Stock Market Drops This Morning
JIM SCIUTTO, CNN ANCHOR: We continue to watch the markets. They're still well down this morning. This is the Dow Jones Industrial average there, down 5.5, close to six percent this morning, although off, so far, its lowest levels.</s>POPPY HARLOW, CNN ANCHOR: Yes. It's right off the lows of the morning. Let's get straight to Richard Quest. Richard, I just want to -- could use your help giving some perspective to people. Why is this so different from 2008?</s>RICHARD QUEST, CNN EDITOR-AT-LARGE: Oh, one major, major reason. If you think of the economy as a house, in 2008 --</s>HARLOW: Burning.</s>QUEST: -- the -- well, it was burning, it was the rot that set in. But the rot had set in in the foundations of the house.</s>SCIUTTO: OK.</s>QUEST: The banking system. The banking system was rotten, and therefore the house was on shaky foundations and therefore it started to fall apart. The house -- the foundations are strong, bank capitalizations at all- time high, the U.S. banks are amongst the best capitalized anywhere in the world. There was no issue, question or structure of a banking crisis, either in the U.S. or large parts of Europe except for Italy.</s>SCIUTTO: OK, so that's on the positive.</s>QUEST: Yes.</s>SCIUTTO: But the real economic effect here, that seems to be what's concerning the markets, right? Is that if planes are empty, airlines aren't making money. If ships are empty, shipping companies aren't making money. If people -- you know, if the supply chain in China is disrupted as it is, then companies can't produce and sell what they need to.</s>QUEST: The good side, it's not 2008. The bad side, this morning, we entered a new phase. The drop in the price of oil was the catalyst. And I'll tell you what, first glance, viewers quite rightly would say, hang on, dropping the price of oil, that's good. Heating oil's less, cost of fuel, manufacturing. That's true. But that drop in the price of oil is because it's predicated on chaos in the Middle East, and the oil markets and a dramatic loss of -- of demand. People don't want as much oil. What worries me most now -- and several economists have been writing about this --</s>HARLOW: Yes.</s>QUEST: -- there comes a tipping point in any crisis, where the sheer amount of stuff -- economic dislocation is so great, that you can't avoid a recession or something like it. And we're very close to that point. I don't -- I would say now, we are -- a recession in the United States is still not likely -- or it's still not probable, but it's becoming more likely.</s>HARLOW: OK. Let's talk about what the Fed can do right now in the United States. Rates are so low, there's not a lot more room to cut. And the White House, our John Harwood is just reporting a senior administration official says that they are considering stimulus, and Congress is coming up with a lot of ideas.</s>QUEST: Right. Let's go -- let's look at what the Fed can do.</s>HARLOW: Sure.</s>QUEST: The Fed has two roles here. The first of all is, lowering interest rates by maybe another 25 basis points or 50 basis points. I promise you now, that will do no good.</s>HARLOW: It's already baked in.</s>QUEST: Not only is it baked in, it doesn't have any -- who wants to go and buy anything or do anything -- the only thing that might help is for those of us who have got fixed-rate mortgages -- but many of us have got fixed-rate mortgage at low levels to start with. So let's put that to one -- because rates have been so low for so long. But the second role of the Fed is within the financial plumbing. If markets seize up, if the money markets, if banks lose trust from each other -- which I don't think's going to happen -- then the Fed can flood the market with intermarket and intraday liquidity, that's a really important point. In terms of what the government can do, well, you're looking at tax cuts to keep people spending, you're looking at relief for the airline industry on taxes, to help them through their woes. You're look at generally creating the pump-priming stimulus. But also, the U.S. is running a trillion --</s>SCIUTTO: I was just going to say. Just as interest rates are already low --</s>QUEST: Yes.</s>SCIUTTO: -- less room to cut, the U.S. is already in enormous debt situation because you've had tax cuts before --</s>QUEST: But that should not --</s>SCIUTTO: -- all this stuff costs money.</s>QUEST: But that should not worry you in a crisis. When the house is on fire, you don't worry about where the fire hose is coming from.</s>HARLOW: Fair enough --</s>SCIUTTO: Fair point.</s>HARLOW: -- but we shouldn't be in this position now, with debt and deficits where they are, when we come into a crisis.</s>SCIUTTO: That was the criticism then.</s>HARLOW: Thank you, Richard.</s>SCIUTTO: Richard Quest, always good to have you on. We know we're going to keep talking to you as we follow this. Sixteen people linked to a nursing home in Washington State, they've now died from the coronavirus. Dozens more there have been hospitalized. We're going to have the latest. This is one of the early places that the virus went to.