AAII Survey: What Members Think About the Fed's Coronavirus Response

The coronavirus pandemic has upended American markets and economy, in addition to changing every aspect of our daily lives. In response, Federal Reserve is taking drastic steps to keep money flowing throughout the financial system. It has cut interest rates to near-zero, introduced a huge bond-buying program, revamped a crisis-era emergency lending program to ease the flow of credit to businesses and households and enacted major backstops in an attempt to restore order to Wall Street’s volatile inner workings. The Fed also said it would offer emergency loans to money market mutual funds, backed by $10 billion from the Treasury Department, following a similar lending program for banks also established this week. Such efforts could keep credit flowing. But some call for the central bank to do even more in the days and weeks ahead. We wanted to hear what AAII members think about the Fed’s response to the coronavirus pandemic.

We asked our members about their top issues with the following question:

Do you agree with the various actions that the Fed has been taking in response to the coronavirus pandemic?

Here are the results:

Nearly 2,600 members participated in this survey.

Of the 2,570 responses we received, a majority of respondents (56%) stated that they agree with the actions the Fed has taken. This compares to 23% of respondents who stated that they are unsure if they agree with the central bank’s response and 21% of respondents who disagree with the Fed’s actions.

Follow-Up Special Question

More than a decade after the financial crisis, at a time when experts agree that the central bank’s 2008 efforts helped prevent the U.S. from experiencing a second Great Depression, the Fed is still regularly blasted in some quarters for its efforts to rescue banks. But the coronavirus crisis is fundamentally different. The financial crisis was a growth slowdown that imprudent risk-taking magnified into a painful economic shock. This time, a real-world shock is instead spilling into the financial system and breaking its gears. We aimed to explore more about why AAII members feel the way they do about recent Fed actions.

We followed up our poll with: 

What specific Fed action do you agree/disagree with most, and why?

Of the nearly 250 responses we received, 35% specifically stated that they disagree the most with the Fed’s decision to cut interest rates to zero. Rationale included concerns of heightened inflation and a lack of future ammunition to combat market weakness. Twenty-eight percent of respondents said they most agree with the Fed’s efforts to bolster liquidity via purchasing Treasury and other securities. Many within this group cited the need for consumers to have access to loans if needed and concerns that many banks will be insolvent if the Fed did not act. Additionally, 26% of respondents stated that they disagree specifically with the Fed’s decision to lend directly to corporations via bond purchasing, citing the need for greater individual assistance and the stipulation that borrowers will be unable to pay dividends. Finally, 11% of respondents said they agree the most with the actions the Fed has taken to support the working class and small businesses. Notably a majority of respondents, regardless of opinion on the Fed’s actions, stated that they were concerned with the national debt levels and the government’s ability to repay its obligations in the future.

Here is a sampling of the responses we received to the follow-up special question:

• “Both the Fed and Congress seem to worry too much about the stock market and large corporations, not enough about the people at the bottom. I think most actions taken on all fronts should be to help those who are struggling to pay rent, buy groceries, etc. They will spend whatever they get and that will create demand.”

• “Buying Treasury securities makes sense because the Fed is probably the only buyer willing to accept such low interest payments. Buying the mortgage securities comes across as bailing out the financial industry again.”
• “I agree with the unlimited bond purchases in order to provide the liquidity that business will need to get through the effects of the virus on the economy. I also agree with the interest that will allow businesses and the public to obtain more favorable loans, although as a saver it doesn’t do anything for me other than further push my returns below the inflation rate.”
• “I agree with their actions being FAST.”
• “I agree with everything they have done so far. We need to throw as much money as needed to help small and large businesses survive. If we don’t do this millions of jobs will disappear. I fear if we don’t do this there will be much more social unrest.”