loans are growing. Mortgage loans are obviously very strong."
If they are as great as Mr Trump says, then Mr Moynihan and his colleagues will be preparing for those positive indicators to reverse as the virus sweeps across the US.
