Slate Money – “Too Big to Be Small” (April 11, 2020)

Hosts: Felix Salmon (Axios), Emily Peck (HuffPost), Anna Szymanski (Reuters Breakingviews)

Episode Overview

This episode (“Too Big to Be Small”) dives into how the COVID-19 crisis has upended assumptions in finance, economics, and daily life. The hosts reflect on how their own beliefs and priors have been shaken, discuss the Federal Reserve's unprecedented interventions, debate the effectiveness and consequences of various rescue programs, and consider the broader impact on employment, cities, and markets. The recurring theme: In a crisis of this scale, everyone’s certainty has been challenged, and institutions are rewriting their playbooks in real time.

Key Discussion Points & Insights

1. The “Bayesian Crisis”: How Certainty Has Collapsed

[00:25 – 05:18]

• Felix Salmon introduces the concept of a “Bayesian crisis,” suggesting that if you haven't changed your mind about anything during this crisis, you haven’t been paying attention. The COVID shock has made even strong convictions feel less certain.
  • “You shouldn't believe anything as strongly so as to withstand the force of this particular crisis.” (Felix, 02:34)
• Anna Szymanski: The crisis has exposed how fragile systems are, leading her to question past attitudes toward industries like airlines and to see the growing need for more robust regulation.
  • “We've just seen how incredibly fragile things are in a level that I think none of us fully appreciated...” (Anna, 03:04)

Memorable Exchange

• Anna: The financial system needs smart regulation – not just more or less regulation (03:58)
• Felix: The Fed’s liquidity playbook has become clear thanks to the crisis, with fast, forceful action (04:36)

2. Changing Minds About the Federal Reserve

[05:18 – 10:53]

• Felix explains how he underestimated Jay Powell. After Yellen’s departure, he’d worried Powell and his “B team” would falter. Instead, “Powell turns out to have been even better than Yellen...he has been basically the only really competent part of the federal government and has done everything right.” (Felix, 06:41)
• Anna raises concerns about the Fed’s aggressive interventions, noting that long-term effects remain unknown, and that a “Powell put” could create dangerous incentives for risky behaviors (08:01).
• Felix: Powell focuses on employment and liquidity, not rescuing stock prices—a distinction from the “Greenspan put.”

3. Political Priors: Crisis as Rorschach

[10:53 – 13:36]

• Emily Peck notes most people’s core political beliefs have only been reinforced, not changed, by the pandemic. People use the crisis as further evidence for preexisting views on the safety net, healthcare, sick leave, etc.
  • “This crisis is like some kind of Rorschach test...instead of having their minds changed, they're using the crisis to have a new reason for their old way of thinking.” (Emily, 11:01)
• Emily shares personal shifts: newfound appreciation for doomsday prepping and increased doubts about dense city living (12:36–13:36).

4. Humility in Prediction & The Future of Cities

[13:36 – 15:20]

• The hosts admit to underestimating the virus and its economic effects—a lesson in the limits of forecasting.
  • “I think this is important going into an age of climate change...we should expand what is in the realm of possibility.” (Anna, 14:33)

5. The Main Street Lending Facility – “Too Big to Be Small”

[15:56 – 24:31]

• New Fed program targets mid-sized firms: “too big to be small, too small to be big.” These are loans, not grants, generally for companies with up to 10,000 employees; minimum loan: $1 million (17:18).
• Debate about effectiveness: Unlike forgivable PPP loans, these are not designed to protect payrolls directly, likely helping most with survival rather than job retention.
  • “I worry it's not going to have a lot of effect on employment.” (Felix, 19:00)
  • Emily: “I think the retention ship has sailed. 16 million people have filed for unemployment in just the past three weeks.” (20:48)
• Goal now is to keep companies solvent so they can rehire post-crisis, even if fewer employees (23:27).

6. Municipal Bonds & State/Local Bailouts

[24:31 – 27:16]

• Fed is now backing up to $500B in loans for states, counties, and cities, addressing core cash crunches (25:57):
  • “Municipalities have faced this massive solvency problem…” (Felix, 24:44)
  • Emily: “I think this is a really big deal. It's really important right now because these locations are struggling a lot.” (25:19)
• Felix notes: The Fed isn’t taking the risk; Treasury is. He credits Steve Mnuchin for quietly accepting this risk on behalf of the government (26:14).

7. Fed’s Expanding Role – Where’s the Line?

[27:16 – 31:42]

• The Fed is now supporting nearly all corners of credit markets, including “fallen angels” (companies downgraded to junk status).
• Anna is uneasy: Protecting market functioning is one thing, but supporting high-yield/junk bonds blurs the line between liquidity and moral hazard:
  • “I think this is one of the first times where I've started to kind of question whether the Fed is crossing that line…” (Anna, 29:33)
• Felix: The distinction is perhaps moot—the aim is to maintain liquidity and prevent systemic collapse, even if asset prices rise as a byproduct (29:47).

8. The Astonishing Rally in “Stonks”

[31:42 – 38:25]

• Despite economic collapse, the stock market has soared—up 25% in 12 sessions, after a 35% drop.
  • “The stock market went up by 25% in 12 sessions. It was quite astonishing.” (Felix, 31:45)
• Anna: Some of the crash and rebound were technical, related to forced selling and market dynamics—then stabilization when forced selling ended (32:53).
• Felix: The rebound only makes sense if you expect a rapid “bounce back” to normal. He suspects the explanation lies in the nature of the stock market itself: It reflects big companies, which are best able to weather the storm and, thanks to crisis, may increase their market share as smaller competitors fail (36:07–36:28).
  • “The big companies are going to have a competitive advantage coming out of the crisis because all of their smaller competitors have gone bust.” (Felix, 36:08)
• Emily: “Where the pain has been...all the mom and pops going out of business...none of that’s priced into the stock market.” (36:28)

Notable Quotes & Memorable Moments

• Felix Salmon:

  “You shouldn't believe anything as strongly as to withstand the force of this particular crisis.” (02:34)
  “Powell…has been basically the only really competent part of the federal government.” (06:41)
  “If you haven't changed your mind on something, then you haven't really been paying attention.” (00:54)

• Emily Peck:

  “This crisis is like some kind of Rorschach test...instead of having their minds changed, they're using the crisis as a new reason for their old way of thinking.” (11:01)
  “I think the retention ship has sailed...16 million people have filed for unemployment insurance in just the past three weeks.” (20:48)

• Anna Szymanski:

  “We've just seen how incredibly fragile things are on a level that I think none of us fully appreciated beforehand.” (03:04)
  “When you're talking about [the Fed] stepping into the high yield market...I think that's a little different because there's real credit risk here.” (28:16)
  “It is very hard to unwind these things [extraordinary policy measures]...as we've seen with QE and exceptionally low rates.” (31:03)

Important Timestamps

• 00:25 – Main theme and “Bayesian crisis”
• 06:41 – Rethinking the competence of Jay Powell and the Fed
• 11:01 – Political beliefs and crisis as Rorschach test
• 13:36 – Changing views on cities and personal behaviors
• 15:56 – Main Street Lending Facility and its implications
• 24:31 – Municipal bond relief and government support
• 27:16 – Limits of Fed intervention: junk bonds and risk
• 31:42 – Stock market rally and what it does (and doesn’t) represent

Numbers Round & Global Perspective

• Anna: $15 billion – Latin American countries trying (with little hope) to pool funds for medical supplies. Saddest quote: “Well, it’s worth a try.” (Anna quoting Peru’s president, 38:35)
• Felix: $141 million – Amount Wimbledon will receive for having pandemic insurance (rare among sporting events). (Felix, 39:36)
• Emily: 63% – Share of Virginia’s jobless claims filed by women in late March, reflecting the “she-cession” nature of the downturn. (41:05)

Tone and Takeaways

The conversation balances expertise, humility, and dry wit. The hosts question their own prior assumptions, praise institutions (and people) that exceeded expectations, and express skepticism about narratives of quick recovery. They agree that COVID-19 has made all economic forecasting more fraught and has exposed—and perhaps worsened—underlying inequalities in the system.

By the end, listeners are left with a clear sense: These are unprecedented times, and the Fed, Treasury, and policymakers are improvising on a massive scale—with no guarantee that the long-term outcomes will be as desirable as the short-term rescues. And, above all, even those best-equipped to interpret events are finding their priors upended—just like the rest of us.