Written by rjs, MarketWatch 666
The news posted last week about economic affects related to the Wuhan coronavirus 2019-nCoV, which produces COVID-19 disease, has been surveyed and some articles are summarized here. Although it is obvious that there will be some economic impact in China, the extent is not yet clear. (Picture below is an empty street in Beijing from The South China Morning Post 19 February.) Articles are primarily related to the U.S. political and economic impacts. News items about epidemiology and other medical news for the virus are reported in a companion article.
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Federal Reserve slashes rates to zero, restarts QE in emergency Sunday announcement – The Federal Reserve made an emergency announcement Sunday afternoon by announcing that it would be cutting interest rates to zero for the first time since the financial crisis.The central bank said it will use its “full range of tools” to battle the economic impacts of the novel coronavirus and announced quantitative easing in the form of at least $700 billion of asset purchases. “The actions we have announced today will help American families and businesses, and indeed, our entire economy weather this difficult period and will foster a more vigorous return to normal once the disruptions from the coronavirus abate,” Fed Chairman Jerome Powell said in a statement.Powell said the U.S. economy appeared to have “strong footing” ahead of the coronavirus outbreak, but said the negative impact to key industries like travel, leisure, and hospitality “means that the second quarter [of growth] is probably going to be weak.”The Fed chairman said Congress and the White House will ultimately have to address the health implications of the crisis, adding that only fiscal policy can “direct relief to particular populations and groups.”Powell reiterated several times in a Sunday night press conference that the actions are designed to motivate banks to support businesses, as quarantines around the country raise concerns that businesses will have to close their doors and possibly lay off workers. Powell said lowering rates to zero “will matter to borrowers who will get some relief from our cuts, but they’ll matter a lot more when the economy begins to recover.” The Federal Reserve made an emergency announcement Sunday afternoon by announcing that it would be cutting interest rates to zero for the first time since the financial crisis.The central bank said it will use its “full range of tools” to battle the economic impacts of the novel coronavirus and announced quantitative easing in the form of at least $700 billion of asset purchases.
Fed Cuts Rate to Zero in Emergency Meeting – FOMC statement:The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected. The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. This action will help support economic activity, strong labor market conditions, and inflation returning to the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals. To support the smooth functioning of markets for Treasury securities and agency mortgage-backed securities that are central to the flow of credit to households and businesses,over coming months the Committee will increase its holdings of Treasury securities by at least $500 billion and its holdings of agency mortgage-backed securities by at least $200 billion. The Committee will also reinvest all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Open Market Desk has recently expanded its overnight and term repurchase agreement operations. The Committee will continue to closely monitor market conditions and is prepared to adjust its plans as appropriate.
The Fed Backfires: Shock and Awe Rate Drop to 0%, Emergency Bond Buying Program Leads to Limit Down Drops in US Equity Futures as Real World Coronavirus Damage Worsens — Yves Smith- Investors reacted to the Fed’s unprecedented Sunday moves, of dropping the Fed Funds rate to 0%, launching a new $700 billon Treasury and mortgage bond buying program, increasing the size of dollar swap lines, and other measures, with revulsion. S&P futures and the Dow mini went to limit down in 15 minutes. The central banks signaled desperation and lost credibility as well as firepower. And the timing, coming right after Trump said he had the authority to remove the Fed chairman, had the look, whether true or not, of the central bank capitulating to the President’s demands. What is the point of cutting interest rates when they are so low as to not have a significant impact on funding decisions? Mr. Market has worked out that central bankers are pushing on a string and what the world needs is more demand to replace the massive deflationary shock of many people and businesses suddenly having or facing the high odds of a hit to their incomes. That means massive spending programs. Even Mark Zandi, whose role as a talking head is to put a happy face on distressing data, is in Defcon 1 mode. From the Wall Street Journal: “The onus is now squarely on the Trump administration and Congress – there’s no other way out,” said Mark Zandi of Moody’s Analytics. The measures so far will help, he said. “But this is a tsunami. They need something that’s three or four times as large.” Just look at the headlines at Bloomberg:Another big bit of bad news came out of China. Even though they claim to have gotten their new coronavirus case rate down to effectively zero, the economic cost so far is much higher than analysts had cheerily predicted. From CNN: Retail sales plunged 20.5% in the January-to-February period from a year earlier, much worse than the forecast 0.8% rise by analysts polled by Reuters, according to the National Bureau of Statistics on Monday. Industrial output also fell 13.5% during the same period, while fixed asset investment plunged 24.5%, both widely missing estimates. And as many experts have pointed out, it isn’t as if business in China will get back to normal all that quickly. The magnitude of the fall in China gives the rest of the world a forecast of what it faces when other economies shut down to stop coronavirus spread. Big corporations see the financial squeeze coming and are trying to get ahead of it.Banks have better capacity to lend than in 2008, but in the US, for a very long time, banks loans have been a diminishing source of funding. They rely more on financial markets: bond issuances, securitizations, commercial paper. Credit lines are a backstop and making serious use of them is a sign of widespread stress. From the Financial Times:
Neel Kashkari Defends Fed’s Actions After 12% Market Rout, Says Negative Rates “Not Off The Table” -Neel Kashkari took to CNBC this morning to not only display his ignorance of the basic laws of economics and finance, but also of epidemiology and medicine. Who knew Neel was such a non-expert in so many fields?Kashkari, who while the market was rallying spent his days on social media taking shots at the “Zerohedge” and “conspiracy” crowd, is now taking to TV to try and defend the Fed’s “effective” ideas that left the stock market crippled by 12% in one trading session after the Fed took unprecedented stimulus actions, including 150 bps in rate cuts in less than a month and more than $2 trillion in liquidity being injected into financial system. First, Kashkari defended the Fed for panicking and taking drastic action in what could be the very “early innings” of the coronavirus economic slowdown. “The notion we should have saved our cuts for later is a colorful metaphor, but it’s just flat wrong,” he told Joe Kernen. As we know now, the market disagreed, promptly plunging limit down about an hour after the Fed’s action on Sunday night.Kashkari also gave a range of outcomes for the current situation, stating that his base case scenario is a 2001-like recession and his bear case is a 2008-like recession. Clearly clueless about the virus and the measures the rest of the world has taken, Kashkari said a best case would be people staying at home for a few weeks or a few months. So, his prediction for this pullback is somewhere between a totally mild recession that lasts a couple weeks and the worst financial crisis the U.S. has had in almost 100 years.
Nothing to suggest trickle-down monetary policy will suddenly work– Ever since March 15, the Federal Reserve has opened its scant toolkit and hurled everything it could still find into a desperate effort to arm financial markets against a storm of falling knives. It didn’t work. This crisis isn’t in the markets – it’s in the air, on the door knobs and most of all, in the fear that keeps people home and cuts off hundreds of millions of Americans from the paychecks on which they counted only last week. Trickle-down monetary policy has worked no better than trickle-down fiscal policy since 2010, giving the U.S. the slowest recovery of modern times, and the most inequality in decades that grew far worse faster than ever. More of the same makes matters worse. Even the markets now knowthat trillions from the Fed aren’t enough. The only policy that will make a meaningful difference is to flood households – not financiers – with urgently-needed liquidity. The Fed can and must open what I call a “family financial facility” that sends billions coursing through the financial system straight to households and small businesses before unpaid bills throw even the soundest financial institutions from illiquidity into insolvency. Although the 2010 Dodd-Frank Act curtailed the Fed’s emergency-liquidity powers, it has ample and unquestionable legal authority to open a family financial facility. The law bars the Fed from saving just one institution and from doing so without Treasury’s agreement. But the Fed must use its powers (under Sections 13(3) and 13(13) of the Federal Reserve Act) to send funds through retail-focused financial institutions that are earmarked for families and small businesses that are catapulting into extremis due to the coronavirus. These funds can be offered at the same 25 basis-point rate the Fed is now charging banks for discount-window access. They should then be immediately converted into credit-card holidays, small-dollar loans, month-by-month mortgage forbearance and short-term, small-business financing for bills such as rent. This facility must hurl trillions into the breach. There isn’t time to build the infrastructure needed to ensure that all borrowers are deserving borrowers, so lenders will need to rely on attestations. There isn’t time to build the products banks don’t now offer to reach lower-income and small-business borrowers, so nonbanks must join the fight. And there isn’t time for the Fed to rewrite the rules to give banks carefully-crafted capital and liquidity rules that take these new obligations into account. The Fed will have to trust the banks; and banks are going to need to deserve that trust. Nonbanks outside of the reach of the Fed can and should be required to post enough collateral at the Fed to ensure that they too act in the public interest. The family financial facility isn’t helicopter money – a new form of quantitative easing that infringes on fiscal policy. In it, the Fed is providing what all central banks are chartered for: emergency liquidity that staves off eviscerating insolvency. U.S. fiscal policy must quickly craft as much of a safety net beneath vulnerable households and small businesses as it can through long-overdue paid sick leave and other supports. But by the time Congress acts, the wellbeing of many households will be too far gone.
What else can the Fed do to blunt coronavirus impact? – – The Federal Reserve made clear Tuesday that it was willing to go further than cutting interest rates to mitigate the economic fallout from the coronavirus.But following its revival of a facility backing commercial debt and the establishment of a separate credit facility for primary dealers, the question still looming over the Fed is just how far is the central bank willing to go to keep credit flowing to consumers and businesses. “They may have to get creative here because liquidity throughout the system is freezing,” said Mark Zandi, the chief economist at Moody’s Analytics.The commercial paper facility announced Tuesday resembles one the Fed put in place during the 2008-era mortgage crisis. The agency reestablished the backstop under its emergency powers in section 13(3) of the Federal Reserve Act, following criticism that its previous actions to cut the federal funds rate to zero in response to the crisis were insufficient.Yet immediately after the Fed announced the facility, observers were divided between those who see the actions as the full extent of what the Fed can do, and those who believe the Fed may feel compelled to do more.“Our expectation remains that pressure will build on the Federal Reserve to expand its use of 13(3) to ensure there is sufficient credit flowing to businesses and households,” said Jaret Seiberg, an analyst with Cowen Washington Research Group, in a note. Zandi said the Fed could consider launching more credit facilities to help other parts of the liquidity market, such as asset-backed securities. Yet he and several others said the Fed has already flexed its muscle in response to the virus outbreak, and can only do so much.”[The Fed is] running out of room to maneuver here,” said Zandi. “The onus is quickly shifting or has already shifted to the Trump administration and Congress to enact fiscal stimulus.”
Fed Again Announces Extra $500BN Repo To Stabilize Funding Markets – Earlier this morning, when discussing the latest Fed repo injections, which at $189BN between overnight and term repos, seemed insufficient to ease the stress in the repo market where GC repo jumped by 40bps to 60bps this morning…we said that “with no other repos scheduled for today, and the next $500BN 84-day facility not due until Friday, banks may soon find themselves in another funding panic, and the Fed may respond as it did yesterday, with an ad hoc $500BN facility later in the day if funding conditions refuse to ease.”Alas, funding conditions have indeed refused to ease, with the BBDXY surging to new session highs perhaps awaiting the Fed to validate earlier reports that a Fed Commercial Paper facility is imminent, and moments ago – just as we expected – the Fed, which is now literally flying blind and making up liquidity injections on the fly, the New York Fed announced that it would conduct an additional overnight repo operation for same-day settlement today from 1:30 PM ET to 1:45 PM ET. And, as yesterday’s ad hoc operation, this repo operation will be conducted for up to an aggregate offered amount of $500 billion with a minimum bid rate of 0.10 percent. And, as yesterday, the Fed explained that this action “is taken to ensure that the supply of reserves remains ample and to support the smooth functioning of short-term U.S. dollar funding markets.” The problem for the Fed is that these actions have done virtually nothing to facilitate the “smooth functioning of short-term U.S. dollar funding markets”, and the longer the Fed delays in unveiling just what can fix these markets, the greater the dollar shortage will be.
Fed starts emergency program to aid money market mutual funds – The Federal Reserve late Wednesday said it was launching a program to support money market mutual funds as alarm over the coronavirus continues to cause strains in short-term funding markets. The Money Market Mutual Fund Liquidity Facility, established under the Fed’s emergency authority, echoes a version that was set up during the global financial crisis. The Treasury Department will provide $10 billion of credit protection. Separately, the Fed issued a rule early Thursday with the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency that makes a technical change to capital requirements allowing U.S. banks to participate in the new liquidity facility. U.S. Treasury Secretary Steven Mnuchin said in a statement the fund would “enhance the liquidity and smooth functioning of money markets, support the flow of credit to hard working Americans, and help stabilize the broader financial system.” Earlier Wednesday, the Treasury Department had proposed to temporarily guarantee money market mutual funds with taxpayer dollars as part of its coronavirus stimulus plan, according to a document obtained by Bloomberg News. The dramatic late-night step was the central bank’s third emergency lending facility in two days, after the Fed on Tuesday unleashed measures to support the commercial paper market and primary dealers. “Money market funds are common investment tools for families, businesses, and a range of companies,” the Fed said in its statement. “The MMLF will assist money market funds in meeting demands for redemptions by households and other investors, enhancing overall market functioning and credit provision to the broader economy.”
The Lehman Playbook Is Here- Fed Announces Bailout Of Commercial Paper Market – Here’s The Bad News – It was supposed to be announced late on Sunday (recall “Fed Expected To Announce CP Bailout Facility Within Hours Or Risk Money Market Panic“), but instead Powell hoped that the bazooka of QE/ZIRP/FX swaps would be sufficient to ease the funding panic. It wasn’t, and instead, with a 2-day delay which forced countless companies facing a funding shortage to scramble for liquidity and draw down on their revolver facilities, moments ago the Fed announced that, just as we reported earlier, it will establish a Commercial Paper Funding Facility (CPFF) – the same facility that was unveiled during the last financial crisis – “to support the flow of credit to households and businesses.”As the Fed explains…Commercial paper markets directly finance a wide range of economic activity, supplying credit and funding for auto loans and mortgages as well as liquidity to meet the operational needs of a range of companies. By ensuring the smooth functioning of this market, particularly in times of strain, the Federal Reserve is providing credit that will support families, businesses, and jobs across the economy. The CPFF will provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper rated A1/P1 (as of March 17, 2020) directly from eligible companies.And since this is effectively a partial Fed bailout of corporate America, certainly its overnight funding needs, the Fed referred to authority granted to it under Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary, as now that the Lehman playbook is in play, the bailout of Corporate America is suddenly very political. As noted above, this is not a new facility, but was first rolled out on October 7, 2008, right after the Lehman bankruptcy prompted Money Market funds to “break the buck” and a Fed bailout of CP was needed. After its start, the facility quickly saw usage jump to $350BN, before fading to zero over the next year as QE1 took over.
Fed expands reach of new credit facility to muni bond market – The Federal Reserve is expanding its facility backing money market mutual funds to also provide support to the municipal bond market as the economy grapples with fallout from the virus pandemic. The Fed announced the creation of the Money Market Mutual Fund Liquidity Facility Wednesday night among a host of recent emergency measures to preserve the flow of credit to households and businesses that could face financial difficulties as the coronavirus wreaks havoc on communities. On Friday, the Fed said the program will also serve as a backstop for state and local governments through municipal bonds. Through the facility, “the Federal Reserve Bank of Boston will now be able to make loans available to eligible financial institutions secured by certain high-quality assets purchased from single state and other tax-exempt municipal money market mutual funds,” the Fed said. The municipal bond markets have been rocked in recent days as investors have fled the historically low-risk instruments at exactly the same time state and local governments are prepping to issue more debt as the virus shuts down cities. Earlier in the week on Tuesday, the Fed established two other credit facilities to support the commercial paper market and primary dealers to ensure the smooth flow of credit, both administered by the Federal Reserve Bank of New York.
Fed Announces Enhanced Central Bank Swap Lines To Ease Dollar Funding Shortage – With the Fed throwing the kitchen sink at the global dollar funding shortage problem, and failing to make much of a dent on the renewed surge in the dollar, last night we said that we expect even more aggressive swap lines with global central banks to be revealed by the Fed in the coming days in hopes of easing the $12 trillion dollar margin call.That happened moments ago when the Fed announced a new round of “enhanced” central bank swap lines with the 5 big central banks, where the biggest difference from the swap lines announced over the weekend is that the frequency of the swap line will increase from weekly to daily.According to a press release by the Fed, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to further enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.To improve the swap lines’ effectiveness in providing U.S. dollar funding, these central banks have agreed to increase the frequency of 7-day maturity operations from weekly to daily. These daily operations will commence on Monday, March 23, 2020, and will continue at least through the end of April. The central banks also will continue to hold weekly 84-day maturity operations.The swap lines among these central banks are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad. Keep an eye on the DXY or BBDXY to see if the market is impressed by this latest development; the good news is that in kneejerk reaction, the FRA/OIS tumbled by about 8 bps, although it has a long way to go before it normalizes.
Fed’s Balance Sheet Skyrockets to $4.7 Trillion – Pam Martens – The Fed’s H.4.1 report was releasedat 4:30 p.m. today and it shows that the Federal Reserve’s balance sheet has skyrocketed to $4.7 trillion. It also shows that as of yesterday, its repo loans to the trading houses on Wall Street had soared to a total of $441.9 billion outstanding while borrowings from its Discount Window added another $28.2 billion, bringing the combined total to over $470 billion in loans outstanding.Wall Street has been receiving hundreds of billions of dollars a week in assistance from the Fed since September 17, 2019 while struggling Americans have yet to see a dime of assistance to help offset job losses from the coronavirus outbreak. The Fed doesn’t have to wait for a vote in Congress to funnel $9 trillion in cumulative loans to Wall Street. It can create an unlimited amount of dollars electronically at the push of a button. (See related articles below.) Following the 2007-2010 financial crisis and three rounds of Quantitative Easing (QE), the Fed’s balance sheet never exceeded $4.5 trillion. The 2007-2010 financial crisis was the worst Wall Street calamity since the 1930s and the Great Depression. In both periods, the depths of the crash resulted from federal regulators allowing depository banks to be under the same management as high-risk Wall Street trading houses and investment banks. The Congress in place in 1933 clearly recognized the problem and passed the Banking Act of 1933 (Glass-Steagall Act). That legislation created federal insurance on bank deposits and banned Wall Street firms engaged in trading or underwriting securities to own federally-insured banks. The U.S. financial system thrived for 66 years under the Glass-Steagall Act. But the Bill Clinton administration, which was filled with Wall Street cronies, repealed the legislation in 1999. It took just nine years after the repeal for Wall Street to blow itself up in the precise fashion of 1929. Rather than having the courage to stand up to Wall Street’s titans and lobbyists and restore the Glass-Steagall Act, the Obama administration passed hodgepodge legislation called the Dodd-Frank Wall Street Reform and Consumer Protection Act, which seemed to be intentionally filled with loopholes for Wall Street’s mega banks to wiggle through easily.As a result, after receiving a $29 trillion Fed bailout from 2007 to 2010 and hundreds of billions more in taxpayer assistance, Wall Street is back again at the money trough as the country faces a national crisis that demands attention to hardworking Americans, who, through no fault of their own, have lost their jobs, their livelihoods and their health insurance that came with that job.
Treasury Yields Jump After Report White House Mulling 50Y Bond To Fund $1.3TN Stimulus – Amid relentless calls for a massive fiscal stimulus, the market apparently forgot that the stimulus will have to be funded somehow, and that moment came moments ago when Bloomberg reported that the White House is revisiting an idea to issue ultra-long bonds, including 50-year and 25-year bonds, as the source of funding. According to the report Trump advisors are trying to come up with the lowest cost option to taxpayers, and that reportedly include the same ultra-long bonds which Mnuchin just two months ago said there was not market interest for. Bloomberg notes that Trump’s top economic adviser Larry Kudlow liked the idea, and although Treasury Secretary Steven Mnuchin was initially skeptical he has since warmed to it. As a reminder, Mnuchin in January announced plans to issue a 20-year bond in the first half of the year in an effort to lengthen the average maturity of the agency’s offerings, although he nixed speculation that a 50 or even 100-year bond may come as there was no market interest. Mnuchin has twice considered issuing 50- or 100-year bonds. Investors have pushed back at the idea because, in their view, ultra-long bonds could not be issued in a consistent and sustainable manner. It appears that the US will have to push back on investor push back, as that $1.3 trillion stimulus will not fund itself. The news sent yields on 10Y and 30Y Treasuries sharply higher although the move has since reversed…
Fed opens liquidity lines with more central banks – The Federal Reserve established temporary dollar liquidity-swap lines with nine additional central banks, expanding the rapid roll-out of financial-crisis-era programs to combat the economic meltdown from the coronavirus pandemic. The new facilities total $60 billion for central banks in Australia, Brazil, South Korea, Mexico, Singapore, and Sweden, and $30 billion each for Denmark, Norway, and New Zealand. The swap lines will be in place for at least six months. The announcement followed the late Wednesday launch of a Fed facility to support money market mutual funds and comes as part of sweeping emergency measures the U.S. central bank has unleashed to support the economy from the coronavirus. The Fed already has standing swap lines with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank. The expansion of the dollar swap lines allows foreign central banks to meet the needs of companies and financial institutions rushing for dollars as the global payments system undergoes severe strain due to the coronavirus. The Bloomberg Dollar Spot Index has soared the most since the financial crisis in 2008, reflecting enormous demand for the currency. The Fed had swap lines outstanding to 14 central banks in the financial crisis. The dollar pared gains from earlier in the day after the announcement, while currencies such as Australia’s, New Zealand’s and Norway’s received some support following recent declines. The swaps lines were initiated in 2007 as the credit crisis erupted, starting first with the main, developed nation central banks. As pressures on the global system intensified, the Fed expanded the availability to smaller, advanced economies and to emerging markets including South Korea and Brazil. Making dollars available to foreign nations — even if it didn’t cost the Fed — became a point of contention for some in the U.S. Congress. The central bank had to repeatedly defend the action and explain to lawmakers that U.S. taxpayers were not lending foreign nations money and that because these were swaps — not loans — there was no risk of default.
The case for a Fed-PBoC swap line – We wrote yesterday about how the revival of dollar swap lines on far more relaxed terms was by far the most important thing the Federal Reserve has done thus far. However, there are some flaws – chief among them that there is no swap line between the US central bank and its Chinese counterpart, the People’s Bank of China. Anyone trying to understand why that’s so important should take a look at a note published by Pierre Ortlieb, economist at OMFIF, a think tank. Ortlieb’s note ishere. But for the time poor, here’s a summary.The crux of the argument is that many of the sectors hardest hit by the coronavirus outbreak, such as airlines and real-estate development, are also among the most likely to have high dollar-denominated debt burdens. The chart below shows the situation for six of China’s airlines: And here is the total dollar-denominated debt burden: The sharp cuts in the federal funds rate would clearly help these firms in normal times. But with global corporate bond markets under stress, it is easy to see how firms such as these could struggle to roll over their debts. A wave of defaults on dollar-denominated debts will do no one much good right now. China is the most important trading nation on the planet. And trade is overwhelmingly denominated in dollars. So why not grant a swap line? The reason is that the politics of the moment precludes it. As Ortlieb puts it:In the light of China’s ongoing reliance on the dollar, it would intuitively make sense to grant them a dollar liquidity swap line; yet geostrategic pressure not to act in favour of China has precluded this and will continue to do so. He does, however, think that the use of swap lines elsewhere will aid Chinese firms by freeing up the global supply of dollars. And there is always the option suggested by Credit Suisse’s Zoltan Pozsar (and noted here): that the PBoC sells of some of its holdings of US Treasuries and uses the cash to cover any dollar funding difficulties China’s lenders might have. The concern there is that this offsets one of the things the Fed is trying to do through its $700bn-worth of new QE. That is, make Treasuries as cash-like as possible. China is one of the biggest holders of US government debt – and the biggest foreign holder after Japan, with more than $1th worth of Treasuries as ofJanuary. A not insubstantial concern if it begins selling that stock in large amounts, then. The loud cries of swap lines being a “US bailout of the rest of the world” will drown out anyone who puts forth this case. But if the dollar is to maintain its status as the pre-eminent global reserve currency (a status that allows the US to borrow cheaply and impose sanctions far more aggressively that it would otherwise be able to), then the most common-sense thing is to offer greenback liquidity direct to Beijing.
Goldman says U.S. growth will shrink 5% next quarter and here’s how low stocks could go – IThe coronavirus crisis has ramped up another level with large parts of Europe on lockdown and the U.S. looking set to follow suit. Health officials have recommended a ban on public gatherings of 50 or more people, while the U.S.’s top infectious diseases expert Dr. Anthony Fauci said a national lockdown wasn’t out of the question. The Federal Reserve slashed interest rates back to zero and launched a massive bond-buying program on Sunday in a bid to prop up the economy.But U.S. stock futures hit limit down ahead of the open on Monday, and the SPDR S&P 500 ETF tumbled SPY, -6.880% 9.6%, indicating the central bank’s dramatic intervention would do little to stop the rot.In our call of the day, Goldman Sachs downgraded U.S. GDP forecasts and said a recession was on its way.The investment bank’s economic research team, led by Jan Hatzius, said economic activity would “contract sharply” for the rest of March and April as consumers and businesses cut back on spending. They expected a recovery after April, though that was uncertainty, but said their new forecasts “probably” met the criteria for a recession.They expected real GDP growth of 0% in the first quarter and a contraction of 5% in the second quarter. “This takes our 2020 GDP forecast down to +0.4%(from 1.2%). The uncertainty around all of these numbers is much greater than normal.” The team said the prospect of a recovery and strong growth in the second half were dependent on whether social distancing and warmer weather reduces the number of virus cases, how quickly reduced infections will bring a return to normality and how effective fiscal and monetary policy turns out to be. Goldman Sachs chief equity strategist David Kostin said, in a separate note, the S&P 500 could fall to as low as 2,000 points if the economic impact of the virus worsens but expected the index to reach 3,200 by the end of 2020.
Goldman Takes Out The Chainsaw- Cuts US Q2 GDP To -5%; Says Recession Has Begun – While it will probably not come as a surprise to anyone who read our earlier post to “Brace For A Record Decline in GDP“, but moments ago Goldman – which last week called the bear market just hours before it officially materialized, and cut its year-end S&P price target to 2,450 which the S&P almost hit late on Thursday – finally capitulated on its optimistic take for the US economy, and in a note published moments ago by its chief economist Jan Hatzius, Goldman said that it expects US economic activity “to contract sharply in the remainder of March and throughout April as virus fears lead consumers and businesses to continue to cut back on spending such as travel, entertainment, and restaurant meals. Emerging supply chain disruptions and the recent tightening in financial conditions will likely add to the growth hit.”As a result, the bank is now expecting Q2 GDP to crater -5%, down from its prior forecast of 0%, and the biggest quarterly GDP contraction since the peak of the financial crisis when GDP cratered by 8.4%.Goldman lays out the details of how it gets to this worst GDP print in 12 years below: Even with monetary and fiscal policy turning sharply further toward stimulus – we expect a 100bp rate cut on Wednesday and a fiscal impulse of 1-2% of GDP – these shutdowns and rising public anxiety about the virus are likely to lead to a sharp deterioration in economic activity in the rest of March and throughout April. Virus fears have already begun to lead US consumers and businesses to reduce spending on activities such as travel, entertainment, and restaurant meals. Airlines have eliminated a significant share of flights, conferences have been called off, major cruise lines have canceled all cruises, theme parks have shut down, and hotel occupancy has fallen sharply in cities with early virus outbreaks. Among sports leagues, the professional and college basketball, hockey, and soccer seasons have been cancelled, as have major golf and tennis events, and the baseball season has been postponed. While we are not assuming an Italy-style national shutdown in the US, the experience of countries like Italy, Spain and France offers some indications of the impact that extreme local-level quarantines could have. In Italy, for example, all retail stores except drug stores and grocery stores are closed, all restaurants are closed, hotel occupancy is at a small fraction of capacity, and some factories have closed temporarily while many others are operating below normal levels because workers are resisting going to work out of fear of getting sick.
JPMorgan Now Expects A Global Depression In The Second Quarter – Earlier we reported that in a report titled “the lamps are going out all across the economy”, JPMorgan’s chief US economist, Michael Feroli slashed his Q2 US GDP forecast to a staggering -14%, which he optimistically expects to form the bottom of a V-shaped recovery that then lifts the US economy by +8% and +4% in Q3 and Q4, respectively (at least until the next downward revision in his forecast). We doubt the V-shaped recovery will take place, in fact if there is any “recovery” it will be L-shaped especially if medical experts are correct that the pandemic will take 12-18 months to full clear out. That said, the Q2 prediction alone is catastrophic, and if that slowdown persists the US is facing not only a recession, but probably a second Great Depression. However, if JPM’s forecast revision for the US was catastrophic, than its latest global outlook is downright apocalyptic. In a separate note by JPM’s Bruce Kasman, has also taken a flamethrower to his global economic forecasts, and the bank’s head of economic policy now anticipates Europe to implode an unprecedented 22%, the UK to crater by a depressionary and with the US plunging 14%, he sees the global economy ex China contracting by a whopping -13.7%. In short, JPM now expects no less than a global depression in the second quarter. This will follow a Q1 quarter in which China is expected to collapse by -40.8%, which however will somehow surge by 57.4% in the second quarter. This is how Kasman lays out his latest forecast: Last week we concluded that the COVID-19 shock would produce a global recession as nearly all of the world contracts over the three months between February and April. This week’s reports, which show a collapse in China’s activity in February and in survey readings for March elsewhere in the world, validate this view. There is no longer doubt that the longest global expansion on record will end this quarter. The key outlook issue now is gauging the depth and the duration of the 2020 recession.
Economist- It’s A Mistake To Think Business Conditions Will Quickly Return To Normal Levels – Economic recession is an infrequent occurrence, but in a fundamental sense recessions are the economy’s way of cleansing the “rot” out the system that have been built up over time. This emanates from bad investments, bad loans, bad policies, excessive risk and speculation. Recessions expose the vulnerabilities of the economy and the financial system. Even though the proximate cause could come from an outside shock it’s the weaknesses and imbalances that are the underlying cause. So when the “right” shock comes along the fragile structure would collapse. Recessions fundamentally change behavior and policies and post recession business and finance will be materially different. Since 1960 the US economy has experienced eight recessions; each economic downturn has been different along with the duration and depth. The average peak to trough decline in real GDP was around 1.7%, but the range is wide from 0.5% to 4.0%. Economic recession acts like a forest fire, such that it doesn’t discriminate between the “deadwood” and the “good” in the economy. In the process, it destroys jobs and people’s lives, but also forces small companies (sometimes mid-sized to big) to close or downsize that were not previously vulnerable. It’s the sheer force of an abrupt drop in spending, the curtailment of lending and the scramble for liquidity where few escape. Some of the industries largely affected today include airlines, restaurants, hotel accommodations, and recreation (sports centers, parks, concerts, theaters, etc.). According to the data in the GDP report, the annual spending by consumers for these services and activities amounts to about $2 trillion – businesses probably spend similarly.In other words, if there were a cessation of all of these activities for an 8-week period the impact to the US economy would be over $650 billion, equal to 3% of GDP (this is just from the aforementioned service industries). Only the consumer aspect of the spending decline would directly affect GDP, but these industries would feel the full impact of this spending collapse. Spending in these service industries is not going to “zero”, but in some cases it will. There are no professional sports of any kind scheduled for the time being or foreseeable future. These companies are enormously affected since they have to reimburse paid customers for travel and events cancellations. It’s impossible to predict confidently how severe the economic slump will be or the duration. Nothing on this scale has hit the US economy in the post-war period. This disruption goes far beyond work and finance because it also encompasses people’s mobility, health care, education, all forms of entertainment and recreation, and confidence in our government.
Why Sanctions Against Iran and Venezuela During a Pandemic Are Cruel – Swiftly moves the coronavirus disease (COVID-19), dashing across continents, skipping over oceans, terrifying populations in every country. The numbers of those infected rises, as do the numbers of those who have died. Hands are being washed, tests are being done, and social distance has become a new phrase. It is unclear how devastating this pandemic will be. In the midst of a pandemic, one would expect that all countries would collaborate in every way to mitigate the spread of the virus and its impact on human society. One would expect that a humanitarian crisis of this magnitude would provide the opportunity to suspend or end all inhumane economic sanctions and political blockades against certain countries. The main point here is this: Is this not the time for the imperialist bloc, led by the United States of America, to end the sanctions against Cuba, Iran, Venezuela, and a series of other countries? Venezuela’s Foreign Minister Jorge Arreaza told us recently that the “illegal and unilateral coercive measures that the United States has imposed on Venezuela are a form of collective punishment.” The use of the phrase “collective punishment” is significant; under the 1949 Geneva Conventions, any policy that inflicts damage on an entire population is a war crime. The U.S. policy, Arreaza told us, has “resulted in difficulties for the timely acquisition of medicines.” On paper, the unilateral U.S. sanctions say that medical supplies are exempt. But this is an illusion. Neither Venezuela nor Iran can easily buy medical supplies, nor can they easily transport it into their countries, nor can they use them in their largely public sector health systems. The embargo against these countries – in this time of COVID-19 – is not only a war crime by the standards of the Geneva Conventions (1949) but is a crime against humanity as defined by the United Nations International Law Commission (1947). The U.S. Congress passed the Countering America’s Adversaries Through Sanctions Act (CAATSA) in 2017, which tightened sanctions against Iran, Russia, and North Korea. In particular, the U.S. government made it clear that any business with the public sector of Iran and Venezuela was forbidden. The health infrastructure that provides for the mass of the populations in both Iran and Venezuela is run by the State, which means it faces disproportionate difficulty in accessing equipment and supplies, including testing kits and medicines.
What to Know in Washington: A ‘Spike’ in Virus Cases is Expected – Expanding testing for the Covid-19 virus in the U.S. will result in a “spike in the curve” over the next week as more cases are uncovered, a top White House aide said yesterday.“For those of you who watched China, and China reporting, remember when they changed their definition and all of a sudden there was a blip in their curve? We are going to see that,” Dr. Deborah Birx, virus response coordinator, said yesterday at a briefing by the White House coronavirus task force.“We are going to see a spike as more and more people have access” to the tests, Birx said.There have been 3,365 confirmed coronavirus cases in the U.S. as of Sunday evening, with 64 deaths. Cases of the highly-infectious virus are now present in every U.S. state except West Virginia. New York, Washington, California and Massachusetts have been some of the hot spots.At least ten states now have the availability of drive-by testing for the coronavirus as tests ramp up nationwide after a slow start, said Vice President Mike Pence. Pence, head of the task force, Birx, and other officials including Trump, spoke at yesterday’s briefing. Read more from Justin Sink and Anna Waters.Meanwhile, the Federal Reserve slashed rates to near zero and the Bank of Japan strengthened stimulus as central banks moved to blunt the financial impact of the coronavirus outbreak. Airlines cut flights and a consultant warned many could go bankrupt by May. The World Health Organization warned that Europe is reporting more new cases each day than China did at its peak and countries all over the continent are in lockdown. Cases also soared in the U.S. and Goldman Sachs Group predicted the country’s economy would shrink 5% in the second quarter. New York City and Los Angeles limited restaurants and bars to takeout and delivery service. Bloomberg is tracking the latest developments here.
A third person who visited Trump’s Mar-a-Lago club over the weekend has reportedly tested positive for coronavirus – A third person who visited Mar-a-Lago, President Donald Trump’s Palm Beach, Florida, residence and golf club, has tested positive for the novel coronavirus on Friday. “Brazil’s Chargé d’Affaires Ambassador Nestor Forster has learned tonight that he has tested positive for Covid-19,” the Brazilian embassy in the US announced Friday. “Following medical advice, Amb. Forster will extend his self-quarantine, which he had already placed himself into as a precautionary measure, for another two weeks.”The Washington Post reported that the second infected person was present at a Sunday fundraising lunch “hosted by Trump Victory, a committee that raises money for the Trump campaign and the Republican Party.”The first Mar-a-Lago visitor to test positive for the coronavirus was Fabio Wajngarten, press secretary to Brazilian President Jair Bolsonaro. Trump met and was photographed with Wajngarten at the club on Saturday. Also on Friday, Miami Mayor Francis Suarez announced that he too tested positive for COVID-19 after meeting with the same Brazilian delegation. Two GOP Senators, Sen. Lindsey Graham of South Carolina and Sen. Rick Scott of Florida, are self-quarantining after coming into contact with Wajngarten.
Trump administration official admits coronavirus could kill millions in US – The death toll and infection toll from COVID-19, the disease caused by the coronavirus epidemic, is skyrocketing across the major countries of Western Europe, with hospitals filled to bursting. Italy, Spain and France are all on lockdown, and emergency measures are in effect in most other countries. On Friday, the World Health Organization declared that Europe, rather than China, was now the epicenter of the pandemic. Italy is under the greatest strain with 24,747 cases and over 1,800 deaths – a far greater toll, in proportion to the population, than in China, where the epidemic has begun to subside after reaching 80,649 cases and more than 3,000 dead. The United States, however, could well become the next epicenter of the pandemic, as the deliberate failure of the Trump administration to conduct any effective response opens up the American population to losses in the millions of lives. In a blunt exchange on the Sunday CNN program State of the Union, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, was asked, “There have been estimates of hundreds of thousands of people in the U.S. who could die or, in the worst-case scenario, millions. Can you tell the American people that that is possible?” He replied, “It’s possible.” The state of the pandemic, by all credible accounts, is racing ahead towards a disaster for millions. By Sunday, there were 167,638 cases of COVID-19 globally. The number of infections outside of China now exceeds that in China, which has 80,849 cases. Of the 76,219 patients that have recovered from the disease, 66,931 are in China. That means there are presently 80,658 active infections, the majority in Europe and Iran, of which 5,655 have been deemed severe or critical. The number of deaths due to COVID-19 now stands at 6,456. Italy, Iran and now Spain have high daily rates of new deaths, running at or above 4 percent. Other nations like France, Germany and the UK, in the early phases of the pandemic, have fatality index rates that are at 2.5 percent or less. Switzerland reported a daily total of 842 new cases as it joins a list of nations that are seeing a catastrophic rise in new cases. The speed of the pandemic is remarkable. Only four weeks ago, on February 20, a 38-year-old Italian man was the first known victim in that country of COVID-19. The local outbreak in the Lombardy region quickly spiraled out of control over the next two weeks. The number of new cases exploded, followed by an alarming number of deaths. Finally, on March 12, the whole country was placed in lockdown.
Trump Says He Had No Idea His Pandemic Response Team Was Disbanded. What If That’s True? – PRESIDENT DONALD TRUMP denied on Friday that he was in any way responsible for his administration’s failure to make coronavirus testing widely available, and professed to have absolutely no idea who had disbanded the White House pandemic response team two years ago (John Bolton), or even if that had happened (it did). The president’s insistence that the buck very much does not stop with him was overshadowed by his false claim that Google had 1,700 engineers working to create a nationwide website that would direct Americans to testing sites nationwide.On Saturday, Trump appeared briefly at another news conference and revealed that he has been tested for the illness, Covid-19, after being exposed last weekend to at least two Brazilian officials who have subsequently tested positive. But Trump’s testy, wounded response to being asked on Friday if he shared the blame for the federal government’s halting effort to stem the spread of the virus is worth pausing on for a moment, because it suggests that he still has little idea, and less interest, in what happens in his own White House.The revealing exchange began when Kristen Welker of NBC News asked Trump about the lag in testing, which Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, had described as “a failing,” the day before.“Do you take responsibility for that?” Welker asked. “Yeah, no,” Trump replied. “I don’t take responsibility at all.” When Yamiche Alcindor of PBS NewsHour followed up by pointing out that Trump’s National Security Council had eliminated a team responsible for global health security, which was created by his predecessor to coordinate the response to pandemic threats, the president took offense and denied even knowing if such a thing had taken place. “You said that you don’t take responsibility, but you did disband the White House pandemic office, and the officials that were working in that office left this administration abruptly. So what responsibility do you take to that?” Alcindor asked. “And the officials that worked in that office said that you, that the White House lost valuable time because that office was disbanded. What do you make of that?” “Well, I just think it’s a nasty question,” Trump replied. “And when you say me – I didn’t do it. We have a group of people I could – ” “It’s your administration,” Alcindor interjected. “I could ask perhaps,” Trump continued. “It’s my administration, but I could perhaps ask Tony about that, because I don’t know anything about it,” the president said, gesturing towards Dr. Fauci, who was not involved in disbanding the team, but had expressed regret that it was no longer there. “I mean, you say we did that. I don’t know anything about it,” Trump added.
Coronavirus forces airlines to consider a once unthinkable possibility – halting US flights – Airlines around the world are racing to preserve cash as demand for flights craters after political leaders turn to increasingly draconian measures that have disrupted daily life in an effort to stop the spread of COVID-19. Now U.S. airlines, which reported record revenues earlier this year, are grappling with an unthinkable scenario. On Sunday, acting Homeland Security Secretary Chad Wolf said “all options remain on the table” when asked at a White House press conference whether the administration is considering a halt of domestic air travel. A day earlier, President Donald Trump said the American public should avoid unnecessary travel. Early Monday, the administration expanded its 30-day ban on most European visitors to Ireland and the U.K., an unprecedented curb on international travel. It is not certain that the administration will take that action – which would be the first time the U.S. instituted a blanket air travel ban since the wake of the Sept. 11, 2001, attacks – or whether such a ban would last two weeks, a month or longer. But several executives told CNBC they are considering all possibilities. Trump, speaking on Saturday, said he is considering potential travel curbs to areas hard hit by the coronavirus, which has infected roughly 170,000 across the world and killed more than 6,500, according to data compiled by Johns Hopkins University. In the U.S., it has spread to roughly 3,800 and killed at least 69, according to Hopkins. Abrupt cuts across airlines would reverberate around the economy. U.S. airlines alone employed some 747,000 people as of the end of January, according to federal data, but as carriers park aircraft and defer orders, manufacturers as large as Boeing and Airbus and their suppliers are now on shakier footing. Airlines expect to receive some form of government support but it’s not yet clear what form it will take. Executives have warned the drop in demand is more severe than after 9/11.
Peter Navarro to bring executive order to Trump to reduce US foreign dependency on medicines – White House trade advisor Peter Navarro told CNBC on Monday that he’s preparing an executive order that would help relocate medical supply chains from overseas to the U.S. Navarro’s proposal comes as Berlin said it’s trying to stop Washington from persuading a German company seeking a coronavirus vaccine to move its research to the U.S. German government sources told Reuters on Sunday the Trump administration was looking into how it could gain access to a potential vaccine being developed by a German firm, CureVac. Navarro, in a “Squawk Box” interview, brushed off a question about the administration’s reported overtures toward CureVac and instead spoke about the general need to manufacture more medical equipment and supplies in the U.S. “What I can speak to is this broader, interesting issue of how dependent the United States of America is on the global supply chain, not just for its medicines but for its medical supplies and medical equipment,” Navarro said. “The essence of the order … is to bring all of that home so that we don’t have to worry about foreign dependency,” he said, adding that 70% of the ingredients used in advanced pharmaceuticals “comes from abroad.” The increased demand for medical face masks due to the coronavirus, for example, demonstrates the challenges of relying on foreign supply chains, Navarro argued.
Trump Invokes Defense Production Act to Fight Wuhan Coronavirus Pandemic –President Trump on Wednesday invoked the Defense Production Act to mobilize the private sector to manufacture goods needed to fight the Wuhan coronavirus pandemic. The legislation allows the president to require production and orders from certain industries to prioritize the response to a national emergency. Originally passed in 1950, the legislation was first used in the Korean War and has been activated in response to various crises since that time. “Right after we finish this conference, I’ll be signing it and it’s prepared to go,” Trump said at a press briefing at the White House. The legislation will be used to ramp up production of medical supplies needed to treat coronavirus patients. Trump’s announcement came minutes before former vice president Joe Biden’s campaign released its own statement urging Trump to invoke the DPA. During the press briefing, Trump said he viewed himself as a “war-time president.” “We had the best economy we ever had, and one day you have to close it down to defeat this enemy,” Trump told reporters.The Trump administration is working with Republican senators on a possible $1 trillion economic stimulus to offset the economic impact of the pandemic. While details of the stimulus have not been finalized, the administration has been pushing for direct cash paymentsto Americans below a certain income level to help keep the economy afloat.
Schumer Requests $8.5 Billion in Coronavirus Funds, Accuses Trump Admin. of ‘Dangerous Incompetence’ – Senate minority leader Chuck Schumer on Wednesday requested $8.5 billion in emergency funding to combat the coronavirus, more than three times the amount the White House has requested. Schumer sent his request Wednesday to the Senate Appropriations Committee. The emergency funding includes $1.5 billion for the Centers for Disease Control and Prevention, $3 billion for the Public Health and Social Services Emergency Fund, $2 billion in reimbursements for coronavirus-related spending by states and local governments, $1 billion for the National Institutes of Health to develop a vaccine, and $1 billion for the U.S. Agency for International Development as an emergency reserve fund. During a floor speech, Schumer accused the Trump administration of “towering and dangerous incompetence” in its approach to addressing the virus. “Here in the United States, the Trump administration has been caught flat-footed. The administration has no plan to deal with the coronavirus, no plan and seemingly no urgency to develop one,” Schumer said. “This proposal brings desperately-needed resources to the global fight against coronavirus. Americans need to know that their government is prepared to handle the situation before coronavirus spreads to our communities. I urge the Congress to move quickly on this proposal. Time is of the essence,” the New York Democrat said of his funding request in a statement. The Trump administration requested only $2.5 billion to protect Americans against the virus, $1.25 billion in new funding and the remainder appropriated from current health programs, including $535 million from funding currently earmarked to combat the Ebola virus. Schumer’s request would not siphon any funding from current health programs.
Trump Admin. Considering Sending $2,000 to Certain Americans During Wuhan Coronavirus Pandemic: Report – The economic stimulus package to fight damage from the Wuhan coronavirus pandemic under consideration by the White House includes a proposal to send two $1,000 checks to certain Americans, the Washington Post reported on Wednesday.Checks would be sent to Americans below a certain income level, although it is not yet clear what that level will be. The Trump administration’s stimulus currently calls for $500 billion in cash payments, with another $500 billion for various businesses including $50 million for the airline industry, which has been particularly hurt by the pandemic. Senate Democrats proposed a $750 million stimulus package on Monday, while on Tuesday the Trump administration floated an $850 million stimulus. Talks between administration officials and Congress are ongoing, with the current proposal amounting to an injection of $1 trillion into the U.S. economy.Republican senators have called for immediate assistance to Americans affected by the pandemic, although the specifics of the assistance are still being debated.“Direct assistance to working people is a good start, but FAMILIES with kids need more relief,” Senator Josh Hawley (R., Mo.) wrote on Twitter in comment on the Post‘s report. “A working single mom with three kids needs more support than an unmarried computer programmer living in his parents’ basement. Help families.”Hawley has called for monthly payments to working families below a certain income bracket, with payments gradated based on family size and married or single-parent status. Senators Tom Cotton (R., Ark.) and Mitt Romney (R., Utah) have each called for direct cash payments of a fixed amount. Treasury Secretary Steve Mnuchin has repeatedly stressed the importance of getting cash directly to Americans who need it. “Americans need cash now and the president wants to get cash now. And I mean now, in the next two weeks,” Mnuchin said at a White House press conference on Tuesday.
Senate passes House’s coronavirus aid bill, sending it to Trump – The Senate passed the House’s coronavirus aid package on Wednesday, sending it to President Trump, who is expected to sign it. Senators voted 90-8 on the bill that passed the House in a middle-of-the-night Saturday vote but needed dozens of pages of corrections and changes, which cleared the chamber on Monday. The measure, which the Joint Committee on Taxation estimates will cost $104 billion, is the second package that Congress has passed amid growing concerns about the widespread coronavirus outbreak in the United States that has already bludgeoned the economy. The vote on the second package comes as senators are already working on “phase three,” with Senate Republicans wanting to pass that next week. The third coronavirus bill is expected to include help for impacted small businesses, industries and families, including direct cash payments for Americans. McConnell has created GOP task forces for drafting the bill. Republicans briefed their colleagues during a closed-door lunch Wednesday and are expected to hand over their work by Thursday. The majority leader told reporters after the lunch that Republicans were “getting close” and “hoping to be together shortly.” The bill approved Wednesday bolsters unemployment insurance and guarantees free diagnostic testing for the coronavirus. It also provides up to 10 days of paid sick leave for some workers. It caps that at companies with 500 employees and would allow for those with fewer than 50 to apply for a waiver. But the bill’s path through the Senate wasn’t without drama. The House bill, which was negotiated by Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin, sparked fierce opposition from some Senate Republicans, who were largely sidelined from the talks. Senate Majority Leader Mitch McConnell (R-Ky.) tipped his hand to the frustration ahead of Wednesday’s vote. “I will vote to pass their bill. This is a time for urgent bipartisan action, and in this case, I do not believe we should let perfection be the enemy of something that will help even a subset of workers,” McConnell said. “However, the House’s bill has real shortcomings. It does not even begin to cover all of the Americans who will need help in the days ahead,” he added. GOP senators have bristled, in particular, over the paid sick leave provisions over concerns that it will negatively impact small businesses, some of which are already facing closure and potential layoffs because of the economic impact of the coronavirus.
Trump signs coronavirus aid package with paid sick leave, free testing – President Trump on Wednesday signed into law a multibillion-dollar emergency aid package aimed at helping Americans impacted by the coronavirus. The House-passed measure was approved by the Senate earlier Wednesday and includes provisions offering paid leave benefits for Americans, bolstered unemployment benefits and free diagnostic testing for the virus. “The [Families First Coronavirus Response Act] makes emergency supplemental appropriations and other changes to law to help the Nation respond to the coronavirus outbreak,” Trump said in a statement Wednesday evening announcing he had signed the bill. The bipartisan bill, which is the product of days of negotiations last week between Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi (D-Calif.), is the second such legislative package passed by Congress to address the COVID-19 outbreak. Trump endorsed the legislation on Friday before it was passed in a late-night vote in the House. The lower chamber approved technical corrections to the bill in a vote late Monday, and the Senate passed it in a 90-8 vote Wednesday afternoon. A handful of Republican senators voted against the legislation. The bill’s signing comes as the Trump administration is negotiating with Senate Republicans on an economic stimulus package to assist small businesses, American workers and specific sectors such as the airline industry impacted by the coronavirus. The White House has proposed a $1 trillion stimulus package, which would include sending direct cash payments to Americans. The coronavirus has infected more than 7,000 Americans, forced restaurants and other businesses to close, and caused airlines to significantly cut back on flights in recent days. Trump last week declared a national emergency over the virus and on Monday recommended that Americans avoid restaurants and bars, cut back on unnecessary travel, and restrict gatherings to 10 or fewer people over the next few weeks as the federal government tries to mitigate the spread of COVID-19.
Mnuchin confirms plan for $1,000 cash payments to all Americans -The White House’s coronavirus stimulus plan could see every American get two $1,000 checks from the government within nine weeks, Treasury Secretary Steve Mnuchin said Thursday.”This is an unprecedented situation, where for good reason the government has instructed major parts of the economy to close down so that we can win this fight against this virus,” he said in an appearance on Fox Business.”While we’re doing that we understand there are impacts on hard-working Americans, and the president is determined to support them,” he added.The $1 trillion package the White House and Senate Republicans plan on presenting would provide every adult American with a $1,000 check, plus another $500 for each child. A family with two parents and two children, for example, would get $3,000.”As soon as Congress passes this we’d get this out in three weeks, and then six weeks later, if the president still has a national emergency, we’ll deliver another $3,000,” Mnuchin said. Earlier in the week, Mnuchin had pointed to a two-week target to send out cash payments.That portion would amount to half of the bill’s overall spending.Another $300 billion in the bill would be used to help businesses keep people on payroll and offer loan forgiveness for those that do after the crisis ends.Already, unemployment claims have shot up by some 33 percent between the first two weeks of March. A final $200 billion would be devoted to securing lending to airlines and other critical industries hit hard by the pandemic.
Senate GOP mulls forgivable loans to businesses to halt layoffs, bankruptcies – Sen. Marco Rubio (R-Fla.) said Tuesday that Senate Republicans are crafting a plan to provide forgivable loans to businesses derailed by the coronavirus outbreak through a $1-trillion economic rescue plan.In a series of Thursday tweets, Rubio detailed how GOP senators plan to support companies that could be forced to lay off workers as the measures to slow the coronavirus pandemic shut down entire industries across the U.S.Rubio said that the loans would be issued through banks, credit unions and other private-sector financial firms to help speed the process of distributing funds. If a business uses the loan to keep workers on payroll, pay their rent or handle other necessary expenses, Rubio added, they would not be forced to pay back the loan.The overall goal was to “Get cash to small business [as] fast & easy as possible so they don’t have to lay people off,” tweeted Rubio, who is spearheading the Senate GOP’s deliberations on business aid.“If they use it for that purpose doesn’t have to be paid back.”President Trump and lawmakers are scrambling to get ahead of a likely flood of layoffs and business failures driven by the coronavirus pandemic and the drastic measures needed to slow its progress.Claims for unemployment insurance spiked by 70,000 in the week between March 8 and 13, with numbers almost certain to soar as a rising number of restaurants, bars, entertainment venues, hotels and other businesses are forced to close or limit service for weeks, if not months.“There are a lot of enterprises that are hurting right now, and they’re going to start laying off people unless we get some money to them,” said Sen. Mitt Romney (R-Utah) on the “The Hugh Hewitt Show” on Thursday. “We’d rather have the employers paying those people than have them show up to the unemployment office.”
U.S. lawmakers pushing ahead with third coronavirus aid package – (Reuters) – U.S. lawmakers were rushing ahead on Thursday with forging a massive economic stimulus measure to counter the destructive impact of the coronavirus, with the Senate’s leader vowing not to let the chamber adjourn until the mission is accomplished. Although a few lawmakers expressed doubts about the yawning sums under discussion, with one Republican warning this week against “shoveling money out of a helicopter,” the Senate’s majority Republicans said they hoped to have a proposal agreed on with President Donald Trump’s administration by sometime on Thursday. Only then did they plan to start negotiations with Democrats. Top Democrats said that was backward. Both House of Representatives Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer said the fastest route to finishing a package would be to have the leaders of both parties and chambers in talks with the White House. Schumer has proposed his own $750 million plan of action that would expand jobless benefits, help small businesses and fund childcare for healthcare workers. The Trump administration is pushing for a package of some $1.3 trillion in aid to help businesses and individual Americans devastated by the virus. Senate Majority Leader Mitch McConnell, a Republican, said the Senate would remain in session until it finishes the legislation and sends it to the House. “I would recommend senators stay around, close,” he said on the Senate floor. “We are moving rapidly because the situation demands it.” Congress already passed an $8.3 billion measure earlier this month to combat the spread of the new coronavirus and develop vaccines for the highly contagious disease that has infected almost 8,000 people in the United States and killed at least 145. The outbreak has paralyzed large sectors of the U.S. economy and led to fears of a global recession. On Wednesday, lawmakers approved and Trump signed another $105 billion-plus plan to limit the damage from the coronavirus pandemic through free testing, paid sick leave and expanded safety-net spending.
Senate negotiators near agreement on keeping rebates in coronavirus stimulus package – In a major victory for President Trump, Senate negotiators are nearing a deal to provide $1,000 cash rebates in the phase-three stimulus deal and match the cost of the program with a major expansion of unemployment benefits. The emerging deal being hammered out by Senate negotiators would provide one round of $1,000 checks to eligible adults at a cost of approximately $250 billion and match that with a similarly costly expansion of unemployment benefits – in the ballpark of $250 billion, according to two sources familiar with the talks. As a result, the entire cost of the stimulus package is expected to swell well above the $1 trillion proposed by Trump, possibly to more than $1.2 trillion. The projected cost of the package is not yet certain as negotiators are waiting for a cost estimate from the Congressional Budget Office (CBO), said a person familiar with the talks. The total cost of expanding unemployment benefits remains uncertain until the CBO issues a budgetary projection, negotiators said. The partisan disagreement over whether to provide direct economic assistance in the form of rebate checks or unemployment insurance was a major sticking point heading into the talks. The progress both sides made on the issue signals that a deal is possible this weekend, even though negotiators failed to meet Senate Majority Leader Mitch McConnell’s (R-Ky.) Friday midnight deadline to get a deal in “principle.” Treasury Secretary Steven Mnuchin initially proposed providing two rebate checks of $1,000 to eligible individuals at a cost of roughly $500 billion to boost the economy in the midst of the coronavirus crisis; however, senate Republicans shaved down that amount, instead proposing a single payment of $1,200 to eligible adults and $500 for claimed dependents. But Senate Democrats objected and said the relief to individuals would be best distributed through the unemployment benefits system. “One-time payments are not what people need. What people need is a paycheck. They need ongoing income until this is done. That’s what they need,”
Senate unable to reach coronavirus stimulus deal before Friday deadline – Senators left on Friday night without a deal on a mammoth stimulus package, ensuring they miss a midnight deadline to get a deal in “principle.” Senate Majority Leader Mitch McConnell (R-Ky.) established midnight Friday as the deadline for getting a deal on the broad contours of the package as Congress tried to move at “warp speed” amid growing concern about the spread of the coronavirus. But senators and administration officials emerged from closed-door meetings on Friday night conceding that there were too many unresolved issues and that the talks would carry over into Saturday. Sen. Chuck Grassley (R-Iowa) said as he left the building on Friday that there were still “three or four” outstanding issues. Eric Ueland, the White House director of legislative affairs, indicated that talks would continue on Saturday. “We believe there is a broad consensus but there is no deal yet,” he said. The chances for an agreement appeared increasingly unlikely as Friday night wore on. A GOP leadership aide said roughly two hours before the deadline that “significant progress” had been made, but acknowledged that they did not have a deal. “The bipartisan groups have made significant progress and will continue to work through the night,” the aide said. Roughly a half an hour later, Grassley, Sen. Ron Wyden (D-Ore.) and administration officials acknowledged that they were breaking their meetings for the night without a deal. Grassley and Wyden, who oversaw the working group for tax-related provisions, will reconvene on Saturday morning. Congress is under intense pressure to move quickly as the coronavirus has spread across the United States, with more than 19,000 cases and 260 deaths as of Friday evening. The economy, meanwhile, has cratered with the Dow Jones Industrial Average dropping 9,000 points in the past month.
Colorado governor labels Trump ‘socialist’ over ‘corporate bailouts’ during coronavirus Colorado Gov. Jared Polis (D) on Friday slammed President Trump as a “socialist,” suggesting the president is more interested in offering “bailouts” to large corporations than small businesses impacted by the coronavirus. “I think that the government should not own the means of production. I’m not a socialist like Donald Trump. I think that’s a very dangerous way to go,” Polis told MSNBC’s Chuck Todd. Democrats have criticized the latest Republican economic relief proposal for dedicating billions of stimulus dollars to large corporations like airlines. Trump said Thursday that he supports the idea of the government taking an equity stake in certain companies accepting federal aid but did not specify which companies. “I think that rather than these corporate bailouts we should talk about helping people, Chuck,” Polis said. “That means workers, that means small business owners, it means everybody.” “Frankly I like this idea of sending everybody $2,000, I like the idea of temporarily increasing the SNAP benefits, emergency loans to small businesses, especially those in food and hospitality that have been interrupted,” he said. “I think those are the kind of measures, rather than using this as an excuse to implement socialist measures across corporate America.”
Benefit-Cost Analysis and the Coronavirus — We are in the middle of a flurry of decision-making on how to deal with COVID-19. After much resistance, officials are now canceling public events, closing schools and discouraging other activities that put us in contact with each other. Travel restrictions and possible shutdowns of workplaces, as we’ve seen in Italy, may be up next. It’s interesting we haven’t heard anything about benefit-cost analysis in all this. Nearly all economists profess to think that BCA is the single best decision method. Almost every introductory economics textbook is built around benefit-cost thinking, and for decades federal regulations have mandated BCA for proposals with significant economic impacts. But now we are facing immense choices – what could have a more drastic impact than shutting down most of the economy by fiat? – and BCA is nowhere to be found. As a public service, here’s a quick and dirty. Coronavirus policy is primarily about saving lives, right? So, if you believe in this sort of thing, the official “value of a statistical life” (VSL) as determined by the Environmental Protection Agency is $7.4 million. According to BCA wisdom, we should spend up to this amount to save the life of a currently unknown (statistical) person, but not a penny more.* In order to get a first impression, suppose the more stringent measures proposed will shave 1% off US GDP for the year. Based on last year’s figure, that would eliminate $214 billion in economic value. Using the value of life metric, that means we shouldn’t do this unless we expect to save at least 28,919 lives. If not, let’em die. Actually, I think it’s likely that we will see even greater economic costs from stringent social distancing policies, especially taking into account that the economy would probably have grown by a couple percent or so this year had the virus not struck. Maybe these actions would pass the BCA test, maybe not.
Senate Democrat introduces legislation requiring permanent pandemic coordinator – Sen. Ed Markey (D-Mass.) introduced legislation on Thursday requiring the administration to appoint a permanent pandemic prevention and response coordinator to the National Security Council (NSC) amid concerns over the coronavirus outbreak. The proposed legislation follows President Trump’s decision in 2018 to scrap the post, which was first created under the Obama administration to combat the Ebola crisis. “Had the Trump administration not eliminated the global health chief position on the NSC in 2018, our response to the coronavirus pandemic would have been swifter and better informed,” Markey said in a statement. “This coronavirus is not the first, and will not be the last biothreat we face. The outcome will be inevitably better both for this outbreak and the next if we have in place a single qualified individual to help lead our global health efforts at the highest levels of our federal government.” Trump’s decision to eliminate the NSC position was thrust into the spotlight last week when he was pressed on why he disbanded the pandemic response team. While responsibility for monitoring threats from infectious diseases was shifted to another group within the NSC, the move was reportedly interpreted as a downgrading of his administration’s focus on global health security. “Well, I just think it’s a nasty question,” Trump fired back when asked about the closure at a press conference. “I don’t know anything about it. I mean, you say we did that. I don’t know anything about it. Disbanding, no, I don’t know anything about it.”
Second Capitol Hill staffer tests positive for coronavirus –A staff member in Rep. David Schweikert’s (R-Ariz.) D.C. office has tested positive for COVID-19, the congressman said Sunday. The staff member is resting “comfortably at home and following guidance from local health officials,” Schweikert said in a statement. Schweikert said his D.C. office will be closed with staff members working remotely until further notice. He said staff at his Scottsdale, Ariz. will also work remotely out of “an abundance of caution.” Sen. Maria Cantwell (D-Wash.) said Wednesday a member of her D.C. office tested positive for coronavirus. Cantwell’s announcement marked the first known instance of a congressional staffer getting the virus. Mayor Muriel Bowser declared a state of emergency in D.C. on Wednesday. A total of 16 cases of COVID-19 were confirmed in D.C. as of Saturday, according to the D.C. health department. Bowser announced restrictions on restaurants and bars Sunday, including capping gatherings at restaurants and bars to no more than 250 people and prohibiting bar seating and service to standing patrons. Former House Intelligence Committee attorney Daniel Goldman said Sunday he tested positive for COVID-19.
Florida Republican becomes first lawmaker to test positive for coronavirus – Florida Rep. Mario Diaz-Balart (R) announced Wednesday he tested positive for COVID-19 after developing symptoms Saturday. He is the first member of Congress to test positive for the novel coronavirus. Shortly after his announcement another House member, Rep. Rep. Ben McAdams (D-Utah), 45, announced he had also tested positive for the virus. Diaz-Balart, 58, has been in self-quarantine in his Washington, D.C., apartment since Friday. “On Saturday evening, Congressman Diaz-Balart developed symptoms, including a fever and a headache. Just a short while ago, he was notified that he has tested positive for COVID-19,” read a statement released by his office. According to the statement, Diaz-Balart did not return to Florida “out of an abundance of caution.” Diaz-Balart’s wife, Tia, is a cancer and chronic lung disease survivor, both “conditions that put her at exceptionally high risk.”
Scalise to self-quarantine in response to Diaz-Balart test – House Minority Whip Steve Scalise (R-La.) said Wednesday evening that he will self-quarantine for the next two weeks after Rep. Mario Diaz-Balart(R-Fla.) tested positive for the coronavirus, citing a meeting between the two congressmen last week.“I have just been informed that my colleague, Mario Diaz-Balart, tested positive for COVID-19. Since I had an extended meeting with him late last week, out of an abundance of caution, I have decided it would be best to self-quarantine based on the guidance of the Attending Physician of the United State Congress,” Scalise said in a statement. “Fortunately, I am not experiencing any symptoms, and will continue working remotely on Congress’ coronavirus response, and will remain in close contact with the Trump administration’s coronavirus task force, my colleagues in Congress, as well as local officials and health professionals in Louisiana to ensure that swift action to address this crisis continues,” he added.
Utah Democrat becomes second lawmaker to test positive for coronavirus – Rep. Ben McAdams (D-Utah) announced Wednesday he tested positive for the coronavirus after developing symptoms on Saturday. McAdams, 45, is the second lawmaker to test positive for COVID-19. Rep. Mario Diaz-Balart (R-Fla.), 58, announced his diagnosis shortly before the Utah Democrat. McAdams said in a statement he developed mild cold-like symptoms and consulted with his physician on Sunday. He had isolated himself in his home and conducted meetings via phone, he said. “My symptoms got worse and I developed a fever, a dry cough and labored breathing and I remained self-quarantine,” he said in a statement. “On Tuesday, my doctor instructed me to get tested for COVID-19 and following his referral, I went to the local testing clinic for the test,” he said in a statement. “Today I learned I tested positive. McAdams said, despite having the virus, he is committed to continuing working from home until he is cleared to end his quarantine. He went on to urge the people of Utah to take the virus seriously “and follow of the recommendations we’re getting from the [Centers for Disease Control and Prevention] and other health experts.” A number of House lawmakers are pushing for members to be able to vote remotely due to the national health crisis in an attempt to cut down the spread of the virus. But the push has been met with resistance from leaders in both parties.
15 Among Brazilian Delegation That Met With Trump Now Have Coronavirus – It’s been eleven days since the Brazilian President Jair Bolsonaro and his delegation met with Trump and many White House staffers at Mar-a-Lago on March 7. First it was Nestor Forster, Brazil’s Chargé d’Affaires in Washington, and Nelsinho Trad, who both tested positive for Covid-19, and as of early this week it was further announced Brazilian Foreign Trade Secretary Marcos Troyjo has been confirmed for the virus. President Bolsonaro reportedly tested negative, and so did Trump; but Miami Mayor Francis Suarez, who had shaken hands with many among the Brazilian delegation members during their Florida trip, tested positive last last week and went into quarantine. Senior White House correspondent for Bloomberg Jennifer Jacobs now says at least 15 among the Brazilian delegation that had met with Trump’s team has now been confirmed for coronavirus, citing Brazil’s Globo. “General Heleno, 72, confirms he has coronavirus… In recent days, the minister went to into quarantine and has kept in touch with staff and authorities,”Globo reports.And Bloomberg elsewhere confirms “Brazil’s top security official is the 15th member of President Jair Bolsonaro’s recent delegation to the U.S. to test positive for coronavirus.””General Augusto Heleno, 72, said he’s undergoing additional testing to confirm the result. He joined Bolsonaro at a dinner with U.S. President Donald Trump at Mar-a-Lago on March 7 and has since maintained a normal work schedule, including meetings at the presidential palace,” the report adds. Newsweek reports the list among the Bolsonaro delegation that have tested positive so far as follows:
Pence staffer tests positive for coronavirus – An official working for Vice President Pence has tested positive for the coronavirus, his office announced Friday, becoming the first known positive test to date for a White House staffer. “This evening we were notified that a member of the Office of the Vice President tested positive for the Coronavirus,” Pence’s press secretary, Katie Miller, said in a statement. “Neither President Trump nor Vice President Pence had close contact with the individual. Further contact tracing is being conducted in accordance with CDC guidelines,” the spokeswoman added. The positive test reflects the degree to which the virus is spreading across the country, including to those in proximity to the country’s leaders. The news comes days after two congressmen tested positive for the virus, prompting several other lawmakers to self-quarantine. Both Trump and Pence previously interacted with lawmakers who have self-quarantined after coming into contact with an individual with the virus, and both posed for a photo with a Brazilian official earlier this month at the president’s Mar-a-Lago club in Florida who has since tested positive. Pence said this week he had not been tested for coronavirus, citing guidance from the White House doctor. Trump was tested last week, despite the White House physician saying there was no need and that his interactions were low risk for transmission. The White House said Saturday that the test was negative. More than 16,600 Americans have tested positive for the virus as of Friday afternoon, and more than 200 have died from the virus, according to The New York Times.
US general: Afghanistan deployments paused to protect troops from coronavirus – The U.S.-led mission in Afghanistan is temporarily stopping the movement of troops into the country as officials work to stem the spread of the coronavirus pandemic, the top U.S. general in Afghanistan confirmed Thursday. In a statement, Gen. Scott Miller, commander of U.S. and NATO forces in Afghanistan, said the decision also means some troops may not be able to leave Afghanistan. “To preserve our currently healthy force, Resolute Support is making the necessary adjustments to temporarily pause personnel movement into theater,” Miller said, adding the coalition is establishing pre-deployment screenings. “In some cases, these measures will necessitate some service members remaining beyond their scheduled departure dates to continue the mission.” As of Thursday, 21 Resolute Support personnel are exhibiting flu-like symptoms and are in isolation, he said. There is no lab to analyze coronavirus tests in Afghanistan, so samples are being flown to a U.S. military testing facility in Germany or other certified civilian testing facilities. Miller also said 1,500 multinational troops, civilians and contractors who arrived in Afghanistan in the past week are in quarantine, but stressed that the step was taken “out of an abundance of caution, not because they are sick.” Other measures to protect Resolute Support personnel include conducting meetings with Afghan partners using “technical means” rather than in person. The coalition has also limited base access to only “mission-essential” personnel and reorganized to create physical distance between people. “Resolute Support leaders at all levels are evaluating and assessing the impacts of COVID-19,” Miller said. “Our priorities are clear: protecting the force and protecting our collective national interests.”
Coronavirus: Trump says coronavirus crisis may last all summer – US President Donald Trump has said the nationwide coronavirus emergency could last until the end of the summer or even longer. He said Americans over the next 15 days should not gather in groups of more than 10 and avoid bars, restaurants, food courts, gyms and crowds. At the White House, Mr Trump said the country is facing “an invisible enemy” that is “so contagious”. The US has so far had more than 4,600 cases of the virus and 85 deaths. There have been more than 180,000 confirmed cases of Covid-19 globally and over 7,100 deaths, according to a tally from Johns Hopkins University. Under the US coronavirus task force’s other recommendations announced by Mr Trump on Monday: All older Americans are urged to stay home, while work and schooling for everyone should be from home Discretionary travel, shopping trips and social visits should be avoided and people should stay away from nursing homes or retirement facilities Anyone in a household who tests positive for the virus should remain at home along with everyone who lives there “We’ve made the decision to further toughen the guidelines and blunt the infection now,” a sombre-sounding Mr Trump told reporters. “We’d much rather be ahead of the curve than behind it.” Asked how long the emergency would last, Mr Trump – who previously predicted the outbreak would be over in weeks – told reporters: “They think August, could be July, could be longer than that.” White House coronavirus response co-ordinator Dr Deborah Birx, who joined the president, said: “If everybody in America does what we ask for over the next 15 days, we will see a dramatic difference.” She issued an appeal directly to millennials, asking them to limit social contact even though they are at lower risk of suffering if they contract the virus. “They are the core people that will stop this virus,” she said. “We really want people to be separated.”
Coronavirus shock will likely claim 3 million jobs by summer: Policy is needed now to curb further losses – At this point, a coronavirus recession is inevitable. But the policy response can determine how deep it is, how long it lasts, and how rapidly the economy bounces back from it. If this response includes enough fiscal stimulus that is well-targeted and sustained so long as the economy remains weak, job loss will be substantially reduced relative to any scenario where policymakers drag their feet. Even with moderate fiscal stimulus, we’re likely to see 3 million jobs lost by summertime. Keeping this number down and allowing any job loss to be quickly recouped after the crisis ends should spur policymakers to act. Put simply, the federal government needs to finance a much larger part of household consumption in coming months, transfer significant fiscal aid to state governments, and ramp up direct government purchases (particularly on items helpful in fighting the epidemic). Currently, the closely watched Goldman Sachs economic outlook is forecasting 0% growth for the first quarter of this year and −5% contraction (expressed as an annualized rate) for the second quarter. Given the cratering of demand already evident in data from restaurant reservations and airlines and accommodations, this may already be an overly optimistic forecast, but we’ll stick with it for now. This forecast implies that the economy will shrink by roughly 1.25% from January to June (2.5% at annualized rates for half a year). Given that productivity growth (or output growth divided by hours of work) has been rising at roughly 1.25% in recent years, output growth of 0.75% is needed just to keep job growth from falling below zero in these months. (The intuition is that if output growth was zero for an entire year, and the amount of output produced in a given hour rose by 1.25%, then 1.25% fewer hours of work would be needed in the economy.) If output growth actually contracts by 1.25% between January and June, this implies a loss in employment of roughly 2% (1.25% reduction from output contraction and 0.75% reduction from productivity growth), or more than 3 million jobs lost. If the actual number of jobs lost by the end of the summer is anywhere near this large, it will represent a pace of job loss comparable to the very worst months of the Great Recession. The unique nature of a coronavirus-driven recession means that the numbers of job losses could diverge substantially from these established, mechanical models of economic forecasts. But this is not cause for complacency – some forecasts for growth in coming quarters are even a bit worse than the Goldman Sachs projection.
Every state will lose jobs as a result of the coronavirus: Policymakers must take action – Workers across the country have already lost their jobs as businesses temporarily shutter in response to the social distancing measures necessary to stop the spread of coronavirus – a trend which can be mitigated if policymakers act quickly. Expectations of just how many jobs will be lost are rapidly evolving. Goldman Sachs forecasts that the economy will contract by 2.5% over the first half of this year – which we estimate will translate into a loss of 3 million jobs by June. An even bleaker forecast from Deutsche Bank, which is in line with projections from JPMorgan, suggests that 7.5 million jobs will be lost by the summer. In this post, we attempt to predict the state-level impacts of these losses using the midpoint of these two forecasts – an estimated 5.25 million jobs lost. We have distributed this projected job loss across states to provide a sense of the magnitude of the state-level shock, shown in Figure A. The coronavirus shock that is causing this recession is broad-based; the effects will likely be felt in every industry and geography. Still, workers in certain industries will be disproportionately affected – in particular, workers in food service, accommodations, and brick-and-mortar retail. As a result, states where these industries make up a larger share of employment, such as Florida, Hawaii, and Nevada, will be particularly hard hit. In Nevada, where two out of every five jobs are in leisure, hospitality, or retail, the state will likely lose 5.3% of private-sector jobs. This disproportionate impact matters for our estimation of job loss by state. To capture both the expansive effects of this recession and the outsize impact on the leisure, hospitality, and retail industries, we provide three measures of projected state job loss: one that distributes the national estimate based on each state’s share of total private employment; one based instead on their share of leisure, hospitality, and retail employment; and the average of those two measures. Figure A displays the average measure and Table 1shows all three job-loss projections. Both the figure and table also show the leisure, hospitality, and retail industries’ share of private-sector employment and the projected job losses as a share of private-sector employment in each state. The data presented here reflect our most recent total job-loss estimate of 5.25 million. As our understanding of the situation evolves, you can use our methodology to distribute other estimates of total job loss across states by inputting a national estimate into this spreadsheet.
Manufacturers call for $1.4T in assistance – The National Association of Manufacturers (NAM) is asking the federal government to create a $1.4 trillion fund in loans to provide liquidity to manufacturers and small businesses struggling through the coronavirus pandemic. The Manufacturing Resiliency Fund would protect the nearly 13 million men and women working in the manufacturing industry, according to NAM. “This is a crisis unlike anything we’ve seen, and it demands a response of historic proportion,” NAM CEO Jay Timmons said in a statement. NAM is also asking the government to designate manufacturing supply chains as “essential” to help mitigate interruptions in providing the health and safety supplies during the outbreak. NAM released its updated and expanded “COVID-19 Policy Action Plan Recommendations,” building on recommendations first released on March 9. It suggested five key policy areas where legislative and administrative action would provide relief for the manufacturing industry and establish a foundation for future public health emergencies. That includes recognizing manufacturers’ critical role in the coronavirus response by creating the $1.4 trillion fund. It also proposes protecting manufacturers from economic collapse by delaying federal tax payments for 90 days, among other measures, ensuring economic security for workers by allowing companies to pay a portion of wages to underemployed workers, reducing regulatory burdens by directing the Securities and Exchange Commission (SEC) to provide reporting flexibility, and setting the stage for economic growth. NAM is also calling for tax credit for employers who continue to pay workers who are quarantined or during periods when business is closed, enhance tax deductions for employers who add equipment like cleaning products, and protect employers under medical privacy laws, among other requests. Chamber of Commerce CEO Tom Donohue offered guidance to President Trump on Wednesday by recommending the government designate “essential businesses and services” and “essential infrastructure” during the coronavirus outbreak. Multiple other industries are seeking relief because of quarantines and closures due to the coronavirus. The National Retail Federation asked for a direct, government-based loan program and the National Restaurant Association called for financial relief, loans and tax measures to help it combat the crisis. The airline industry this week, through Airlines for America, requested $50 billion in the form of grants, loans and tax relief to weather the coronavirus downturn. And the tourism industry, through the U.S. Travel Association and the American Hotel and Lodging Association, has called for $150 billion in overall relief.
US seeks $3 billion to boost oil producers as prices plunge – – The Trump administration said today that it is seeking $3 billion from Congress to top up the country’s strategic petroleum reserves, potentially propping up U.S. oil producers after crude prices crashed globally. President Donald Trump had directed the Energy Department last week to fill the United States’ emergency stash of crude oil to the top, over objections from congressional Democrats who said he was favoring climate-damaging fossil fuels and the profits of oil giants. Plummeting crude prices benefited U.S. consumers filling up their cars, Trump said Thursday. “But on the other hand, it hurts a great industry, and a very powerful industry,” Trump told reporters. West Texas crude prices fell below $21 a barrel Wednesday after oil producers Russia and Saudi Arabia stepped up pumping, threatening the market share of U.S. oil, and as the coronavirus moved the world toward recession and tamped-down consumer demand for energy. Benchmark crude oil fell $2.79, or 11.1%, to close at $22.43 a barrel Friday. Brent crude oil, the international standard, fell $1.49, or 5.2% to $26.98 a barrel. Energy Secretary Dan Brouillette told reporters Thursday that the move was about filling up the country’s 713.5 million barrel Strategic Petroleum Reserve at a time of cheap oil, not about throwing U.S. oil producers a lifeline in rough markets. The reserves are stashed underground in Texas and Louisiana.
Lawmakers ask Trump administration to help Gulf oil and gas producers – A group of 14 lawmakers is asking the Trump administration to help out the offshore energy industry amid a decline in oil prices linked to international disputes and the coronavirus pandemic. The 13 Republicans and one Democrat sent a letter on Friday to Interior Secretary David Bernhardt asking him to reduce or waive royalties for oil and gas leases in the Gulf of Mexico. “The Department of the Interior has existing authority to temporarily reduce or eliminate royalties set forth in the leases in the Western and Central Planning Areas of the Gulf of Mexico and other lease areas,” the lawmakers wrote. “We urge you to examine the viability of a temporary reduction in royalties as domestic energy producers weather this combination of an [Organization of the Petroleum Exporting Countries]-driven price war and an epidemic that is driving millions of people around the world into quarantines of one kind or another,” they added. “Such an action in the short term will help mitigate a price war that is sinking prices and decreasing production.” Their letter follows a separate action by the Trump administration that boosts the oil industry at large. On Thursday, the Energy Department announced that it will buy 30 million barrels of oil from producers to be stored in the Strategic Petroleum Reserve. The Friday letter was signed by Reps. Dan Crenshaw (R-Texas), Randy K. Weber (R-Texas), Clay Higgins (R-La.), Mike Johnson (R-La.), Bill Flores (R-Texas), Chip Roy (R-Texas), Bruce Westerman (R-Ark.), Ralph Abraham (R-La.), Kevin Hern (R-Okla.), Jeff Duncan (R-S.C.), Brian Babin (R-Texas), Michael C. Burgess (R-Texas), Michael Cloud (R-Texas) and Lizzie Fletcher (D-Texas). “This call for royalty relief on offshore oil and gas will help ensure that the cost of production isn’t more than the price of the commodities. This is especially important for America’s smaller producers – many of whom are based in Texas – who feel the burden of these royalties the most,” Crenshaw’s office said a statement about the letter.
PANDEMIC: Coal industry asks Trump, Congress for coronavirus bailout — Friday, March 20, 2020 — Coal has joined the list of industries asking for a federal bailout as the coronavirus pandemic batters a sector already in crisis.
Tourism industry calls for $300B in relief in coronavirus stimulus package – Thousands of travel organizations have teamed up on a letter calling on lawmakers to give the industry $300 billion in federal aid as the Senate negotiates a third coronavirus relief bill. The letter was signed by 6,000 groups, including the U.S. Travel Association and organizations in transportation, lodging, recreation and entertainment, food and beverage, meetings, conferences and business events, travel advising and destination marketing. The groups are calling for the third coronavirus stimulus bill to include $300 billion for enhanced Small Business Administration (SBA) loans to the industry. The U.S. Travel Association and the American Hotel and Lodging Association (AHLA) had called for $150 billion in grants on Tuesday, but the new letter asks for increasing that loan amount as well as more financial assistance for severely impacted businesses through unsecured loans and loan guarantees. Also, it seeks at least $10 billion in airport grants to pay debt service and maintain operations.
Bailout Nation: US Movie Theaters Join Airlines, Hotels And Restaurants In Demanding A Taxpayer Bailout -Back in 2008, when the US government bailed out the US banking sector, it became clear that virtually any industry in America’s $18 trillion economy could pass off for “too big to fail.” So fast forward to today when the longest expansion in history has mutated in under a month into the biggest market crash since the Great Depression, and sure enough, virtually any industry is trying to get bailed out. Consider this – until today, the US government and by implication US taxpayers, had received bailout requests both direct or indirect from:
- The Airline Industry
- The Public transportation industry
- The Hotel and lodging industry
- The Restaurant Industry
- And, of course, Boeing.
And now, demonstrating just how fucked up everything has become once the government has opened the Pandora’s Box of government bailouts, US movie theaters are also demanding a bailout. That’s right: movie theaters are now somehow a systemically important industry, one which deserves billions in taxpayer funds. And even if it doesn’t, well everyone else is getting bailed out so why not them too. According to AP, the National Association of Theater Owners (also known as NATO, but definitely not to be confused with that other NATO), the trade group that represents most of the industry’s cinemas, said Wednesday that it’s asking for immediate federal help for its chains and its 150,000 employees. The theaters are requesting loan guarantees for exhibitors, tax benefits for employees and funds to compensate for lost ticket sales and concessions.Just because that’s how things are done in the US where moral hazard is the name of the game. Every game. The organization said the movie theater industry is “uniquely vulnerable” to the crisis, and needs assistance to weather a near total shutdown of two to three months. It wasn’t clear how society would collapse if there were no movie theaters after three months, especially with most Americans now having a streaming service pumping non-stop crap into their TV 24/7, but we are confident McKinsey will be hired soon to come up with a pretty slideshow explaining it all.
Treasury and IRS to delay tax payment deadline by 90 days – Taxpayers will get a three-month reprieve to pay the income taxes they owe for 2019, Treasury Secretary Steven Mnuchin said on Tuesday at a news conference. As part of its coronavirus response, the federal government will give filers 90 days to pay income taxes due on up to $1 million in tax owed, Mnuchin said in Washington. The reprieve on that amount would cover many pass-through entities and small businesses, he said. Corporate filers would get the same length of time to pay amounts due on up to $10 million in taxes owed, Mnuchin said. During that three-month deferral period, taxpayers won’t be subject to interest and penalties, he said. You should still get your 2019 income tax return in to the federal government as soon as possible, especially if you’re due a refund and need cash. “We encourage those Americans who can file their taxes to continue to file their taxes on April 15,” Mnuchin said. “Because for many Americans, you will get tax refunds.” Indeed, the IRS processed more than 65 million income tax returns as of March 6. Of these, 52.7 million filers received tax refunds, averaging $3,012, according to the agency.
ICE pausing most immigration enforcement during coronavirus crisis – Immigration authorities will halt most enforcement across the U.S., shifting efforts to deport only foreign nationals who have committed crimes or pose a threat to public safety, Immigration and Customs Enforcement (ICE) said Wednesday. The agency said it will “temporarily adjust” its enforcements beginning Wednesday. Changes will include delaying enforcement actions for individuals who do not pose a public safety risk until after the crisis and using alternatives to detention “as appropriate.” “ICE’s highest priorities are to promote life-saving and public safety activities,” the agency said in a statement. ICE said it will not carry out enforcement operations “at or near health care facilities,” including hospitals, doctors’ offices, accredited health clinics and emergency or urgent care facilities, “except in the most extraordinary of circumstances.” “Individuals should not avoid seeking medical care because they fear civil immigration enforcement,” ICE said. No detainees have tested positive for COVID-19 as of Wednesday, an agency spokesperson confirmed. The shift in the immigration enforcement comes as the outbreak is rapidly spreading across the U.S. There are more than 7,700 confirmed cases of COVID-19 and 118 deaths from the virus in the U.S, according to data compiled by Johns Hopkins University.
Immigrants in US detention facilities plea for help as coronavirus pandemic spreads – As the global COVID-19 pandemic continues to spread, hundreds of immigrant detention centers holding over 55,000 people are at high risk for becoming epicenters of the disease. Immigrant detention centers are infamous for their horrific conditions, lack of medical care, and the extremely close quarters – creating excellent conditions for the coronavirus to spread rapidly if even a single person catches the disease. On Thursday night the first ICE officer at a New Jersey detention facility tested positive for COVID-19, meaning that it is likely that the virus has already taken hold in detention facilities across the country, putting thousands of lives at immediate risk. The immigrant advocacy group, RAICES, the Refugee and Immigrant Center for Education and Legal Services, has been working with immigrants in detention centers across the US, advocating for their release in the face of this pandemic. One 40-year-old detainee from the Democratic Republic of the Congo described the situation facing him, his wife and their nine-year-old son. “Here in detention the situation is not good, especially as we hear about the spread of the virus outside of these walls. We can see on the news that the virus is spreading and that there is a serious risk,” he noted. “Here at this detention center, we do not have access to hand sanitizer or masks, or anything else that could protect as we are all stuck together in close quarters. The officials here have not said anything to us about what is happening outside, or any extra precautions that we should take.” In an online press conference held by RAICES on Wednesday, the wife of a detained immigrant reported that the detention facility’s staff have been given masks and hand sanitizer while the immigrants are given nothing.
Immigration policy impedes COVID-19 – U.S. immigration law and its enforcement as currently operated impede public health surveillance and interventions and are likely to thwart adequate measures against COVID-19. Business as usual in the immigration arena almost automatically casts vulnerable persons into conditions that would have appalled health workers a century ago and should alarm policymakers as well as health professionals today. The Department of Homeland Security’s Inspector General has found detention facilities “dangerously” overcrowded and lacking adequate hygiene and medical attention. On Jan. 29, Doctors Without Borders reported, “Just steps from the U.S. border in Matamoros, there are thousands of asylum seekers now living in makeshift camps with limited access to shelter or basic health care.” However unintended, the system is a jumble of recipes for contagion. Undocumented immigrants in the United States get inadequate or no health care. Many fear to report the illness. Many are likely to fear to cooperate in contact tracing, lest they bring family members and friends to the attention of immigration authorities. Intensified incarceration, despite alternatives, and management failure have resulted in confinement in substandard federal facilities, private facilities, and municipal rent-a-jails. We have dense concentrations of persons and confusion over and direct or indirect exposures. These put at risk those who run the system, those who work in or alongside it, those who get caught up in it, and the general public as well. Foreign visitors, students, and special hires lawfully in the United States are not exempt from enforcement or disease. Many are unaware that their visas die if not especially extended when their schools or workplaces are closed even temporarily. There is a concern in the immigration law community that individuals here on non-immigrant visas for employment or study could be subject to removal if the situations anticipated in their visas are interrupted, even for public health reasons. Federal policymakers should consider whether harsh, arbitrary enforcement in non-egregious immigration cases is worth the cost. This is less quantitative than a qualitative task. The scale is obvious.
Supreme Court to issue opinions as scheduled Monday — The Supreme Court will break with tradition and issue opinions Monday without taking the bench, a court spokeswoman said Friday.Kathleen Arberg said the justices held their private conference Friday to review petitions, with an unspecified number of the nine participating by telephone. All are healthy, she said, but there was another change in routine because of concerns over the coronavirus: “The justices are temporarily forgoing their traditional handshake.”The court is closed to the public, and the justices have indefinitely postponed two weeks of oral arguments scheduled to begin Monday.A majority of the justices are considered to be in the higher-risk category for coronavirus because of their ages. Justice Ruth Bader Ginsburg turned 87 on Sunday, and Justice Stephen G. Breyer is 81. Justice Clarence Thomas is 71, and Justice Samuel A. Alito Jr. will turn 70 on April 1. Chief Justice John G. Roberts Jr. and Justice Sonia Sotomayor are 65.Typically when the court issues opinions, the justice who wrote the majority opinion reads a summary from the bench. Sometimes, a dissenting justice might also read. The opinions are issued in reverse seniority of the author, so the chief justice goes last if he has written an opinion. That pattern will continue when the opinions are posted on the website, supremecourt.gov, Monday morning beginning at 10. The court does not reveal in advance how many opinions will be issued, nor which cases will be decided. They could be any of the cases the court has heard since the term began in October, and the court has a heavy caseload.
Bloomberg lays off hundreds as coronavirus bears down – Mike Bloomberg’s defunct presidential campaign laid off hundreds more staffers Friday as he announced that that he’s folding his massive battleground operation into the Democratic National Committee. Many of the Bloomberg aides – including those purged in an initial round of dismissals – were holding out hope he would deliver on a promise to keep them on his payroll through November, particularly with the coronavirus baring down. But those hopes were also dashed Friday when the staffers were told in frank conference calls that Bloomberg would not move ahead with his planned super PAC, and instead would cede his state operation to the DNC, including an $18 million infusion to help presumptive nominee Joe Biden. The staffers, who said they were lured to the late-starting campaign with yearlong guarantees of competitive pay and health benefit packages, were invited to apply for jobs with the DNC as part of a “competitive process.” “I guess it’s cheaper to give the DNC $18 million than keep promises because @MikeBloomberg just fired his whole campaign staff – including those of us promised jobs though November on his IE,” Amol Jethwani, a former aide, wrote in a tweet. “Disappointed I don’t have a job. Not surprised that a billionaire is cheating scum.”
Spectacularly wrong: Why Wall Street doesn’t understand the corona virus – From the comfort of the sealed caverns of Wall Street the actual physical and social world is just an abstraction to be quantified and analyzed. One of Wall Street’s most prominent investment research and management firms released an analysis that says the corona virus won’t be all that bad for the economy. Analysts from Morningstar Inc. – which is actually headquartered in Chicago’s cavernous downtown – say that this pandemic will be a “mild pandemic.” I’m not sure how pandemics can be mild, but the analysts outline cases for “moderate” and “severe pandemics.” One of the things that gives these analysts such a sanguine view, particularly in the United States, is the country’s advanced health care system which is “likely much more prepared for the taxing of our hospital system, as we appear to have a massive lead over other developed nations in the number of intensive care unit beds per citizen.” And yet, a first-hand report from a physician in those hospitals suggests that there will be very little room for severe corona virus cases in any hospital ICU. Those beds are already being used by patients and not just waiting empty. In all likelihood, hospitals will be quickly overwhelmed and forced to decide who gets critical live-saving treatment and who does not. The “who does not” number could be very large if the Italian experience is anything to go by.The analysts do admit that lack of health insurance and paid sick leave will likely lead to higher infection rates in the United States than would otherwise be the case. Naturally, people without insurance will be reluctant to seek treatment, and those without paid sick leave may come to work even when ill in order to make enough money to pay their bills.The surprisingly upbeat report is based on the idea of a return to business as usual. The assumption is that the corona virus pandemic will not shatter confidence in our institutions which are so clearly incompetent and/or inadequate to the task of fighting this pandemic. For the first two months of this year the U.S. markets virtually ignored the growing dangers of a pandemic and assumed that any economic problems would be confined to China. In fact, even as infections spread like wildfire in China, market averages touched new highs. The idea that novel infectious diseases for which there is no treatment do not recognize national boundaries just didn’t occur to most investors and investment advisors. Reality, however, began to sink in by late February and led to the historic stock market collapse.
Dow plunges nearly 3,000 points as Fed intervention does little to subdue Wall Street’s distress – Fears that policymakers have not done enough to avert a protracted economic downturn deepened a sense of national crisis Monday and sent stocks to their worst single-day losses since the Black Monday crash of 1987. The sell-off accelerated, with the Dow Jones industrial average plunging nearly 3,000 points, after President Trump warned that disruption from thecoronavirus pandemic could last through August and issued new public health guidance, saying Americans should limit gatherings to no more than 10 people. He also defended his handling of the crisis, which has been marred by a slow rollout of testing, saying his administration has done “a fantastic job.”San Francisco area urged to shelter in place. The Supreme Court said it will postpone scheduled oral arguments through April, citing its stance during the 1918 Spanish flu epidemic and outbreaks of yellow fever in 1793 and 1798. On Wall Street, investors fled stocks, despite the Federal Reserve’s move Sunday night to cut interest rates to near zero and to begin purchasing $700 billion worth of Treasury bonds and mortgage-backed securities in a bid to calm jittery markets. The Dow Jones industrial average closed down nearly 13 percent in late trading before closing at 20,188, down more than 2,997 for the day. That marked the largest one-day point decline in U.S. history, though in percentage terms Monday’s 13 percent loss was topped by the nearly 23 percent decline on Oct. 19, 1987. All three of the Dow’s 2,000-point daily losses have occurred in the past week. The broader Standard & Poor’s 500-stock index and the technology-rich Nasdaq suffered similar setbacks. Trading was halted almost as soon as it began after stocks fell 7 percent, breaching a “circuit-breaker” designed to discourage panic selling. It was the third such halt in the past six sessions. Investors welcomed the Fed’s actions, but said the central bank needed to do more and do it quickly. Clogged markets for commercial paper – a form of short-term corporate borrowing – threaten to spill over into the banking system and cause a run on money-market funds, according to analysts at Bank of America.The Fed, joined by fellow banking regulators from the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, reiterated its call Sunday for banks to borrow from its “discount window.” The Fed has slashed the rate it charges banks for those short-term loans to just 0.25 percent, in hopes of spurring lending to cash-strapped businesses. Frustration is building with Washington’s failure to find a way to quickly assemble an economic rescue. “The fiscal response should already have been done,” said David Kotok, chairman of Cumberland Advisors. “And the fiscal response, in my estimation, will eventually have to be more than $1 trillion or the country is going to have a raft of bankruptcies.”
Here’s Why the Fed Hasn’t Yet Invoked Its 13(3) Emergency Powers to Stem a Stock Market Crash – Pam Martens – The U.S. stock market set new records yesterday – all of them bad. The Dow Jones Industrial Average suffered its worst point loss in history, closing down 2,997 points at 20,188.52, which effectively erases all of its gains in the last three years. On January 20, 2017, when Donald Trump was sworn in as President, the Dow closed at 19,827. It’s now grown by just 1.8 percent in total over that span of time. The Dow also had its second worst percentage loss in history yesterday, losing 12.93 percent. That loss is only exceeded by Black Monday, October 19, 1987, when the Dow lost 22.6 percent. It barely beats out October 28, 1929 when the Dow lost 12.8 percent and ushered in what would become the worst stock market crash in history. From late 1929 to 1933 the stock market would go on to lose 90 percent of its value and not reset the highs it had made in 1929 until 25 years later. Citigroup was the worst performing bank of all of the Wall Street behemoths, losing 19.30 percent in one trading day. And yet no matter what pundit you see on TV, all that one hears is that Wall Street banks have plenty of capital. These two things cannot be simultaneously true: the Fed cannot have had to be pumping hundreds of billions of dollars each week into Wall Street banks and their trading arms for the past six months (long before there was any coronavirus outbreak anywhere in the world) if these banks actually did have adequate capital.The chart above shows that the major Wall Street “universal” banks, which combine a toxic trading culture, tens of trillions of dollars of dark derivatives along with owning federally-insured banks that are backstopped by the taxpayer, are once again trading as a herd just as they did in the 2008 financial crash. Citigroup, as of yesterday’s close, has lost 48 percent of its market value since February 14. And Citigroup is not alone. JPMorgan Chase, Goldman Sachs, Morgan Stanley and Bank of America also hold insane levels of derivative exposure. Their likely insurance company counterparties, as outed by the Office of Financial Research, have also been bleeding massive amounts of common equity capital this year. And Deutsche Bank, Germany’s largest bank, is another counterparty that has been bleeding capital and setting all time lows. This is likely the key reason that the Federal Reserve has not used its Section 13(3) emergency lending authority and created a commercial paper bailout program and other such programs. Under the Dodd-Frank financial reform legislation of 2010, the Fed can only use those emergency lending authorities if it briefs the Senate Banking Committee and House Financial Services Committee, including providing the names of the banks getting the money. The Fed is also prevented from bailing out individual banks as it did in 2008 and can provide only broad-based lending programs. Fed Chairman Jerome Powell has repeatedly testified to Congress that the Wall Street banks it regulates have plenty of liquidity and capital. The Fed has been approving all of the stress tests for these banks and allowing them to spend tens of billions of dollars each year doing stock buybacks and paying increased dividends to their shareholders. Imagine the public and political backlash if it now turns out that the Fed has allowed these banks to become the same money-losing derivative casinos that they were in 2008 and they need trillions of dollars more in another bailout.
Fed Announces Program for Wall Street Banks to Pledge Plunging Stocks to Get Trillions in Loans at ¼ Percent Interest – Pam Martens – The Federal Reserve Board of Governors announced at 6 P.M. last evening that it is following the direction of Steve Mnuchin, the former foreclosure king who now serves as U.S. Treasury Secretary, and authorizing the reinstatement of a hideously operated, multi-trillion dollar bailout program for Wall Street’s trading houses known as the Primary Dealer Credit Facility (PDCF). Veterans on Wall Street think of it as the cash-for-trash facility, where Wall Street’s toxic waste from a decade of irresponsible trading and lending, will be purged from the balance sheets of the Wall Street firms and handed over to the balance sheet of the Federal Reserve – just as it was during the last financial crisis on Wall Street. The Fed fought for years in court to keep the details of the PDCF and its sibling Wall Street bailout programs a secret from the American people. Thanks to an amendment attached to the Dodd-Frank financial reform legislation of 2010 by Senator Bernie Sanders, the Government Accountability Office (GAO) was instructed to conduct an audit of the PDCF and the rest of the alphabet soup of programs the Fed set up to secretly funnel $29 trillion to the denizens of Wall Street, the foreign banks that were counterparties to their failing derivative trades, central banks, and even a hedge fund that was shorting the Wall Street banks’ own stocks. We learned from the GAO audit that the Primary Dealer Credit Facility was the largest Wall Street bailout program during the financial crisis. It issued 1,376 loans that cumulatively totaled $8.95 trillion. Just as is happening this time around, the Fed spun the story that the program would help American workers and businesses. It did no such thing. It went to bail out the trading and derivative operations of sinking ships on Wall Street as those same firms paid out millions of dollars in bonuses to their derelict executives and traders. Of the $8.95 trillion in loans issued by the PDCF, $5.7 trillion, or 64 percent, went to Citigroup, Morgan Stanley and Merrill Lynch according to the GAO audit. (The Levy Economics Institute, per chart above, found that percentage to be 67.3 percent.) Yesterday, CNBC spun the news about the program this way: “The Federal Reserve is adding another weapon in its effort to make sure households and businesses get the funding they need as the economy deals with the coronavirus crisis.” CNBC added that Treasury Secretary Mnuchin said the program would “help facilitate the availability of credit to American workers and businesses.” Only in some alternative universe from hell that exists in the likes of the brains of Lloyd Blankfein (the former CEO of Goldman Sachs who famously said he thought he was doing “God’s work”) could funneling $5.7 trillion to Citigroup, Morgan Stanley and Merrill Lynch be construed as helping American workers and businesses.
The Median US Stock Is Now Down 50% From Its Highs As World Loses $25 Trillion In A Month (27 Bloomberg graphs)Global stock and bond markets have seen $25 trillion of ‘paper’ wealth erased in the last month, wiping out all the gains from the Dec 2018 crash lows…. Global bonds are actually still up around $5 trillion while global stocks have lost around $5 trillion since the Dec 2018 lows, and a lot of those losses come from the US markets where the median stock is now down 50% from its highs… (because the Value Line index below is based on a geometric average the daily change is closest to the median stock price change) As Washington signs and promises more and more bailouts and helicopter money drops, USA sovereign risk is starting to get a little spooked… Systemic risk remains extremely elevated… Which makes sense when the world’s largest banks are seeing their credit risk explode like it did ahead of the Lehman crisis… And despite the endless liquidity from global central banks and polititicians, financial conditions are tightening at their fastest rate ever… And the real ‘fear’ trade is now at its most extreme since the peak of the Lehman crisis… Policy Fail – The Dollar rallied for the 8th straight day, soaring to a new record high despite The Fed opening unlimited FX Swap Lines… This is the largest 8-day rally in the DXY Dollar Index… ever! Greater even than when Soros broke The Bank of England in Sept 1992… But The Fed will “never give in”… Since the COVID-19 Malrarkey began, Chinese stocks remain the leaders (down only 12%), while Europe is the laggard… US equity markets soared today (thanks to the biggest short-squeeze in 7 years), but failed to erase yesterday’s gains… (NOTE Nasdaq just tagged unch from Tuesday and then rolled over – algo-tom-foolery)… On the week, it’s still a shitshow with The Dow worst, down 13%… Today saw “Most Shorted” stocks soar 8% – the biggest short-squeeze since August 2013… Directly virus-affected sectors rebounded today… VIX fell notably today, testing below 70 ahead of tomorrow’s Quad-Witch option expiry… Meanwhile, Boeing credit risk continues to soar (as questions rise about whether they should be bailed out or not)… And Ford suspended its dividend and withdrew its guidance sending its credit risk soaring… Credit markets were not buying what stocks were selling today… Treasury yields were mixed with the long-end higher and rest of the modestly lower (despite a huge range)… (10Y yields briefly dipped below 1.00% today) Another late-day purge in yields pushed 30Y to end higher on the day… Munis were massacred today – 10Y yield spiking 47bps!! (MUNI-BOND OUTFLOW ALMOST THREE TIMES PREVIOUS RECORD) EUR tumbled today to 3 year lows today in biggest loss since Jan 2001 (bigger than Jun 2016 Brexit vote loss) And Cable crashed to the weakest since 1985… Cryptos had a big day with Bitcoin Cash outperforming… Today’s commodity markets were dominate by oil’s biggest rally ever…however, given the carnage in crude, WTI is still down 20% on the week… Today was oil’s biggest daily gain… ever. Bouncing off a $20 handle and helped by talk of Trump intervention, WTI was up around 25%!! However, in context, it doesn’t look like much (apart from the insane $2 spike at settlement for a 35% surge intraday)… Oil and the dollar both rallied together late on… Gold was modestly lower on the day but silver actually managed gains, bouncing off $12 again.. And on a somewhat related note, is this the other reason why gold has been sold? Volatile day in PMs with Palladium best and Platinum worst… Finally, as Bloomberg notes, anyone referring to the past month’s plunge in U.S. stocks as a crash has history on their side. The S&P 500 Index’s volatility for the 10 trading days ended Wednesday was 122%, according to data compiled by Bloomberg. Only two periods have produced higher readings: the aftermath of the 1929 Black Tuesday crash and the 1987 Black Monday crash. The volatility gauge climbed more than 17-fold from Feb. 19, when the S&P 500’s latest bull market ended, through Wednesday. The FRA-OIS spread spiked once again today signaling major tensions in the liquidity markets remain… And global basis swaps spiked again (led by JPY) as the dollar shortage worsened today… In other words – whatever The Fed is doing – “It’s Not Working!”
Four senators sold stocks before coronavirus threat crashed market – Four senators sold stocks shortly after a January briefing in the Senate on the novel coronavirus outbreak, unloading shares that plummeted in value a month later as the stock market crashed in the face of a global pandemic. According to financial disclosure forms, Sens. Kelly Loeffler (R-Ga.), James Inhofe (R-Okla.), Dianne Feinstein (D-Calif.) and Richard Burr (R-N.C.) each sold hundreds of thousands of dollars in stocks within days of the Senate holding a classified briefing on Jan. 24 with Trump administration officials on the threat of the coronavirus outbreak. The sales raise questions about whether the senators violated the STOCK Act, a law that bans members of Congress from making financial trades based on nonpublic information. Loeffler and her husband, who is the chairman of the New York Stock Exchange, sold at least $355,000 in stocks from Jan. 24-31, according to Senate records, after the coronavirus briefing hosted by the Senate Health and Foreign Relations committees. The senator and her husband also sold $890,000 in stocks from Feb. 5-14, just days after the first confirmed coronavirus cases emerged in the U.S. but nearly two weeks before community spread of the disease was confirmed within the country. The sales, worth at least $1.2 million together, saved Loeffler and her husband from steep losses they would have incurred after the stock market’s crash began Feb. 24. Loeffler said in a pair tweets Friday that she doesn’t control her and her husband’s financial assets and was informed of the sales on Feb. 16. Loeffler was among several Republican senators who tamped down concerns about the administration’s response to the coronavirus outbreak while selling stocks that soon plunged within weeks of the disease spreading within the U.S. Loeffler is facing a tough election race this year, which includes a challenge from Rep. Doug Collins (R-Ga.). Inhofe sold at least $180,000 in stocks on Jan. 27, days after the Senate’s coronavirus briefing, according to Senate records. Inhofe also sold at least $50,000 in stock in an asset management company on Feb. 20, four days before the stock market crashed.
NYSE Kicks Out Humans, Moving Temporarily To Fully Electronic Trading — Just in case the NYSE trading floor, which in the past decade became better known for being a TV studio for various financial networks wasn’t enough of a ghost town, starting Monday not a single trader, or TV anchor, will be present at the historic downtown NYC venue after at least one person tested positive for covid.In a notification posted late on Wednesday, the NYSE said it would initiate its business continuity plan and move, on a temporary basis, to fully electronic trading on Monday, March 23. The decision to temporarily close the trading floors represents a “precautionary step to protect the health and well-being of employees and the floor community in response to COVID-19.”“NYSE’s trading floors provide unique value to issuers and investors, but our markets are fully capable of operating in an all-electronic fashion to serve all participants, and we will proceed in that manner until we can re-open our trading floors to our members,” said Stacey Cunningham, President of the New York Stock Exchange.“While we are taking the precautionary step of closing the trading floors, we continue to firmly believe the markets should remain open and accessible to investors. All NYSE markets will continue to operate under normal trading hours despite the closure of the trading floors.”Trading and regulatory oversight of all NYSE-listed securities will continue without interruption. All-electronic trading will begin with Monday’s market open. The facilities to be closed comprise the NYSE equities trading floor in New York, NYSE American Options trading floor in New York, and NYSE Arca Options trading floor in San Francisco.
Things Have Changed – Kunstler – At least in wartime, the bars stay open. That’s how you know this is a different thing altogether from whatever else you’ve seen in your lifetime. Even those of us who signed up for this trip – that is, who expected a long emergency – may be a little bit in cosmic awe at just how much shit is flying into the ol’ fan. I know I am. The gods must have glugged down a mighty draft of Dulcolax. The mega financial bubble-of-bubbles is deflating with frightful velocity precisely because of the efforts since 2008 to artificially inflate it. The Federal Reserve gave it one final blast Sunday night – while everybody else was counting their rolls of toilet paper – and the effect was like blowing hot air into a shredded Zeppelin. Stock futures are “limit down” as I write, before the Wall Street open. Nobody really knows how deep and how harsh this gets (and perhaps the ones who have a clue ain’t sayin’). But the situation presents two salient questions: how much disorder is entailed in this ordeal? And what does the world look like when the convulsion phase of this thing is over? Americans have never been through anything remotely like this. The disorders of the Civil War were sharp and horrendous military operations conducted mostly in cornfields, pastures, and woods (yes, and some small cities like Richmond, pop. 38,000, and Atlanta, pop. 10,000). When the smoke cleared, battered Dixieland emerged to numb civil order. Up in Yankeedom, the New York draft riots ran for a week around the small patch of Manhattan island, but everybody else went along with Mr. Lincoln’s program. After all that, America got on quickly with the lively business of the 19th century: railroads, mines, factories, and all that. The world wars took place in foreign lands, and the home-front scene of the 1940s now looks nostalgically idyllic. The stresses mounting on the national scene today reflect the extreme fragilities of the way-of-life we constructed since then, and an awful lot of bad choices we made in the process, like suburbanizing the nation and making everybody a hostage to happy motoring. I won’t belabor that point, except to ask how are those vast regions of the country going to manage daily life as the supply chains wobble? I’d say a shortage of toilet paper may only be the beginning of their problems. The cities – at least, the few that didn’t already implode from the inside out – made assumptions about how big and tall they could grow which don’t jibe with the new circumstances chugging ferociously down the line. Just think what a lockdown of the global economy will do to all those residential skyscraper projects lately hoisted up in New York, San Francisco and Boston? I’ll tell you: They are assets instantly converted into liabilities. And how will these cities even begin to pay for maintaining their complex infrastructures and services when the money for all that no longer exists and there’s no way to pretend that it will ever come back? Answer: They won’t be able to keep borrowing and they won’t manage. These cities will depopulate and there will be battles over who gets to live in the parts that still may have some value, like riverfronts.
Liquidity Panic Reaches Staples- Kraft Heinz To Fully Draw Down $4 Billion Revolver – Last week investors were shocked when a barrage of major US corporations – including Boeing, Hilton, Wynn and a handful of PE portfolio companies – announced their decision to fully draw down on their existing credit lines. That said, for all the ominous banking crisis undertones – many still remember that one of the early symptoms of the global financial crisis was countless companies whose revolvers were pulled by a panicking banking sector – there was a common theme linking all these companies: they were all in sectors (airlines, casinos, lodging, energy) that were directly impacted by either the coronavirus pandemic or the recent oil price war. Today, that changed when food giant Kraft Heinz – which should be benefiting generously from the recent food hoarding panic – was set to also draw down on its credit facility of as much as $4 billion, even though it faced none of the same coronavirus/oil headwinds as so many other companies that jumped the gun to boost their liquidity while they still could.”We maintain our $4.0 billion senior credit facility, and subject to certain conditions, we may increase the amount of revolving commitments and/or add additional tranches of term loans in a combined aggregate amount of up to$1.0 billion,” the company said. Speaking to Bloomberg, which first reported the drawdown of the Buffett-owned company, a Kraft Heinz spokesman said that “the demand for our brands, our cash flow and our balance sheet remain strong,” which is a rather bizarre explanation why it would need billions more in liquidity. “As a matter of practice, we typically maintain a conservative liquidity posture, which is even that much more important as we focus on making sure all our products remain available to the public during these challenging times.”
A Revolving Panic- Here Are The Companies That Have Fully Drawn Down Credit Lines This Week – In the aftermath of the great Commercial Paper panic of 2020, which erupted over the past two weeks when initially the Fed failed to launch a Commercial Paper backstop facility, something it did with a two day delay on Tuesday, countless blue chip (and less than clue chip) companies found themselves with gaping liquidity shortfalls, and to bridge their funding needs, they rushed to draw on their existing credit facilities (also a hedge in case the banking system imposes a lending moratorium similar to what happened in the 2008 crash). As a result, corporate borrowers worldwide, including Boeing, Hilton, Wynn, Kraft Heinz and dozens more, drew about $60 billion from revolving credit facilities this week in a frantic dash for cash as liquidity tightens. On Wednesday alone, another seven more companies – CEC Entertainment, Metropolitan Transportation Authority, Diamondrock Hospitality, Tailored Brands, J Jill, Boyd Gaming, and National Vision – announced intentions to draw down credit lines. As of Friday morning, the week recorded $58BN of drawdowns, more than a five-fold jump from the $11BN for the whole of the previous week, according to Bloomberg data. The total drawdown would bring the utilization ratio above 24%, double from the 12% as of 4Q19 for US Investment Grade companies. Thursday alone saw $21BN of facilities drawn, just short of the $21.3BN recorded on Tuesday, with Ford ($15.4BN), Kohl’s ($1BN), TJX ($1BN) and Ross Stores leading the revolving charge. What is concerning is that despite the Fed’s CP backstop, companies continue to draw down on revolvers, whether because the rate on their CP is too high, or they simply do not trust banks. The BofA table below summarizes all the companies that have drawn down on their revolver in response to the the Global Corona/Crude Crisis…
Distressed Debt In The US Doubles In 2 Weeks To $500BN As BofA Expects Surge In Defaults – Last week, in the aftermath of the historic oil price collapse, we warned that the long-awaited “fallen angel” day has arrived, as $140 billion in oil producer (and up to $360 if one includes the mid-stream companies) investment grade debt was on the verge of being downgraded to junk and throwing the entire high yield market in turmoil.Fast forward to today when Bloomberg calculates that since we published out article, the amount of distressed debt – a term that describes borrowings likely to default – in the U.S. alone has doubled to a half-trillion dollars as the collapse of oil prices and the fallout from the coronavirus shutters entire industries.While rating agencies have been slow to respond to the total collapse in cash flow generation across most US industries as long as the US economy remains paralyzed due to the spreading lock downs across the nation, markets have been far faster, and the result has been a plunge in the price of countless bonds. As a result, corporate bonds – which according to BofA are no longer properly functioning – that yield at least 10% points above Treasuries, as well as loans that trade for less than 80 cents on the dollar, have swelled to $533 billion. This is more than double from the March 6 total of only $214 billion. And, according to UBS, if one adds across all company debt globally, including loans to small- and mid-sized companies that rarely if ever trade, the distressed pile could top $1 trillion. And yes, that number is only going to surge. An analysis via Trace shows that the amount of distressed bonds has surged to the highest level since the financial crisis, surpassing the oil/manufacturing recession of 2016.
Fed to create emergency backstop for commercial debt market – The Federal Reserve said it will use emergency authority to provide a liquidity backstop for commercial debt issuers as the coronavirus scare has raised concerns about the flow of credit. The central bank said Tuesday that it was establishing the Commercial Paper Funding Facility to “support the flow of credit to households and businesses.” The facility resembles a backstop the Fed created for the commercial paper market in the 2008 financial crisis. “By ensuring the smooth functioning of this market, particularly in times of strain, the Federal Reserve is providing credit that will support families, businesses, and jobs across the economy,” the Fed said in a press release. The CPFF will act as a liquidity backstop to U.S. issuers of commercial paper through a special-purpose vehicle that will in turn purchase unsecured and asset-backed commercial paper from eligible companies, the Fed said. The Fed’s latest action came amid calls from several market observers for the central bank to do more to prop up markets in the face of the virus scare. The Treasury Department is providing $10 billion of credit protection to the Fed from the department’s Exchange Stabilization Fund. The Federal Reserve Bank of New York also has committed lending to the facility on a recourse basis. “By eliminating much of the risk that eligible issuers will not be able to repay investors by rolling over their maturing commercial paper obligations, this facility should encourage investors to once again engage in term lending in the commercial paper market,” the Fed said. “An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak.” The special-purpose vehicle will stop purchasing commercial paper March 17, 2021, unless the Fed decides to extend the facility. The Fed’s latest action came amid calls from several market observers for the central bank to do more to prop up markets in the face of the virus scare. Some commentators raised the concerns that recent interest rate cuts and other actions from the central bank will not directly reach those who most need help from economic stabilization efforts. The Fed said the commercial paper facility will be created under authority granted by Section 13(3) of the Federal Reserve Act.
Fed announces launch of second facility to support credit markets – – The Federal Reserve announced it is establishing a credit facility for primary dealers under its emergency powers, on the same day it exercised its authority to restart a liquidity backstop for commercial debt issuers. The Primary Dealer Credit Facility “will allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households,” the Fed said in a press release release. The new facility will be available March 20, the Fed said.The move is among a flurry of recent Fed actions intended to limit the economic impact of the coronavirus. Treasury Secretary Steven Mnuchin said in a statement that he had sent Fed Chairman Jerome Powell a letter Tuesday approving the creation of the PDCF. “The global coronavirus outbreak has contributed to significant financial market volatility,” said Mnuchin. “The establishment of a PDCF will help address illiquidity, mitigate disruptions in funding markets, support smooth market functioning and help facilitate the availability of credit to American workers and businesses.”The PDCF will only be accessible to primary dealers of the Federal Reserve Bank of New York, and will provide loans for terms of up to 90 days. Loans made under the PDCF will be charged an interest rate equal to the primary credit rate at the New York Fed. Borrowers will be able to pledge investment grade corporate debt securities, commercial paper, municipal securities, mortgage-backed securities and asset-backed securities. Also eligible is any collateral that can otherwise be pledged in open market operations.The PDCF will be in place for six months, but could be extended, Mnuchin said in a stataement. Earlier Tuesday, the Fed said it would establish the Commercial Paper Funding Facility to “support the flow of credit to households and businesses.” The CPFF will act as a liquidity backstop to U.S. issuers of commercial paper through a special-purpose vehicle that will purchase unsecured and asset-backed commercial paper from eligible companies, the Fed said. The facility was last activated during the financial crisis.
Agencies encourage banks to use their capital to boost lending – – The federal banking agencies took steps to encourage financial institutions to dip into capital and liquidity coffers as households and businesses cope with the economic challenges of the coronavirus.The regulators issued a joint statement Tuesday that they support banks “that choose to use their capital and liquidity buffers to lend and undertake other supportive actions in a safe and sound manner.” The statement was similar to one issued solely by the Federal Reserve Board over the weekend.The extra capital and liquidity cushions that banks built following the 2008 financial crisis “were designed to provide banking organizations with the means to support the economy in adverse situations and allow banking organization to continue to serve households and businesses,” according to the joint statement by the Office of the Comptroller of the Currency, Fed and Federal Deposit Insurance Corp. The agencies also issued an interim rule that makes a technical change to banks’ capital requirements. The rule, which revises the definition of “eligible retained income” aims to soften the impact of regulatory restrictions on capital distributions in order to enable banks to more easily reduce their capital levels.“The interim final rule … addresses the impact of recent dislocations in the U.S. economy as a result of COVID-19,” the agencies said in the new regulation. “By modifying the definition of eligible retained income and therefore allowing banking organizations to more freely use their capital buffers, this rule should help to promote lending activity and other financial intermediation activities by depository institutions, bank holding companies, and savings and loan holding companies and avoid compounding negative impacts on the financial markets.”In their joint statement, the agencies’ noted that the largest banks hold $1.3 trillion in common equity and $2.9 trillion in high-quality liquid assets, which is well in excess of their regulatory minimums.The new actions Tuesday were accompanied by the Fed’s announcement that it was reviving a financial crisis-era facility that provides a backstop to the commercial paper market. On Sunday, the Fed separately took steps effectively slashing the federal funds rate to zero, as well as urging financial institutions to use their capital buffers to support lending.
Regulators issue more guidance on banks’ pandemic response -Federal banking regulators took a series of steps Thursday to further guide banks in supporting customers, small businesses and communities in the midst of the coronavirus outbreak.The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency expanded activities eligible for Community Reinvestment Act credit to include actions that support communities affected by the pandemic. The agencies also clarified earlier guidance encouraging banks to use their capital and liquidity buffers for lending efforts. The joint statement on CRA built on guidance last week, when the FDIC and OCC advised banks that examiners would not penalize institutions for allowing loan flexibility or taking other measures to help their customers. Now, the host of actions banks are encouraged to take in order to help customers – including waived fees, loan deferment and “alternative servicing” in light of bank branch closures – will be eligible for CRA credit. That guidance is consistent with past action in response to natural disasters and other crises, such as the destruction in Puerto Rico after Hurricane Maria. The agencies’ announcement on Thursday said they would consider CRA credit for additional community development activities as well, including loans, investments and services that support digital access, health care, small-business expenses and even food for low-to-moderate income communities. According to the regulators, the expansion of CRA-eligible activities will be in effect through the six-month period after the U.S. lifts the national emergency declaration. The actions announced Thursday were among a flurry of moves from the regulatory agencies to help banks and their customers cope with the financial fallout from the pandemic. The FDIC also separately issued two “frequently asked questions” documents – one for banks and another for consumers – to “address a variety of issues that may arise as financial institutions work with customers and communities affected by COVID-19.”
Sherrod Brown calls on regulators to suspend non-coronavirus rulemaking – Sen. Sherrod Brown has requested that financial regulators suspend all rulemaking unrelated to the coronavirus pandemic. Earlier this week Brown wrote letters to a number of regulators, calling for comment periods closing after March 1 to be suspended or extended for at least 45 days. The Ohio Democrat reached out to the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the National Credit Union Administration, among others. “The COVID-19 virus threatens both the health of the public and the economy,” Brown wrote. “It presents immediate challenges to real households and every entity in the housing market, from frontline homelessness providers to homeowners. In light of this crisis, we urge you to implement an immediate moratorium on rulemakings not related to the virus response or other imminent health and safety concerns.” Brown, who is the ranking member on the Senate Banking Committee, additionally called for regulators to put their resources toward responding to the health crisis and providing guidance. The verbiage in Brown’s letters varied slightly depending on which agency it was directed at, though there were no substantial differences. The United States had over 14,000 COVID-19 cases and 205 deaths as of Friday mid-morning, according to a database from Johns Hopkins University. Across the country, officials have closed schools, ordered non-essential businesses to shutter and requested that people stay home as much as possible to try and stem the spread of the disease. Given these difficult circumstances, Brown was concerned that the public wouldn’t be able to meaningfully engage with the agencies to provide thoughtful suggestions or comments on proposed rules.
Virus focus further dashes banks’ hopes of pot banking, AML reform – Despite partisan divisions in Congress, banks were hopeful that lawmakers could come together on a select number of industry-backed bills that had bipartisan support.But with Congress now shifting gears to efforts to stabilize the financial markets, the coronavirus outbreak has further narrowed the odds for progress on bills to help banks service marijuana businesses and require businesses to disclose their beneficial owners.“It’s going to obliterate the legislative calendar,” said Brian Gardner, an analyst at KBW. Dwight Fettig, a former Democratic staff director for the Senate Banking Committee, agreed that preexisting banking policy issues such as cannabis banking and beneficial ownership are not currently on the radar for members of the Senate and House banking committees.“I think it’s fair to say that the committee staff … are going to be extremely busy and have been extremely busy working on their pieces of the coronavirus legislative efforts,” said Fettig, a partner at Porterfield, Fettig & Sears. “That’s talking about forbearance for mortgages, student loans, emergency rental assistance and transit assistance.”Before the coronavirus pandemic hit the U.S., bank lobbyists were urging the Senate to take up two key bills that had passed the House in 2019. One would bar regulators from penalizing banks that opened accounts for cannabis businesses in states where the substance is legal. Bankers also saw potential for Congress to reform decades-old anti-money-laundering laws and pass a bill that would require businesses to report their true owners to the Financial Crimes Enforcement Network. That bill would take the burden off of banks to report beneficial ownership information for their customers.
McWilliams urges FASB to halt CECL implementation – Federal Deposit Insurance Corp. Chairman Jelena McWilliams has joined a growing chorus of voices seeking a delay of a controversial accounting rule for anticipated loan losses.McWilliams on Thursday called on the Financial Accounting Standards Board to let banks that are subject to the Current Expected Credit Losses standard to postpone implementation due to challenges created by the coronavirus outbreak. She also asked FASB to impose a moratorium on the effective date for banks and credit unions that are otherwise required to convert to the standard in January 2023. “In view of the unprecedented challenges, FDIC is concerned that the scheduled introduction of recently enacted accounting standards may strain the ability of financial institutions to serve their depositors and prudently meet the credit needs of their communities,” McWilliams wrote in a letter to Shayne Kuhaneck, the FASB’s acting technical director.Lawmakers and financial industry trade groups have ramped up opposition to CECL since the onset of the pandemic. McWilliams is the first regulator to express support for halting implementation. A FASB spokeswoman said Thursday afternoon that it was reviewing McWilliams letter. On Monday, the Credit Union National Association called for pushing back CECL’s effective date for credit unions by a year, until January 2024. The American Bankers Association announced its support Wednesday for a bill introduced by a group of Republican lawmakers that would push conversion for community banks back to the same period.
Regulator predicts delay in GSE capital rule due to pandemic – The Federal Housing Finance Agency became the first financial regulator Wednesday to announce a rulemaking delay resulting from the coronavirus outbreak. FHFA Director Mark Calabria said the agency will push back the timeline for overhauling Fannie Mae and Freddie Mac’s capital framework. The FHFA had committed to revising a previous plan developed under the Obama administration and issue a new proposal to establish risk-based capital requirements for the government-sponsored enterprises once they exit conservatorship. But on the same day his agency had already announced a foreclosure halt because of the virus, Calabria said the public health crisis will complicate the notice and comment process for advancing the capital proposal. He noted that FHFA usually meets with external parties to discuss a proposal, but given the crisis, the “ability to hear from the public is compromised.” “We are delaying the opening of existing comment period until we have some certainty on what the current overall situation is,” said Calabria, speaking Wednesday on a conference call with members of the Exchequer Club. “We’re going to be cognizant of the fact that it may be very difficult for people to weigh in.”
Will more regulators call for delay of CECL? -The novel coronavirus has the potential to stop a controversial accounting standard before it really kicks in.Bankers and lawmakers have been pressuring the Financial Accounting Standards Board for years to delay implementation of its Current Expected Credit Losses standard, or CECL, which would require banks and credit unions to project lifetime credit losses the day they originate a loan. With the pandemic weaking havoc on lenders, Federal Deposit Insurance Corp. Chairman Jelena McWilliams entered the debate on Thursday, releasing a letter calling on FASB to postpone CECL for large publicly traded institutions that converted to the standard on Jan. 1. McWilliams pressed for a moratorium for smaller banks and credit unions set to convert January 2023. The letter also urged FASB to exclude any coronavirus-related loan modifications from being classified as troubled debt restructurings.
Consumers seek early access to wages to soften coronavirus hit – As the coronavirus pandemic wreaks economic havoc in the U.S. – one estimate says 3 million jobs will be gone by summer – it’s pushing consumers to take advantage of the early wage access programs offered by fintechs like PayActiv, DailyPay and Branch. Some of these providers are making the service free.To be sure, the practice of letting people borrow from their own next paycheck is controversial. Some critics say the fees charged are usurious, no better than a payday loan. Others argue that even when the fee is low or waived completely, it is still a bad idea for people living on the financial edge to borrow from future earnings.“Early wage access programs are no panacea for the current crisis, and in fact the crisis illustrates the limits of those programs,” said Lauren Saunders, associate director of the National Consumer Law Center. “This crisis will not be over in one paycheck, yet taking money from next week’s paycheck just creates another hole to fill and less ability to meet future challenges that will only get worse.”But desperate times arguably call for desperate measures.The economic toll of the coronavirus is bound to be tougher on that 74% of workers who, according to the American Payroll Association, live paycheck to paycheck. According to the Federal Reserve, 40% of American adults will not be able to cover a $400 emergency with cash, savings or a credit card charge that they could quickly pay off. They have no reserve to draw from when they are furloughed.As reports of companies laying off and furloughing employees due to the coronavirus pandemic roll in, lower-income households are being hit hardest. According to an NPR/Marist poll conducted last week, 18% of households have already have had one person laid off or received a cutback in hours due to the outbreak. Among households with less than $50,000 in income, a quarter have lost jobs or seen hours cut; in households earning more than $50,000 the rate is 14%. Meanwhile, the regular rent, mortgage and utility bills roll in and families need to buy extra supplies for indefinite periods of working and schooling from home. All of this is driving people to early wage access companies, to fill those pressing needs that are hopefully short-term.
Long-term crisis could put GSEs on unsteady ground, FHFA chief says – Federal Housing Finance Agency Director Mark Calabria said Thursday that if the economic fallout from the coronavirus lasts longer than a few months, the agency might have to seek help from Congress or the Federal Reserve to support the government-sponsored enterprises. Although Fannie Mae and Freddie Mac are currently equipped to handle an uptick in delinquencies, the mortgage giants are less prepared to do so over the long term, Calabria said. “If this is a short-term event – say six to eight weeks – we believe that Fannie and Freddie and the servicers are equipped financially to be able to get through this time,” he said in an interview on CNBC. “If this goes beyond that, then we may be having to look for public assistance from Congress [or] from the Fed.” FHFA on Wednesday directed Fannie and Freddie to suspend all foreclosures and evictions for at least 60 days for homeowners with mortgages backed by the GSEs. But Calabria added Thursday that the agency will “certainly roll out something larger if it looks like this crisis is going to go beyond that.” Although Fannie Mae and Freddie Mac are currently equipped to handle an uptick in delinquencies, the mortgage giants are less prepared to do so over the long term, Calabria said. FHFA is also urging any borrowers affected by the coronavirus to contact that mortgage servicer about loan forbearance. As long as borrowers in forbearance plans meet the terms of those plans, no negative information will be reported to the credit bureaus, Calabria said.
Fed keeps trying to calm markets; Mortgage payment pause considered -“Taking a page from its 2008 financial crisis playbook,” the Federal Reserve said it would start buying commercial paper, “a key funding source used by companies to cover payroll and day-to-day operations,” the New York Times reports. The Fed also said “it would roll out a new Primary Dealers Credit Facility, which will allow banks that are key conduits between the Fed, Treasury Department and the broader financial system to get the short-term loans they need to buy and hold securities including corporate bonds.” Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker here and here Despite the two moves, “the question still looming over the Fed is just how far is the central bank willing to go to keep credit flowing to consumers and businesses,” American Banker says. In Europe, top bankers “are trying to calm fears about an incipient financial crisis after huge drops in their securities over the past two weeks, reflecting growing investor concern about the economic fallout of the coronavirus pandemic,” the Financial Times reports. Both Ana Bot’n, executive chairman of Spain’s Santander, and a top Deutsche Bank executive, said they expected a “v-shaped” recovery. Bot’n said her bank is “well-positioned to withstand even a severe stress scenario.” But there’s not as much optimism in Italy, where “an epic misfortune is playing out,” the New York Times says. “Fears are intensifying that the economic damage could trigger a far more familiar danger – a banking crisis. If the downturn persists, many Italian companies could find themselves short of the profits needed to repay their loans. That could weaken bank balance sheets to the point of crisis.” In the U.K., the Financial Conduct Authority “has told banks and investment managers to take a flexible approach to loan repayments, account fees and savings withdrawal penalties, to help ‘meet the challenges coronavirus could pose to customers and staff,’” the FT notes. “Measures include using the flexibility within existing rules to give customers easier access to their cash, such as waiving fees for individual savings accounts and allowing them to cash in fixed-term deposits early. Other recommendations are that lenders support borrowers who are in difficulty and “show greater flexibility to customers in persistent credit card debt.’” The Housing Policy Council, a group of banks and other mortgage industry participants that includes Citigroup, Wells Fargo, JPMorgan Chase and Quicken Loans, “is working on a plan to offer a temporary pause in payments on home loans,” the paper says. “Details were still being decided, but the plan would allow borrowers to stop paying for as long as the public health and economic disruptions lasted,” according to Ed DeMarco, the CEO of the group, who also said the “group wanted it in place by April 1.”
Trump administration to halt foreclosures as pandemic worsens – Responding to concerns about the impact of the coronavirus outbreak on the housing sector, the administration announced steps Wednesday to halt foreclosures on government-backed mortgages. In a press conference, President Trump said he had directed the Department of Housing and Urban Development to suspend all evictions and foreclosures on HUD-backed properties until the end of April. Moments later, the Federal Housing Finance Agency said it was directing Fannie Mae and Freddie Mac to suspend all foreclosures and evictions for at least 60 days for homeowners with mortgages backed by the government-sponsored enterprises. News of the temporary freezes came after the administration had faced increasing pressure from members of Congress and advocates to prevent consumers from losing their homes as the economic fallout from the spread of COVID-19 worsens. “We’re working very closely with [HUD Secretary] Dr. Ben Carson and everybody from HUD,” Trump said. FHFA Director Mark Calabria said the foreclosure suspension “allows homeowners with an Enterprise-backed mortgage to stay in their homes during this national emergency.” “As a reminder, borrowers affected by the coronavirus who are having difficulty paying their mortgage, should reach out to their mortgage servicers as soon as possible,” Calabria said in a statement. FHFA had previously issued guidance urging borrowers affected by the coronavirus to reach out to their servicers about forbearance options. The agency will continue to monitor the situation going forward and “update policies as needed,” FHFA said. Just this week, over 100 Democrats in the House urged the Trump administration to establish a moratorium on foreclosures and evictions from properties owned or insured by government agencies. Meanwhile, two Senate Democrats have introduced a bill providing a four-month pause in consumers getting penalized on their credit reports for missed payments. In their letter Tuesday to various agencies, 106 House Democrats called for the foreclosure and eviction freeze on properties backed by Fannie Mae, Freddie Mac, HUD, the Department of Veterans Affairs, and the Department of Agriculture’s Rural Housing Service. They did not specify a duration for the moratorium.
Empire Fed Survey Crashes By Most Ever To 11-Year-Lows – After what appears now to be pure hope-driven rebound in February – despite all real world signals screaming otherwise – the Empire Fed’s Manufacturing Outlook survey just crashed by the most on record to its lowest since April 2009…The Federal Reserve Bank of New York’s general business conditions index fell 34.4 points to -21.5… The survey responses were collected between March 2 and March 10.Manufacturers in New York expect a gloomier future too. The index of future business conditions also dropped to an 11-year low. A gauge of shipments fell to the weakest level since September 2016, and the index of the average employee workweek slumped to its lowest level since December 2015.The Empire State survey is the first of several regional Fed manufacturing indexes to be released for the month. Others for areas including Philadelphia, Richmond and Dallas will be released throughout the month. We suspect those rebounds will all be devastated.
Philly Fed Crashes By Most On Record To 9 Year Lows – After soaring unexpectedly to two-year highs in February (as stocks ignored the global disruptions), Philly Fed’s Business Outlook Survey has collapsed in March. From 36.7 in February, Philly Fed plunged to -12.7 (massively worse than the +8 estimate from clearly cognitively challenged analysts). That is the weakest level since September 2011… Graph Source: BloombergThis is the biggest drop in Phily Fed… ever… Source: Bloomberg Under the hood – everything tumbled…
- March prices paid fell to 4.8 vs 16.4
- New orders fell to -15.5 vs 33.6
- Employment fell to 4.1 vs 9.8
- Shipments fell to 0.2 vs 25.2
- Delivery time fell to -9.1 vs 2.7
- Inventories fell to 1.7 vs 11.8
- Prices received fell to 6.8 vs 17.1
- Unfilled orders fell to -7.4 vs 7.4
- Average workweek fell to 0.5 vs 10.3
Hotels: Occupancy Rate Declined 24.4% Year-over-year – From HotelNewsNow.com: STR: US hotel results for week ending 14 March: Showing further COVID-19 impact, the U.S. hotel industry reported negative year-over-year results in the three key performance metrics during the week of 8-14 March 2020, according to data from STR. In comparison with the week of 10-16 March 2019, the industry recorded the following:
• Occupancy: -24.4% to 53.0%
• Average daily rate (ADR): -10.7% to US$120.30
• Revenue per available room (RevPAR): -32.5% to US$63.74
Performance declines were uniform across chain scales, classes and location types. “To no surprise, the hurt continued and intensified for hotels around the country,” said Jan Freitag, STR’s senior VP of lodging insights. “The performance declines were especially pronounced in hotels that cater to meetings and group business, which is a reflection of the latest batch of event cancellations and government guidance to restrict the size of gatherings. “The questions we are hearing the most right now are around how far occupancy will drop and how long this will last. Through comparative analysis of the occupancy trends in China and Italy over the past weeks, we can with certainty say that we are not yet close to the bottom in the U.S. However, the timeline for that decline and the eventual recovery are much tougher to predict because there is still so much uncertainty around the COVID-19 case numbers in the U.S. and how serious citizens are when practicing social distancing. China and Italy saw a more abrupt decline in occupancy because of stricter lockdowns. That will dictate the speed of recovery.” The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels). 2020 was off to a solid start, however, COVID-19 is now significantly impacting occupancy. It is likely the four week average will drop below the 2009 average during the crisis.
Walmart shortens its hours and stores across America close their doors – CNN -The coronavirus crisis is hurting America’s retail industry, so many stores are shutting their doors or reducing their hours.Walmart (WMT), the largest retailer in America, said Saturday that it will modify its store hours in response to the pandemic, while other retailers plan to temporarily close stores.Beginning Sunday, all of Walmart’s more than 4,700 US stores will be open from 6 am to 11 pm until further notice. The company said the shortened hours will help employees restock shelves overnight and clean stores. Thousands of Walmart stores are already operating under shortened hours.Walmart employees will keep their regular daytime or evening shifts, the company said.Other US grocery stores, including Publix, Giant, Stop & Shop and H-E-B have also modified their hours in recent days as the virus has spread.Late Saturday, Urban Outfitters (URBN) said it will close all of stores around the world and will not reopen them until at least March 28. Patagonia (HGLD), Glossier and Neighborhood Goods have also announced their stores will temporarily close.
Walmart joins group of retailers reducing hours, adding special shopping time for seniors – Walmart cut its store operating hours for the second time in a week Wednesday, in addition to making other store changes amid continued concerns over the coronavirus pandemic. Walmart stores in the U.S. will be open from 7 a.m. until 8:30 p.m. beginning Thursday. The move will “further help associates restock the shelves for customers while continuing to clean and sanitize the store,” Dacona Smith, Executive Vice President and Chief Operating Officer of Walmart U.S., said in a Wednesday statement. “Our associates have been nothing short of heroic in their commitment to serve customers, stock shelves as quickly as possible and keep their stores clean,” Smith added. “When their communities needed them the most, our people have been at their best. Their efforts continue to be a tremendous source of pride for everyone at Walmart.” The store also announced that it will be offering special shopping hours for seniors amid the pandemic. From March 24 through April 28, shoppers 60 and older will be able to enter the store one hour before it opens for all customers. Walmart’s pharmacies and vision centers will also be open to older customers, who are considered among the most vulnerable to the virus, during that time. The store announced that it will have item limits for customers purchasing paper products, milk, eggs, cleaning supplies, hand sanitizer, water, diapers, baby formula and baby food. Grocery stores across the country have been cleared out as Americans stock up on food and other essentials in the case of an emergency, although public health officials and grocery stores have discouraged many from doing so. Walmart will also make changes to two of its department: its auto care centers and vision centers. The stores will temporarily close their auto care centers so that those store associates can help stock and sanitize stores across the country. Walmart vision centers will provide essential services such as glasses repair and filling “existing orders.” At least one store associate will remain in the vision centers, while others will be assigned to “help in the rest of the store,” according to the Wednesday statement.
Amazon suspends warehouse shipments except high-demand products – Amazon has temporarily suspended the shipment of all items from independent merchants to its warehouses that are not medical supplies or “high-demand” products. This temporary suspension will go through 5 April as the e-commerce giant prioritises products relating to combating the growing coronaviruspandemic. “We are temporarily prioritising household staples, medical supplies and other high-demand products coming into our fulfilment centres so we can more quickly receive, restock, and ship these products to customers,” an Amazon spokesperson told the Independent. “We understand this is a change for our selling partners and appreciate their understanding as we temporarily prioritise these products for customers,” the spokesperson added. This decision from Amazon comes after the online site saw an increase in shopping from people around the world. Items prioritised by shoppers and subsequently going out of stock related to cleaning supplies and other necessary items for Covid-19. Independent merchants already experienced issues with selling their products after factories in China shuttered during its own outbreak. As China has gotten a handle on the coronavirus in its country, some of these factories have opened up. But now merchants will have to determine what to do with their products. Amazon said products already en route to its warehouses will be accepted and shipped out. But no new products will be accepted for the next three weeks.
Casino industry estimates $21B in economic losses from coronavirus – The American Gaming Association (AGA) found that if casinos stay closed for the next eight weeks, it will cost the U.S. economy $21.3 billion in direct consumer spending, according a report released on Wednesday. Ninety-four percent of the commercial casinos in the U.S. were closed as of Wednesday afternoon and 37 percent of tribal casinos. Over 530,000 gaming industry employees are out of work, which is 96 percent of the total U.S. casino workforce, according to AGA. The group said it is working with the White House and Congress on relief packages for these employees and providing lawmakers with specific ideas that will provide the liquidity needed to support employees. “The American Gaming Association, in partnership with our colleagues across the hospitality sector, is engaged with Congressional and administration leadership to shape stimulus and aid packages that will support employees, their families, and our communities through this unprecedented crisis,” AGA Senior Vice President of Strategic Communications Casey Clark said in a statement. Casino closures could lead to nearly $59 billion in total wage loss annually for casino workers. Additionally, casino gaming typically generates $34.4 billion in annual total tax revenue. AGA also noted that half the jobs the gaming industry supports are at non-gaming businesses such as restaurants and local shops. Earlier this week, the National Retail Federation asked for a direct, government-based loan program and the National Restaurant Association called for financial relief, loans and tax measures to help it combat the crisis. The airline industry, through Airlines for America, requested $50 billion in the form of grants, loans and tax relief to weather the coronavirus downturn. And the tourism industry, through the U.S. Travel Association and the American Hotel and Lodging Association, has called for $150 billion in overall relief.
Update: Decline in Restaurant Traffic –There are some sectors that will be hit hard over the next several months: hotels, airlines, restaurants, movie theaters, sporting events, and convention centers. People will probably avoid these places as part of social distancing.Here is some restaurant data from OpenTable: This data shows the year-over-year change in diners as tabulated by OpenTable for the US, the states of Washington and New York, and a few impacted cities (Seattle, San Francisco, and Boston).This data is updated through March 15, 2020. Seattle and San Francisco saw a dramatic decline starting at the beginning of March. Starting a few days ago, restaurant traffic is declining sharply just about everywhere. As of yesterday, San Francisco was off 72% YoY, Boston was off 70% YoY, and Seattle was off 62%. Going forward, restaurants are closing in many states (or going to half occupancy). Clearly the US will need to help the employees (and owners) of these impacted sectors.
Supermarkets limit shoppers as FDA officials warn against excessive buying — The novel coronavirus has pitched grocers onto the front lines of an accelerating public health crisis, forcing many chains to reduce hours and put buying caps on such high-demand foods as ground beef and frozen pizzas. Now some chains and independent grocers are restricting the number of shoppers in their stores or offering hours only for the elderly. In a statement Tuesday, FDA Commissioner Stephen M. Hahn discussed additional steps to help preserve the food supply chain as “grocery stores face unprecedented demand.” “While we are confident that stores will remain open and supply will continue to meet demand nationwide, we ask all Americans to only purchase enough food and essentials for the week ahead,” Hahn said. Industry experts and trade groups say it’s only a matter of time before supermarkets take even more drastic measures, as they look for ways to curb the spread of the highly contagious virus among customers and employees. Many are looking abroad for guidance. In Italy, Lidl is capping stores to 20 shoppers at a time, who are limited to 10-minute slots. In the United Kingdom, some supermarkets are opening an hour early, at 8 a.m., to accommodate elderly shoppers, who are at higher risk if they contract the virus. In China, at the height of its outbreak, stores checked customers’ temperatures at the door and required them to stand at least three feet apart from others in line. U.S. chains such as Kroger, Walmart and Dollar General have already begun shortening store hours to allow employees enough time to restock and disinfect at the end of the day. Costco said in an email to members on Tuesday that it would begin restricting the number of shoppers in stores in the interest of social distancing but did not provide details on how it would do so. Target announced it would reserve an hour on Wednesday mornings for elderly shoppers and those with underlying health conditions.
American Airlines to suspend nearly all long-haul international flights starting March 16 (Reuters) – American Airlines Group Inc (AAL.O) on Saturday said it will implement a phased suspension of nearly all long-haul international flights starting March 16, amid reduced demand and travel restrictions due to the ongoing coronavirus outbreak. Between March 16 and May 6, American will reduce its international capacity by 75% on a year-over-year basis, it said in a statement, adding the changes will result in the airline parking nearly its entire widebody fleet. The airline also anticipates its domestic capacity in April will be reduced by 20% on a year-over-year basis. Domestic capacity for the month of May will be reduced by 30%, the company added.
Covid-19 Could Bankrupt Most Airlines By End Of May – Sydney-based consultancy CAPA Centre for Aviation warned in a statement on Monday morning that most of the world’s airlines will be bankrupt by the end of May. Airline carriers are suspending routes for March, April, and May, and full grounding of fleets have yet to be ruled out as flight restrictions have been placed across the world, spurring a collapse in demand, due to the Covid-19 pandemic. “As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants. Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full,” CAPA said. CAPA said, “demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon.” It said cancellations among global carriers had been seen in more significant amounts with new flight restrictions coming online.Henry Harteveldt, a travel industry analyst in San Francisco, tweeted on Sunday evening that a “Growing number of sources within #airlines & DC telling me the WH giving serious consideration to grounding all passenger flights for 14-30 days (cargo would be exempted).” Treasury Secretary Steven Mnuchin was heard on Saturday, indicating that the Trump administration is laser-focused on providing relief for airlines and other industries affected by the groundings. CAPA said, “coordinated government and industry action is needed” to avoid a collapse of the airline industry. Otherwise, “emerging from the crisis will be like entering a brutal battlefield, littered with casualties.”
Big Three Automakers To Close Factories Due To Coronavirus; Tesla Defies Order – The Big Three Detroit automakers – General Motors (GM), Ford (F) and Fiat Chrysler(FCAU) – are shutting down their factories amid the ongoing coronavirus crisis. Honda Motor(HMC) also is halting North America production. Meanwhile, Tesla (TSLA) continues to keep its Fremont, Calif., factory running despite an order to stop. General Motors confirmed that it will shut all its North America plants “at least” until March 30 due to coronavirus fears. Ford and Fiat Chrysler also have agreed to close plants due to Covid-19 fears, according to multiple reports. They are expected to confirm the shutdowns today. Both Ford and Fiat Chrysler have had employees test positive for coronavirus in the past 24 hours.Ford said it will temporarily suspending production at its manufacturing sites in North America following Thursday’s evening shifts through March 30. This will allow it to clean its facilities to protect its workforce and boost containment efforts.”We’re continuing to work closely with union leaders, especially the United Auto Workers, to find ways to help keep our workforce healthy and safe – even as we look at solutions for continuing to provide the vehicles customers really want and need,” Ford’s president of North America Kumar Galhotra said in a press release. The move will idle about 150,000 autoworkers. They are expected to receive supplemental pay in addition to state unemployment benefits. Combined these should roughly equal what they usually earn.
Automakers shut North American plants over coronavirus fears – – Concerns about the spreading coronavirus forced most of North America’s auto plants to close, at least temporarily. Ford, General Motors, Fiat Chrysler, Honda, and Toyota said they would shut down all factories in the region, citing concerns for employees who work in close quarters building automobiles. Nissan will close U.S. factories. Hyundai shut down its Alabama plant after a worker tested positive for the virus.Detroit’s three automakers said their closures would begin this week, while Honda and Toyota will start next week. Nissan will close U.S. plants starting Friday. Closings will run from a few days to over two weeks, but most automakers said they’ll have to evaluate the spread of the virus before reopening.“We have been taking extraordinary precautions around the world to keep our plant environments safe, and recent developments in North America make it clear this is the right thing to do now,” GM CEO Mary Barra said in a statement. Detroit’s three automakers alone will idle about 150,000 workers. They likely will receive supplemental pay in addition to state unemployment benefits. The two checks combined will about equal what the workers normally make. GM said pay was still being negotiated with the United Auto Workers union. Ford said it will work with union leaders in the coming weeks on plans to restart factories. The union has been pushing for factories to close because workers are fearful of coming into contact with the virus.
Detroit automakers shut down plants but workers may return to build ventilators – Detroit automakers shut down their North American plants this week amid growing fears over coronavirus spreading among blue-collar employees working in tight quarters. Soon they could be back – building ventilators as a shortage presents the US with a potential health crisis. Relations between the Big Three – General Motors, Ford and Fiat Chrysler – have been tense of late after GM workers walked out in their first strike in a decade. But most workers are probably open to returning to the line, said D’Andre Jackson, a United Auto Workers (UAW) committee representative at GM’s Flint Assembly Plant. He added that he would “go back if it would help the country”. “I think the majority of the UAW members wouldn’t mind doing what it takes to get America back running,” Jackson said. Though workers just demanded to leave the plant over coronavirus fears, Jackson said the cause has changed. “Instead of working for profit, you’re working to help save some lives, and I think a lot of people would join in on that,” he said. “It’s what they did during wartime, and that’s what they say we’re in now. I think that if it was on a voluntary basis they could get people to go back in.” Both automakers have confirmed that they are in discussions with the US government, which this week invoked the Defense Production Act, legislation that goes back to the second world war and grants the president broad powers to direct industrial production. “Right now, we are doing an internal study to evaluate this as an option, and we are looking at ways we could help during this crisis including potentially supporting production of medical equipment such as ventilators,” a GM spokeswoman, Jeannine Ginivan, told the Guardian. However, a United Auto Workers spokesman, Brian Rothenberg, said the proposal had not been run by the union. Its leadership was busy working to shut down the plants and did not immediately have a comment, he added. It’s unclear how retooling the factories or sending workers back into them during a pandemic might work. The Trump administration economic adviser, Larry Kudlow, told Fox News this week that an executive said she “might even ask them to do it on a voluntary basis for civic and patriotic reasons. That’s the kind of can-do spirit that we’re hearing and seeing”. Ford, which will suspend production following Thursday evening shifts through 30 March, said in a statement that it “stands ready to help the administration in any way we can, including the possibility of producing ventilators and other equipment”.
Keeping the Lights On: US Utility Sector Braces for Coronavirus Impact – Every industry in the world faces dangers and disruptions from the COVID-19 pandemic. Not all of those industries are tasked with keeping the lights on. U.S. power utilities and generators face an array of risks in the weeks ahead, from energy “demand destruction” as economies slow to tightening debt conditions that could ripple through the commodity markets. So far, North American utilities have not yet seen the sort of power demand reductions that occurred during China’s massive lockdown or those now hitting European countries. But they’re likely to start seeing similar impacts soon, according to a Tuesday update from the Wood Mackenzie Power & Renewables and Energy Transition teams. Italy, as one example, saw an 8.1 percent week-on-week decrease in energy demand after the country ordered its citizens to stay at home and forced the closure of all nonessential businesses, as the chart below illustrates. Depressed demand from commercial and industrial consumers is an obvious source of concern for American electricity companies, particularly in power markets such as Texas’ ERCOT where falling oil and natural-gas prices could cripple those industries. Texas is by far the largest U.S. wind market and the No. 2 market for solar behind California, fueled in part by the state’s voracious C&I power demand. In contrast to C&I, residential electricity demand is “relatively more stable under economic distress,” WoodMac’s report said. “The key question is how long the situation lingers,” said Dan Shreve, WoodMac’s head of global wind energy research. “A months-long economic slowdown will likely induce a minor recession and will probably lead to a minor reduction in power demand.”
ComEd CEO: Exelon expects to have pandemic plan in place through the summer – Exelon and its subsidiaries expect to operate under the pandemic preparedness plan through the end of summer, Commonwealth Edison CEO Joe Dominguez told Utility Dive on Tuesday. President Donald Trump also said on Monday the new outbreak could stretch into August, matching the Exelon utilities’ pandemic response plan. ComEd, serving Chicago and much of northern Illinois, has been responding to the spread of the novel coronavirus ahead of its fellow subsidiaries. “Chicago was one of the first areas in the country to identify the new cases,” putting ComEd at the forefront of utilities that had to react, Dominguez said. Exelon subsidiaries are “all moving on the same continuum, but not necessarily at the same speed … we just go to that a little sooner.” ComEd is not currently facing reliability impacts, said Dominguez, but scheduling delays due to the coronavirus will delay policy work in the state legislature. This diminishes the chances for a passage of a clean energy bill that would empower state regulators to exit the PJM Interconnection, as the Illinois legislature is expected to adjourn at the end of May. “The load profile of the United States is shifting right now,” Scott Aaronson, vice president of security and business continuity at the Edison Electric Institute (EEI), told Utility Dive. “What that looks like remains to be seen.” ComEd is watching how the virus and the response to the virus affect load, “as we see businesses shut down,” according to Dominguez. The coronavirus is “not a major structural change to energy consumption patterns. I don’t think we’re thinking of redesigning [when nuclear and other resources are run] around an event that has that kind of time limitations,” he said. One potential concern for ComEd and other utilities in the country, however, is losing staff. “Massive absentee rates” would likely lead to reduced or scattered shifts, he said, as greater absenteeism “could impact restoration time in the case of storm” or other outages. Dominguez is “most concerned of an operational failure,” or the potential for critical infrastructure needs repairs and not having the “workforce to restore it.”
Millions of Americans could lose their jobs in a coronavirus recession. Many won’t get severance – The odds of slipping into a recession are increasingly likely as the global coronavirus outbreak puts acute stress on the U.S. economy. That could be bad news for American workers, who may lose jobs by the millions in a downturn. For those workers who don’t receive severance pay, the financial impact could be especially devastating. “The ripple effect can be dramatic in so many different industries.” The coronavirus, which causes a disease officially known as COVID-19, has spread rapidly around the globe since it originated in China late last year. More than 169,000 people have been infected worldwide, and more than 6,500 have died. Financial markets have cratered. American life has come to a screeching halt, as schools and cultural institutions have closed, sports leagues have suspended their seasons, major events have been canceled and state officials have moved to ban large gatherings. Officials from major cities like New York have ordered bars and restaurants to close to limit community spread. Economic cracks are beginning to emerge. Small-business owners are starting to report supply-chain problems and lost sales. The travel industry is reeling. Big oil and gas companies are slashing spending and cutting dividends amid a plunge in oil prices. Consumer spending has fallen as Americans pull back from their daily routines. The coronavirus fallout has been so dramatic that many economists think the U.S. is headed for a recession. Some economists believe the recession has already begun. “I wouldn’t be one bit surprised if when we look back at the data, it is decided … that the recession started in March,” Blinder, a former Federal Reserve vice chairman and now a professor at Princeton, told CNBC’s “Squawk Alley.” Some reports have emerged that layoffs have already begun in businesses across the country.
14 Million Americans Have Been Laid Off So Far Due To COVID-19 – A staggering 9% of working Americans, or 14 million people, have been laid off as a result of the Chinese coronavirus panic, while 25% of workers have had their hours reduced according to extrapolated polling by Survey USA. A SurveyUSA poll taken one week ago showed just 1% of Americans would take home no paycheck.Virtually every American was either laid off or has family members & friends who have. I know AN ENTIRE IMMEDIATE FAMILY (husband,wife, two adult children & their 2 spouses) all laid off in last 72 hours.But some people want to argue over what name we should use for the virus – Marco Rubio (@marcorubio) March 20, 2020 Of note, in California alone, Governor Gavin Newsom said on Thursday that unemployment insurance filings had spiked by 80,000 on Tuesday alone, vs. the usual rate of around 2,000 per day. Meanwhile in Ohio, jobless claims have spiked to nearly 140,000 vs. last week.
Nearly 20% Of Households Have Already Lost Work Due To Pandemic-Shutdowns The arrival of helicopter money in the form of two $1,000 checks to most Americans is the government’s acknowledgment that the economy crashed, and upwards of 30 million people could be unemployed due to the Covid-19 outbreak shutting down cities and towns across America.A new NPR/PBS NewsHour/Marist poll has shown that 1 in 5 households have already experienced a layoff or reduction in work hours thanks to social distancing measures enforced by the government that is grinding local economies to a halt.People across the country are staying home, avoiding large crowds, and ordering food on Amazon, as the fast-spreading virus is rapidly infecting people in New York, Washington state, and California. Confirmed cases have now been recorded in all 50 states. The federal government missed containment windows to implement social distancing policies by nearly a month, and this means cases are likely to be exponential in the days or weeks ahead. Deaths have stayed low at this point because ICU treatment capacity at major hospitals has yet to be overwhelmed, but when they do, America could be the next Italy. Bill Gates said on Wednesday that virus shutdowns could last upwards of ten weeks. The most affected industries have so far been restaurants, bars, hotels, casinos, cruise ships, and airlines, but as we noted last week, the ripple effect has collapsed the entire gig and service economy. The poll was conducted on March 13-14, shows layoffs and reduced hours had already hit 18% of households. Lower-income households were hit the hardest, at least a quarter of them were making $50,000 per year had the most hours cut or experienced the most significant amount of job losses. Most of the jobs that experienced reduced hours or have been entirely cut have been blue-collar and service or retail jobs, which cannot be conducted remotely.
Oil giants set health checks for critical staff, work-from-home rules – (Reuters) – Major energy companies in the United States imposed work-from-home rules for office staff and began health checks for remote or critical workers as coronavirus spread and threatened an industry reeling from falling demand and profits. BP, Exxon Mobil, Kinder Morgan, Motiva Enterprises and Royal Dutch Shell told most office staff to work from home starting Monday. Federal regulators on Friday were pressed by companies to ease work rules for pipeline operators and to limit visits to some sites. Shell and Chevron began health checks of workers and visitors at some key U.S. facilities, spokesmen said. Offshore rigs, refineries and pipelines require on-site teams and group workers in close quarters, making them vulnerable in a Covid-19 outbreak. They cannot be run remotely and health checks could prevent forced shutdowns that could lead to big losses or local fuel shortages. The pandemic has infected more than 156,000 people worldwide including some 2,900 people in the United States, killed more than 5,800 globally and slashed fuel demand amid shuttered schools, churches, offices and some retail stores. There is only one known case of Covid-19 to hit a U.S. refinery. Marathon Petroleum Corp, the nation’s largest refiner by capacity, removed some staff at a California plant after an employee became ill. Norwegian oil firm Equinor halted a North Sea development project and removed staff after an offshore worker fell ill. Falling oil demand and a price-war that slashed crude prices by about 50% this year has put the industry in a tailspin. Many oil firms have abruptly cut spending and staff to cope with the downturn. Work-at-home rules, fewer car and plane trips are expected to reduce U.S. petroleum demand by up to 2.5 million barrels per day (bpd). For the full year, it could cut motor fuel use by roughly 300,000 to 400,000 bpd. There have been no refining or chemical plant shut-ins caused by coronavirus. Still, companies are drafting plans similar to hurricane measures that keep plants running with minimal staff, said people familiar with operations. Shell asked salaried staff at its Louisiana refineries to begin shadowing hourly plant operators to prepare managers to run units if necessary, the people said. Exxon will allow only trained operators into control rooms at its Baytown plant, and they must remain at least six feet apart from one another, they added.
‘Grotesque Level of Greed’: Owned by World’s Richest Man Jeff Bezos, Whole Foods Wants Workers to Pay for Colleagues’ Sick Leave During Coronavirus Pandemic When progressives like Sen. Bernie Sanders say “now is the time for solidarity” amid the coronavirus outbreak, they likely do not mean that employees of Whole Foods – owned by the world’s richest man, Jeff Bezos – should be asked to give their own accrued paid sick days to their co-workers who have either contracted the deadly virus or been forced to take time out of work because of what is now a global pandemic.But that is exactly what executives with the grocery chain are asking its employers to do, even though Bezos’ could effectively give them unlimited paid sick leave during the current national emergency without barely a scratch in his bank account.In a letter sent to employees earlier this week, Whole Foods CEO John Mackey explained that one of the options available to workers was for them to “donate” their “paid time off” (pto) days to a pool that other workers could draw from.Journalist Lauren Kaori Gurley, who broke the story with reporting for Motherboard, notes that “as a subsidiary of Amazon, the world’s biggest company, Whole Foods could easily afford to pay its hourly employees for sick days taken during the coronavirus outbreak without breaking the bank. Instead, the company has put the onus back on workers, and they’re not happy about it.”In Mackey’s letter reviewed by Motherboard, the executive stated: “Team Members who have a medical emergency or death in their immediate family can receive donated PTO hours, not only from Team Members in their own location, but also from Team Members across the country.” Though such labor practices are not unusual – with workers in various sectors and industries pooling accumulated sick leave for a colleague experiencing a long-term illness – doing so in the face of a global pandemic, in which all members of society are equally at heightened risk, the move was seen by critics as shortsighted, tone deaf, and cruel. The fabulous wealth of Bezos only increased the ire for many.
$1.4 Billion In Sporting Event Tickets May Have Just Went Poof! – The shock and fallout from the coronavirus has been no more noticeable in many American households than with the suspension of major sporting events. But the shock isn’t just on TV. The secondary market for ticket holders has also collapsed, with a total of $1.4 billion worth of tickets now “up in the air”, according to Bloomberg. The $1.4 billion number doesn’t even include the NHL or NBA playoffs (which would be taking place in upcoming months) and is indicative of a small sliver of money that could be lost as a result of the global coronavirus outbreak. The Los Angeles Lakers alone, for example, have $82.1 million in tickets tied to finishing the rest of the regular season. The Toronto Maple Leafs have $42.2 million.Over the last week, almost all major sporting leagues have suspended events, led by the NBA who abruptly cancelled a Utah Jazz vs. Oklahoma Thunder game last week, before shortly announcing that the rest of the league would be suspended. The Utah’s Jazz’s Rudy Gobert tested positive for the novel coronavirus, it was revealed the next day.Executives at the NHL and NBA have said they intend on completing the season, but there’s no timeline for doing so as of yet. TicketIQ said they would refund any ticket sold on their site for events that have been canceled. For games that have been “postponed”, the site says it is waiting to hear from the league.
“Unparalleled Challenge” – Inside America’s First Locked-Down Major City, “Everything’s Out Of Our Control” – The number of confirmed COVID-19 cases in the US has more than doubled in the last several days. California Governor Gavin Newsom has issued a state-wide “stay at home” order amid the virus outbreak – the strongest and most restrictive measure passed by a governor yet. On Tuesday, there were about 5,700 confirmed cases in the US. But by Thursday the number exploded to 11,500. Now, on Friday morning, confirmed cases stand at 14,000. The announcement comes after San Francisco and the surrounding Bay Area issued ‘shelter in place’ orders after a surge of deaths and confirmations in the state. As of Friday morning, there are 18 virus-related deaths.Several days into one of the most extreme lockdowns, Bay Area residents have been forced to stay at home, only allowed to leave for essential travel, such as shopping for groceries, medications, fuel, caring for others, and exercise. NBC News spoke with one resident, Trish Tracey, who had to shutter her restaurant on Tuesday in the Mission district. She laid off her entire kitchen staff of 17 employees and has tried to renegotiate her lease. “Everything is out of our control,” Tracey said.The uncertainty of where the city is in the pandemic curve has left everyone confused. Strict social distancing rules have been enforced to slowdown infections to prevent local hospitals from becoming overburden with virus patients.”The goal is to get up and running again and put all my employees back to work,” Tracey said. “I wish I could say with certainty that would happen, and I’m very determined, and I lasted five years because of that, but everything is on pretty shaky ground right now.”The mass lockdown in San Francisco is serving as the blueprint of how other local governments in the state might have to resort to Martial law-style lockdowns. Other states, such as New York and Maryland, could be days or weeks away from a major lockdown to flatten the curve.Bay Area hospitals have started seeing an influx of COVID-19 patients in recent weeks:“This is a challenge unparalleled to any challenge I have faced in the last 28 years of my career,” Dr. Baldev Singh, a pulmonary critical care physician in nearby San Jose.
Music in the age of plague – If you hadn’t noticed, every single major tour within the next six months has been postponed, or will be postponed but can’t admit it. Glastonbury has been cancelled, the Stones are not rolling and Eurovision, to everyone’s great consternation, is off. No better is this wave of mutilation captured than in the share price of Live Nation, the totemic $7.8bn music company that acts across all the verticals of the live music industry: This isn’t just a problem for the big artists but the smaller ones also who, having worked tirelessly to reach a level where a combination of two tours a year, merchandise sales and various content-related income streams can support a semblance of a normal lifestyle, will be struggling to keep their heads above water. You may think that everyone self-isolating will mean more streaming, but from what we know so far that’s not the case. In Italy, the top 200 songs on Spotify actually saw a 23 per cent decline in the number of streams between March 3 and March 17, according to Quartz. Perhaps because music was often listened to in the office, or on the way to work, and is a poor substitute for other forms of entertainment when at home.Calls have been made for Spotify to triple the royalty fees it pays to musicians over this period to make up any deficit, but given the company’s relative lack of profitability, this seems unlikely. Other businesses, however, have been more supportive. Bandcamp, the digital music storefront, has waived its share of the artists’ revenues today to drum up cash for those at the bottom of the food chain. So our advice would be to Alphaville readers with deep pockets and secure jobs looking to support their favourite artist: buy a limited edition vinyl of your favourite act on Bandcamp. Now. (From the internet, obviously, not an actual physical store.) Whether it be a chart-topper, or a compilation of private label American new-age music, every penny counts.
Utilities Face Pressure To Stop Shutting Off Services Amid Coronavirus Pandemic —A breakup doubled Andrea Guinn’s living expenses overnight. Saddled with the bills and rent for the apartment she once shared with her ex in Queens, she fell behind on payments to Consolidated Edison, the $29 billion investor-owned utility that enjoys a monopoly on electricity in New York City. By February, the 33-year-old said, she paid off all but $74 of the nearly $600 she owed the utility and stayed current on her monthly bills. But one night last month, she came home and discovered Con Edison had cut her power off anyway. She charged her dead phone on a nearly drained laptop battery and called the company, demanding it turn the power back on after failing to give proper notice. Staying awake by candlelight, she finally reached an operator at 1 a.m. The utility restored electricity the next day. So as the coronavirus outbreak cascaded into a full-blown economic and public health crisis this week, Guinn was relieved when New York regulators said Friday that electrical and gas utilities across the state had agreed to stop disconnecting services for nonpayment. “It shouldn’t take a pandemic for people to realize that energy should be a right,” said Guinn, 33, who works in Manhattan as a graphic designer. “Even briefly having that interrupted made me realize how precarious our system is… it’s terrifying.” By Friday evening, regulators in at least eight states and five cities had directed utilities to maintain connections to ratepayers struggling to keep up with bills as officials urged Americans to stay home to avoid spreading COVID-19, the disease caused by the novel coronavirus. Nearly 50 more companies voluntarily pledged to postpone shutoffs, according to a survey by a watchdog group.
‘We’re hustlers’: Amid coronavirus fears, this couple has made more than $100,000 reselling Lysol wipes – As Manny Ranga and his wife, Violeta Perez, loaded up their Ford F-150 pickup outside a Costco near downtown Vancouver this week, some passersby couldn’t help but stop and stare. What stood out wasn’t just the sheer volume of the couple’s purchase. It was the fact that it was all the same product: Stacks upon stacks of Lysol disinfecting wipes. The couple say they’ve made a bundle in the past three weeks hitting up every Costco store in the region each day, buying up as many Lysol wipes and liquid cleaners as they can – spending thousands of dollars at a time – and then reselling them, mostly on Amazon, to private individuals and companies. Amid the growing coronavirus outbreak, the hoarding and reselling of certain household supplies to make a quick buck has become a global phenomenon, contributing to frenzied panic buying by shoppers who’ve been fed a steady diet of images of empty store shelves on social media. Ranga, 38, said one six-pack of wipes that goes for $20 at Costco can fetch four times that online. (A check of Amazon on Thursday showed that a six-pack was going for $89 under their seller name “Violeta & Sons Trading Ltd.”)
Florida governor refuses to close beaches as coronavirus cases rise | TheHill -Florida Gov. Ron DeSantis (R) said Tuesday that he will not be ordering the beaches in his state to close despite growing concerns over the international COVID-19 outbreak, NBC News reports. DeSantis said that beaches in the state must adhere to guidelines issued by the Centers for Disease Control and Prevention (CDC), which has advised the public to practice social distancing and avoid gatherings with more than 10 people.”What we’re going to be doing for the statewide floor for beaches, we’re going to be applying the CDC guidance of no group on a beach more than 10 and you have to have distance apart if you’re going to be out there. So that applies statewide,” DeSantis reportedly said at a press conference.“We’ve seen some big crowds on the west coast of Florida and I’ve had a chance to speak to mayors on both coast today,” DeSantis also said, according to a local NBC affiliate. “If … they want to continue to [leave the beach open], we want them to have the freedom to do that, but we also want them to have the freedom to do more if they see fit.” The Florida Republican added that it is “not uniform throughout the state that you’re seeing massive crowds at beaches.” However, DeSantis did urge students celebrating spring break to exercise more caution as the state works to combat the spread. Florida’sDepartment of Health has reported more than 280 cases of residents with the virus and seven deaths so far.“The universities with the spring break … a lot of students have just been congregating at the universities and going out and doing things there, and that’s not something we want,” DeSantis said at one point during his press conference on Tuesday, according to Fox News.His comments came after footage went viral recently showing thousands of beachgoers descending on Clearwater Beach, Fla., despite warnings from health officials urging social distancing amid the COVID-19 pandemic. Though the CDC has said experts are still learning how the novel coronavirus spreads, it says on its website that the disease is thought to be transmitted primarily through “person-to-person” contact.
Coronavirus in California: Toilet paper alternatives cause sewer problems – Some desperate California residents resorted to using shredded T-shirts in the absence of toilet paper during the coronavirus crisis – but ended up wiping out a sewer line. Wastewater management officials in Redding said workers had to take swift action to prevent a dangerous spill after the soiled fabric caused a backup. “The pumps were clogged by what appeared to be shredded T-shirts that were used in place of toilet paper,” the city said, according to the Redding Record Searchlight. As a result of the crappy situation, officials put out the word: “Bag it. Don’t flush it.”
Self-Defeating Fuck-Ups – Part II – Dave Cohen — By now you’ve probably heard the term – social distancing. In short, the call is for humans to isolate themselves from others to prevent an exponential rise in COVID-19 cases. What’s the quickest way to drive a human crazy? Well, one of the fastest, most effective ways is to put them in solitary confinement. As I’ve stressed in the past, humans are social animals. With exception of true introverts like me, humans thrive around other people. Humans get energy from social interactions. If those interactions are cut off, humans become angry. If they are helpless and thus can not fix the problem, they become depressed and despondent, which often serves to mask their anger. Sorry, that’s just the way it is. But wait, there’s more. I’ll use my local situation as an example. I’m in Pittsburgh. It’s pretty typical of what’s happening in the United States. Can I go to a movie? Nope. The theatres are closed by state decree. Can I go to my local bar? Nope. All the bars are closed by state decree. Can I go out to eat? Nope. All the restaurants are closed by state decree. Can I go out to hear some music? Nope. All such venues are closed by state decree. Can I go to see a hockey or basketball game? Or watch one on TV? Nope, the NHL and NBA have suspended play. Can I go anywhere outside the house to be around other people? Nope, unless it’s a gathering of less than 10 as decreed by the state. Can I at least go to a liquor store to buy some wine and drink it at home to let off some steam? Nope, the state-controlled liquor stores are closed by state decree. Now, if you combine stressful social isolation with the cutting off of nearly all modes of socializing or the standard modes of coping to ease life’s pain, what do you think is going to happen? Here’s what I think is going to happen: the big brains of a lot these stressed out humans are going to go haywire. And lots of those humans own guns here in the United States. There’s been a run at the grocery stores on bottled water, toilet paper and other paper products, canned goods and frozen vegetables. At Walmart and other big box retailers, there’s also been a large run on guns. And the longer this goes on, the greater the chances that people’s big brains will go haywire. Sorry, but that’s just how humans work.
New York City finally closes public schools during coronavirus pandemic – After an unconscionable delay, Democratic New York Governor Andrew Cuomo announced on Sunday evening that New York City, the largest city in the United States, would close its public schools this week. According the United Federation of Teachers (UFT), students will not report to school on Monday and will remain out until April 20. Staff, however, will go into work on Tuesday, Wednesday and Thursday to prepare distance learning lessons. Public health experts and epidemiologists have advised federal, state and local governments for weeks now that the most significant action they could take to mitigate sickness and death from the coronavirus was to encourage social distancing by limiting large gatherings and closing down large public institutions such as schools. On March 6, for example, Dr. Howard Markel, a specialist in the history of pandemics, wrote an Op-Ed in the New York Timesentitled, “Coronavirus School Closings: Don’t Wait Until It’s Too late.” Referencing his study of the 1918-1919 Spanish Flu pandemic, Markel wrote, “School closing turned out to be one of the most effective firewalls against the spread of the pandemic; cities that acted fast, for lengthy periods, and included school closing … saw the lowest death rates.” However, as late as last Monday only 507 schools were closed in the US, roughly 0.4 percent of the total. With the rapid spread of the pandemic beginning to take hold in public consciousness over the past week, amid the complete absence of federal action, local and state officials were forced to carry out statewide and district closures en masse. As of this writing, 26 states have now closed all public schools, and a total of at least 56,000 schools have closed, affecting at least 29.5 million public school students. New York City is a center of the coronavirus outbreak in the United States. While thousands in the city are in quarantine and, as of Sunday, 269 people have tested positive for the COVID-19 virus, these figures do not reflect the full scale of the pandemic, since testing is not widely available. Two people have died from the virus, but that number is expected to increase substantially. New York City has the country’s largest school district, with 1.1 million students in 1,900 schools. Cuomo also closed public schools on Long Island and in Westchester County, another center of the coronavirus outbreak, on a similar schedule. The incredibly long delay of school closures to these districts has undoubtedly magnified the spread of coronavirus throughout the region.
Why the Coronavirus Pandemic Could Weaken the School Privatization Agenda – As Valerie Strauss at the Washington Post reported, popular college admission exams such as the SAT and ACT were suddenly being canceled, and some states and school districts were considering cancelations of standardized testing or giving mixed messages about enforcing assessment policies.The U.S. Department of Education also announced it would consider waiving the national requirement for states to conduct annual assessments.A few days later, Strauss reported, state leaders in Texas and Washington canceled testing and Ohio Governor Mike DeWine indicated an inclination to eliminate exams. Those early cancelations seemed to have resulted in a domino effect as more states canceled or suspended tests or sought waivers from the federal government.Some states are choosing to shutter school buildings for the rest of the academic year, while pledges some schools have made to take learning online seem unrealistic.Among the states to outright cancel was Florida, where Governor DeSantis also pushed back school openings and waived the 180-day requirements for students.Fund Education Now issued a thank-you to DeSantis for dropping the tests and seat-time requirement, but Oropeza still expressed concern to me that Florida lawmakers would “stick like glue to their school accountability agenda” even as the coronavirus epidemic and its impact on schools, families, and communities pushed that agenda to the margins of irrelevancy.Not content with a rollback of testing in a few states, state officials and public school advocates, including the Network for Public Education, called on the federal government to drop legal requirements for states to conduct annual assessments. Secretary of Education Betsy DeVos told some states they could cancel tests only if their testing period overlapped days when schools were closed due to the pandemic, but many of these states are urging her to issue a nationwide waiver, and some states, including California and Colorado, are ignoring her guidance.
Student organized investigation finds that Pomona College in California has denied 70 percent of housing requests – Students at Pomona College, a private liberal arts college in Claremont, California, are organizing in order to secure emergency student housing amid the growing coronavirus pandemic which has shut down campuses across the country. Hundreds of students at Pomona are now facing forced eviction from the campus. “I’m being evicted from Pomona college. I’ve been homeless since I was 16. I come from an extremely abusive home without access to heat, hot water or food” one student, who spoke to the WSWS under the condition of anonymity, explained. According to the students who spoke with our reporters, the student body was informed on Wednesday, March 11, that they were not to return to campus after spring break because of the pandemic. The students were provided two links: one to petition to remain on campus, and another to request funding for a flight home. They were told to expect a response about staying on campus at noon on Friday, March 13. A student group which has organized against the measures reported that the majority of responses went out at 11:44 p.m., well after the deadline. Many students were amazed to hear their requests were denied despite their dire circumstances. The group of students which has come to call itself “Occupy Pomona” began conducting their own investigation into the denials after receiving little assistance from college administrators. The group of students polled the student body to find out how many people had applied for housing, what reason they had given, and whether or not their request was approved. The results have been devastating. Of the 19 students who reported to the administration that they would be homeless if forced to evacuate, 11 were denied extended housing. Over 50 students requested housing because of issues of security and lack of resources – 46 of them were denied. At least 24 students reported that they would be returning to a home with family members with compromised immune systems; only 2 of these students were granted extended housing.
Trump: Federal student loan borrowers can suspend payments for 60 days – President Donald Trump announced on Friday that he will allow the nation’s more than 42 million federal student loan borrowers to take a break from making their monthly payments, without incurring interest or penalties for at least the next two months. Trump also announced that he will let states waive federal testing requirements for elementary and high school students, both moves in response to the coronavirus pandemic. State leaders have been increasingly anxious about testing mandates as the coronavirus shutters schools across the nation. On student loans, in addition to suspending payments, the Education Department said it would set the interest rates on all federally held student loans to zero until at least May 12. That carries out Trump’s announcement last week that he was waiving the interest on student loans. Trump said student borrowers won’t have to make loan payments “for at least the next 60 days and if we need more we’ll extend that period of time.” To obtain the 60-day reprieve, borrowers who have federally held loans will have to make a request of their loan servicers, such as Navient, Nelnet, FedLoan Servicing or Great Lakes, over the phone or online. But for borrowers who are already more than a month behind on their monthly loan payments, the Trump administration will automatically apply the 60-day suspension. More than 3.2 million federally-held student loans are more than 31 days delinquent and another 7.7 million are in default, according to the Education Department’s most recent quarterly data. “These are anxious times, particularly for students and families whose educations, careers, and lives have been disrupted,” Education Secretary Betsy DeVos said in a statement. “Right now, everyone should be focused on staying safe and healthy, not worrying about their student loan balance growing.”
Abu Dhabi acts to cushion the blow of coronavirus on UAE companies – Abu Dhabi is putting its development plans “on steroids” despite low oil prices and the global coronavirus outbreak, according to the chairman of the city’s department of economic development. “One of the most important things is that Abu Dhabi as a government is continuing developing its capital investments … which was planned for 2020,” Mohammed Ali al-Shorafa told CNBC’s “Capital Connection” on Thursday. “Abu Dhabi has the resources, even at these levels of crude oil prices, to continue with its planned progression,” he said. That may include fiscal reform, monetary policy initiatives and new projects. “We haven’t moved away from the plans, we’re actually putting these plans on steroids,” he added. His comments come as economies around the world grapple with the ongoing health crisis that has sickened more than 207,000 people and killed at least 8,600. The United Arab Emirates has close to 100 confirmed cases, and on Thursday implemented stringent restrictions that bar even residency visa holders who are abroad from entering the country for two weeks.
These 2 charts show copper prices could fall further – and the global economy too – Copper prices have crashed in recent days amid growing panic over the impact of the coronavirus, and the metal’s reputation as a barometer for the global economy means analysts are looking to see if it has further to fall. On Thursday, copper prices hit their lowest level since January 2016, with three-month copper futures on the London Metal Exchange (LME) touching $4,371 per metric ton. That’s down from a high of around over $6,340 in mid-January. By 6.30 a.m. London time, copper prices were trading around $4,548. It comes amid the coronavirus pandemic, with over 215,000 confirmed cases around the world, according to Johns Hopkins University, and over 8,800 recorded deaths. The fast transmission of the disease has seen both stock and commodity markets tank as businesses shut down, first in China and now in the U.S. and Europe, and people are told to stay indoors. Here, we take a look at two charts that indicate copper could have further to fall. The copper/gold ratio sees copper prices in ounces divided by gold prices in ounces. It is used as a “growth-to-fear proxy” as both copper and gold are mined in similar ways and have similar production cost structures. Max Layton, head of EMEA commodities research at Citi, explained that copper producers tend to make money when global growth is strong, and gold producers tend to make money in periods with high levels of fear, for example, post-recession. “What you end up with is this growth proxy in the copper margin, versus a fear proxy in the gold margin. So if you take them as a ratio, it’s basically: when it goes down it’s because growth is low and fear is high, and when it goes up it’s because growth is strong and fear is relatively low,” he told CNBC.
China Auto Sales Continue Collapse, Plunging 50% And 44% In First And Second Week Of March, Respectively– The coronavirus has certainly wreaked havoc on an already dilapidated global auto industry – and it’s no more evident than in China, where the virus originated and home to the largest auto market in the world. Continuing February’s trends, auto sales in March have continued to collapse: lower by 50% during the first week of March and down 44% the second week of March. And that’s if you want to believe the numbers that are coming out of China, where the optics of a recovery may mean more to the government than an actual recovery. Cui Dongshu, secretary general of the China Passenger Car Association told Bloomberg that the “market is recovering” but that it is doing so at a “slower than expected pace”. He also called for the country to increase car purchase quota, lower purchasing taxes and continue to give subsidies to EV purchases, in an effort to create a tailwind for buyers. The country is also reportedly considering the idea of relaxing emission curbs to help struggling automakers. Recall, sales fell 79% in February, marking the biggest ever monthly plunge on record. We reported less than a week ago that automakers were asking the government for relief after the industry’s collapse, which occurred in the midst of an already-in-progress global recession for automakers. Specifically, they were asking at the time for cuts on the purchase tax for smaller vehicles and support for sales in rural markets, in addition to the easing of emission requirements. It looks as though they may have gotten their wish. Sales for February fell to just 310,000 vehicles from a year earlier, marking the 20th straight month of declines.
China’s Air Quality Is About to Get a Whole Lot Worse Because of Coronavirus – The coronavirus pandemic gave China something it hasn’t seen in years: bright, blue, smog-free skies. That’s about to change. The country is already planning to relax environmental rules to allow Chinese factories idled during the epidemic to get back up to speed. The Chinese government is signaling that addressing pollution won’t be a top priority. The government insists that environment standards remain in place – they just won’t be enforced as aggressively.“The environmental supervision should be adjusted in accordance with practical needs and social economic situation,” said Cao Liping, director of Ecological and Environmental Enforcement bureau at the Ministry of Ecology and Environment, at a press briefing last week.Experts have been warning that the virus could lead to an increase in pollution after the by NASA earlier this month show pollutants essentially evaporating as the coronavirus overtook the country between January and February of this year. Air pollution kills about 1.6 million people annually in China – and a Stanford researcher estimates that a two-month drop in pollution could have spared about 80,000 premature deaths. About 3,200 people have died inside China during the course of the outbreak.The pollution has dropped over Italy during the course of the outbreak, too. But just because emissions are temporarily down around the world doesn’t mean this is a cause to celebrate. “It is, of course, not a good thing,” Riccardo Valentini, a professor at Italy’s University of Tuscia and director of the impacts division of the Euro-Mediterranean Center on Climate Change, wrote in an email to the Washington Post. “This is not the way to reduce emissions!”
Coronavirus: World Bank ‘pandemic bond’ investors face big losses – Investors are looking at big losses in two World Bank-issued “pandemic bonds,” which have fallen under the spotlight as the coronavirus outbreak continues to spread worldwide. Those bonds, issued by the World Bank’s International Bank for Reconstruction and Development (IBRD) in 2017, were designed to pay out funds to countries that need help to contain a pandemic. The World Health Organization classified the current coronavirus outbreak a global pandemic earlier this month. The bonds offer investors high interest payments in return for taking on the risk of losing a certain amount or all of their money if pandemics occur. That includes the current coronavirus pandemic. But prices of those bonds have plunged as investors flee with the number of infection cases surging. Growing fear about the economic fallout of the outbreak has driven a sell-off in risk assets as investors seek the perceived safety of government bonds like U.S. Treasurys. According to ratings agency DBRS Morningstar, investors who hold the riskier of the two bonds could be losing their entire principal amount soon, with the firm telling CNBC that the price should have dropped more than 80%. Pricing for the less risky bond has probably fallen less than 50%, said Marcos Alvarez, senior vice president and head of insurance – global financial institutions at DBRS Morningstar. Pricing information on these bonds is not public as they were privately placed three years ago. “Similar to other catastrophe-linked bonds in the market, investors could lose their principal if a set of parametric triggers, such as outbreak size, growth rate and spread across borders, are met,” the firm wrote in a report earlier this month. According to the World Bank, the outbreak would need to last at least 12 weeks, and have more than 2,500 deaths for the riskier of the two bonds, and 250 deaths for the other. There must also be more than 20 deaths in a second country.
The case for massive corona-stimulus – UK chancellor Rishi Sunak will on Tuesday announce the economic support package that was noticeably missing from the government’s encouragement on Monday for the public to abandon large parts of the service economy. Just in time to embolden timid hearts at the Treasury, a brief paper from Emmanuel Saez and Gabriel Zucman at Berkeley university laid out the urgent case for action on a giant scale: The most important message that needs to come from heads of state immediately, even before any new law or complete implementation details are provided, is: “Do not lay off your workers or liquidate your business. Government will pay your idle workers and your necessary maintenance costs while you are shutdown. Government money is coming soon.”1 This is crucial to stanch the flow of mass layoffs and business destruction that is already starting.The academics estimate that US output will fall 30 per cent, and if the interruption to life lasts for three months, that translates to a 7.5 per cent drop in GDP – a severe recession.Such an outcome demands government intervention on moral, practical, and economic grounds. As Jim Reid, strategist at Deutsche Bank put it on Tuesday, “global economies have effectively been put on war footing but without the usual intense wartime economic activity.”Everyone has been asked to help prevent widespread deaths at a personal cost. The government’s job is to prevent the temporary economic hit resulting from those costs having a permanent impact. Preventing the deaths of businesses is essential, Saez and Xucman said, because such failures have long-term costs: “the links between entrepreneurs, workers, and customers are destroyed and often need to be rebuilt from scratch; laid off workers need to find new jobs.” A three-month programme to mitigate the impact, they estimate, would involve spending 3.75 per cent of GDP: A payer-of-last-resort program will work if it is limited in time (e.g., 3 months), so that the cost remains manageable and business decisions are not affected. It would not fully offset the economic cost of the coronavirus. No matter what governments do, there will be real output losses. But a payer-of-last-resort program would alleviate the hardship on workers and businesses. It would maintain the cash flow for families and businesses, so that the coronavirus shock has no secondary impacts on demand – such as laid-off workers cutting down on consumption – and a quick rebound can take place once demand comes back. Business activity is on hold today, but with an intravenous cash flow, it can be kept alive until the health crisis is over. Assume that the government were to err on the side of overspending, and say commit to 5 per cent of GDP in three months. In the UK that would be about £105bn, in the US about $1tn. The amounts sound big (they are big!), but not in terms of the economic impact of deep recessions. Consider what happened to the UK public finances between 2008 and 2010. Government debt as a proportion of annual economic output went from 34 per cent to 63 per cent in two years because of the financial crisis.
Lagarde Fires Bazooka #2- ECB Announces €750BN Pandemic Purchase Program – Earlier this afternoon we said that because “the Fed’s Bazooka #1 was an epic dud. Here comes Bazooka #2”, and this time it is the ECB that will try to fire. Sure enough, almost three hours later, and just before 1am CET, the ECB announced plans to buy a whopping €750bn in more bonds in the delightfully named Pandemic Emergency Purchase Program (because we clearly needed another alphabet bailout soup) after holding an emergency call of its rate-setting committee on Wednesday evening in response to the Global Covid Crisis and resulting financial market turmoil. The central bank said the additional asset purchases – as a reminder last week the ECB expanded its baseline QE – would be carried out by the end of this year, cover both sovereign bonds and corporate debt, and would last until the coronavirus crisis is over.”The Governing Council will terminate net asset purchases under PEPP once it judges that the coronavirus Covid-19 crisis phase is over, but in any case not before the end of the year.”Because the European Central Bank of Virologists is clearly able to predict that the pandemic will not fade away until at least 2021. The ECB said that purchases will be conducted in “flexible manner” allowing fluctuations over time, across asset classes and among jurisdictions, and unlike prior QE episodes, this time purchases under PEPP will include Greek debt.Just like the Fed, the ECB also expanded the range of eligible assets to non-financial commercial paper and to ease the collateral standards to allow banks to raise money against more of their assets, including corporate finance claims. For those wondering if the ECB would limit itself to A1 and higher CP, like the Fed, the answer is clearly no as per the following: “all commercial papers of sufficient credit quality eligible for purchase under CSPP.” What is sufficient? Anything that the ECB says.
UK PM Boris Johnson announces nationwide lockdown measures, telling cafes, pubs and restaurants to close – U.K. Prime Minister Boris Johnson announced nationwide lockdown measures Friday, telling cafes, bars and restaurants to close. “We are collectively telling cafes, pubs, bars and restaurants to close tonight as soon as they reasonably can and not to open tomorrow,” Johnson said at a daily briefing on the coronavirus. He said takeout services for these businesses would be able to continue. “We are also telling nightclubs, theaters, cinemas, gyms and leisure centers to close on the same timescale.” “These are places where people come together, and indeed the whole purpose of these businesses in many cases is to bring people together. But, the sad thing is, I’m afraid today, for now at least, physically we need to keep people apart,” Johnson said. It was not immediately clear whether the recommendations were enforceable by law, although Johnson said licensing laws would allow the government to order these businesses to close. The prime minister said the newly announced measures would be reviewed on a monthly basis. To date, the U.K. has reported 3,297 cases of the coronavirus, including 168 deaths, according to Johns Hopkins University.
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