“The Fed’s primary motivator in creating these lending facilities is not protecting workers,” U.S. Representative Katie Porter, a California Democrat on the Financial Services Committee, said in an email interview. “The American people should not be asked or expected to loan $500 billion with no strings attached.”

A letter, circulated by the Wall Street watchdog group Americans for Financial Reform and published May 27, urged Congress to attach conditions favorable to workers to any Covid-19-related rescue programs. It was signed by 45 organizations, including labor unions and religious and environmental groups.

Without provisions for employees, “the credit assistance will tend to boost financial markets, but not the broad economic well-being of the great majority of the population,” Marcus Stanley, Americans for Financial Reform’s policy director, said in an interview.

Stanley said the corporate-lending programs don’t have to require companies to keep or rehire workers, but they could give priority to those that do.

In its legislation, Congress did express an intent that workers benefit from taxpayer-funded assistance, but it left a lot of the details to Powell and Treasury Secretary Steven Mnuchin.

“Our No. 1 objective is keeping people employed,” Mnuchin said during a May 19 Senate Banking Committee hearing after Senator Elizabeth Warren, a Massachusetts Democrat, accused him of “boosting your Wall Street buddies” at the expense of ordinary Americans. “What we put in the Main Street facility is that we expect people to use their best efforts to support jobs,” Mnuchin said.

The phrase “best efforts” echoes the original terms for the Main Street program, which required companies to attest they’ll make “reasonable efforts” to keep employees. The wording was subsequently changed to “commercially reasonable efforts,” which Jeremy C. Stein, chairman of the Harvard University economics department and a former Fed governor, called a welcome watering-down of expectations that the central bank would dictate employment policies to borrowers.

Emergency Help
“It was smart of them to weaken that,” Stein said. “You can’t expect companies to borrow to pay employees.”

Companies might not seek emergency help if too many strings are attached to the aid, Stein said. Others question the practicality of tying workers to their companies as economic realities shift.

“To go to great lengths to make companies keep employees that they don’t need, in light of new expectations that economic activity will remain below pre-Covid levels for a long while, doesn’t make sense,” said Mark Carey, a former Fed staff member and now co-president of the Risk Institute of the Global Association of Risk Professionals.