ARI SHAPIRO, HOST:
The Federal Reserve is waging an unprecedented and historic effort to prop up the economy right now. It's doing this by flooding the nation with trillions of dollars. But that doesn't necessarily mean all the money is going to the right places. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: When the history of the COVID-19 crisis is written, it may turn out that the Federal Reserve did more than anybody else to keep the economy from collapsing.
SARAH BLOOM RASKIN: It has taken what were already extraordinary, exceptional, unusual, unconventional tools and has expanded them even further.
ZARROLI: Sarah Bloom Raskin is a former Fed governor. Just as the lockdowns began, the Fed cut interest rates to zero for the first time since the Great Recession. Then it did much more. It's agreed to lend money to almost anyone who needs it - Main Street businesses, city governments, big corporations.
MARCUS STANLEY: This is almost a fire hose of money, really. It's (laughter) not necessarily that targeted.
ZARROLI: Marcus Stanley of Americans for Financial Reform, a coalition of consumer and labor groups, criticizes the Fed for attaching very few conditions to the loans. Companies can use the money however they want.
STANLEY: You could sell a bond to the Fed and turn right around and use that money to buy back shares and basically transfer that money to your shareholders and executives.
ZARROLI: Stanley says even deep-pocketed hedge funds and private equity firms can borrow money through the companies they own without ever having to pay it back if they fail.
STANLEY: This could potentially lead to some of the wealthiest people in our society basically absconding with some of this loan money.
ZARROLI: The Fed's willingness to throw so much money around has sent a message to investors that it stands ready to bail out the financial markets, and this has had an electrifying effect on Wall Street.
Gary Richardson of UC Irvine is a former Fed historian.
GARY RICHARDSON: The U.S. stock market was falling very rapidly at the beginning of this COVID contraction. But once the Fed got into the game, supporting the economy and pulling out all the stops, the stock market has gradually recovered.
ZARROLI: Some of the companies borrowing money are using it to pay workers, but they don't have to. The theater chain Cinemark borrowed $250 million in April with the Fed's backing. Then it laid off 17,500 workers. One of them, Thomas Beck (ph) of Redwood City, Calif., worked in the box office. He misses the camaraderie of customers and co-workers. Beck has heard that employees will be called back.
THOMAS BECK: We were hopeful that within a few weeks we'd be back in the theater. It's gone a little bit longer.
ZARROLI: There's nothing illegal about how companies are spending the money they get, but former Fed Governor Sarah Bloom Raskin says it's leading to a lopsided recovery.
BLOOM RASKIN: We're going to likely end up with an economy that is not recovering at the same rate. So people who own stocks and bonds - those people will recover, will do better quicker than, say, small-business owners.
ZARROLI: Raskin says the Fed had to act with unimaginable speed, crafting untried solutions on the fly. So far, at least, its efforts have managed to prevent the financial markets from collapsing. The benefits just haven't been spread around evenly.
Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.