Written by rjs, MarketWatch 666
The news posted last week about economic effects related to the coronavirus 2019-nCoV (aka SARS-CoV-2), which produces COVID-19 disease, has been surveyed and some articles are summarized here. There are several ‘worst-in-years’ economic metrics, and a lot on the employment report plus some other Main Street economic impacts. I conclude with a handful of reports from other counties around the globe. (Picture below is morning rush hour in downtown Chicago, 20 March 2020.) News items about epidemiology and other medical news for the virus are reported in a companion article.
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Powell Says Fed Prepared to Use ‘Full Range of Tools’ to Support Economy – WSJ – Federal Reserve Chairman Jerome Powell said the central bank will use its “full range of tools to support the economy” as a result of the economic shock caused by the coronavirus pandemic in testimony prepared for delivery to a congressional panel on Tuesday. Mr. Powell and Treasury Secretary Steven Mnuchin are set to appear by videoconference before the Senate Banking Committee on Tuesday morning as part of regular testimony required by the $2 trillion economic-relief package President Trump signed into law in March. The legislation provided the Treasury with $500 billion to provide direct aid and to backstop credit markets, including $454 billion to cover losses in Fed lending programs. The Fed is in the process of establishing operations to lend to businesses, cities and states, an unprecedented expansion of the central bank’s powers to support the U.S. economy during a period of severe distress. The Treasury has provided $195 billion so far to indemnify the Fed against losses in those lending programs. One open question is how the Treasury plans to allocate the remainder of that money. The remaining $259 billion will be used to “create or expand programs as needed, as we continue to monitor a variety of economic sectors closely,” said Mr. Mnuchin. Mr. Mnuchin said he expected economic conditions to improve in the second half of the year in his prepared testimony, which was released Monday afternoon by the Senate Banking Committee. Mr. Powell didn’t announce any new programs in his testimony, and instead recapped the steps the central bank has taken since it cut interest rates to near zero in mid-March. “The Federal Reserve has been entrusted with an important mission, and we have taken unprecedented steps in very rapid fashion over the past few months,” Mr. Powell said in his prepared testimony. STAY INFORMED Get a coronavirus briefing six days a week, and a weekly Health newsletter once the crisis abates: Sign up here. Those actions have helped buoy asset values, and the Fed’s trickiest task now is to get the programs up and running. In one particular novel operation, the central bank will lend through banks to middle-market firms that are too large for aid from the Small Business Administration and too small to borrow in Wall Street debt markets in a forthcoming Main Street Lending Program. Mr. Powell said the Fed would continue to adjust the terms for lending operations “as we learn more” about borrower demand.
Taxpayers Are on the Hook for 98 Percent of the Fed’s $6.98 Trillion Balance Sheet – Pam Martens – The Federal Reserve Board of Governors consists of seven individuals appointed by the President of the United States and confirmed by the U.S. Senate. As of today, only five of those Governor seats have been filled. As of last Wednesday, these five unelected individuals were overseeing a balance sheet of $6.98 trillion at the Federal Reserve, which is 28 percent of the $25.3 trillion federal government debt that is overseen by 100elected Senators and 435 elected members of the House of Representatives.Over just the past year, those five unelected Fed Governors have grown the Fed’s balance sheet by $3 trillion in order to bail out bad bets on Wall Street.The $6.98 trillion balance sheet at the Fed is created out of thin air at the electronic push of a button by the 12 regional Fed banks. The Federal Reserve Bank of New York (New York Fed) has been pushing that money-creating-button more than all of the other 11 regional Fed banks combined. As of last Wednesday, the New York Fed’s balance sheet stood at $3.9 trillion or 56 percent of the balance sheet tally for all 12 regional Fed banks.Why has the New York Fed run up such a monster balance sheet? It’s because the New York Fed is privately-owned by some of the largest, most dangerous banks in America which, since 2008, have been habitually propped up by cheap money from the New York Fed. Those mega banks include JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley.If the New York Fed is privately owned by the member banks in its region (as are all of the 12 regional Fed banks) and has run up a $3.9 trillion balance sheet, its share owners should be on the hook for its liabilities, correct?This is where another of those rarely discussed structural wealth transfer mechanisms for the one percent comes in. If the Fed and its rapidly growing $6.98 trillion balance sheet blows up, the U.S. taxpayer will be on the hook for 98 percent of the losses. We obtained the share totals for each of the 12 regional Federal Reserve banks. Those share totals are listed on the individual financial statements located here. We multiplied the share totals by their $100 par value, and then as the above indicates, multiplied that total by 2. The shocking news is this: the mega banks that own the New York Fed are only responsible for $42.6 billion of its liabilities, despite the fact that those liabilities total $3.9 trillion. When we did the math for all 12 regional Fed banks, the bank share owners were responsible for just 1.8 percent of the $6.98 trillion in liabilities that the Federal Reserve has created with the flick of an electronic button. In other words, an institution controlled by five unelected people, with the insane power to create money out of thin air by pushing an electronic button, have put taxpayers (and the next generation) on the hook for $6.85 trillion.
The Fed Enters Monetary Light Speed – On April 9, 2020, the Fed made the jump to light speed with their announcements of even more remarkable stimulus packages. The new operations were in addition to the myriad of operations in March and prior months.To define monetary light speed, the Fed’s balance sheet rose from $3.76 trillion at the end of August 2019 to $4.16 trillion at the end of February 2020 – a change of $400 billion. As of May 13, 2020 it was at $6.93 trillion. A shocking increase of $2.77 trillion in ten weeks, dwarfing anything seen during the financial crisis. Having promised to purchase Treasuries, mortgages, and municipal bonds, in whatever amount necessary, they set off on a new path. Now they can buy investment grade corporate securities, high yield bonds (junk), and even certain Collateralized Loan Obligations (CLOs – the securitized form of high-risk leveraged loans). These operations will take place through the newly formed Secondary Market Corporate Credit Facility (SMCCF). Per the Federal Reserve Act, the Fed can only purchase or lend against securities that have a government guarantee. So how can they purchase non-government guaranteed securities?The simple answer is the Treasury is enabling the Fed to side-step the law, or to be more accurate, break the law.As the Fed’s accomplice, the Treasury Department provides $75 billion of initial funding from the Exchange Stabilization Fund. The funds are deposited into a special purpose vehicle (SPV), and specifically aimed to purchase secondary market corporate bonds. Technically, the Treasury, not the Fed, is buying those securities on behalf of taxpayers. Enter the co-conspirator. The Fed, acting as an intermediary and employing asset manager BlackRock, intends to leverage that amount ten times. This allows the Fed to buy an additional $675 billion in securities and select Exchange Traded Funds (ETFs). As John Hussman described on April 20, 2020, Congress never granted that authority (the leverage) to the Fed, making such a maneuver illegal.“… additional purchases to “leverage” that funding are neither secured by non-financial collateral, nor have security sufficient to protect taxpayers from losses. They are illegal, both under Section 13(3) of the Federal Reserve Act, and under Section 4003(c)(3)(B) of the CARES act, which “for the avoidance of doubt” specifically invokes 13(3) “requirements relating to loan collateralization, taxpayer protection, and borrower solvency.”Given the leverage and speculative nature of the securities the Fed is acquiring in the SMCCF (SPV) scheme, a 10% drop or more in the value of the SPV assets would result in immediate insolvency and losses to taxpayers. In simple terms:
- The Treasury Department funds the SMCCF SPV with $75 billion (a legal action)
- The Fed acting as the intermediary of the SPV, stated they may leverage those funds 10 times (an illegal action)
- If at any point up to the $750 billion of investments made through the SPV, the value of held assets drops by more than the initial $75 billion funded by the Treasury, the loss is in breach of what Congress authorized.
- The assets the Fed will buy do not meet the stated requirement of sufficient security intended “for the avoidance of doubt” about the potential for loss (to the taxpayer). It is an illegal structure.
The Fed’s $600 Billion Challenge: Lending Directly to Businesses – WSJ -The Federal Reserve is preparing to lend directly to middle-market businesses, filling a hole left by the government’s economic crisis relief efforts, and it is shaping up to be one of the trickiest things it has ever done. The risk for the Fed is that it goes where the central bank has rarely ventured and that not many businesses seek help, creating both financial and political headaches. The program is designed to assist companies like LMI Aerospace, a St. Charles, Mo.-based maker of airplane parts that is too large to get help under the Small Business Administration’s loan program but too small to benefit from the Fed’s other corporate-lending backstops. Under the Fed’s middle-market program, a company would get a loan from a bank, which would then sell up to 95% of the debt to the Fed. This leaves the bank with less additional debt on its books and free to make more loans to other borrowers. LMI, which has cut its workforce by 600 employees since the start of the year to 1,600, has spoken to its lenders in recent weeks about participating in the program, and found them hesitant. “They’re not saying, ‘No, we don’t want to do it,’ but they don’t want to do this when their balance sheets may have a lot of borrowers that are going to be underperforming for some time,” said Ed Dickinson, the company’s chief executive.After credit markets started seizing up amid the coronavirus pandemic, the Fed responded in March and April with promises to backstop them – including corporate and municipal debt markets – reducing borrowing costs and lifting stocks. Now, “its biggest challenges are making these programs work,” said former Fed Chairman Ben Bernanke in an interview. With the midsize business program, a key challenge is setting the terms so the Fed doesn’t become a dumping ground for bad loans – but not so onerous that companies don’t want to participate.
Fed receives bipartisan critique for stalled Main Street lending – The Federal Reserve received a bipartisan critique Wednesday from members of a congressional oversight panel who said the central bank has been slow to launch a key emergency lending program for midsize companies. Rep. French Hill, an Arkansas Republican, and Rep. Donna Shalala, a Florida Democrat, expressed concern that the Main Street Lending Program – which targets companies too large for small business assistance and too small to qualify for corporate lending facilities – was not yet operational. “I’m disappointed that it’s taken as long as it has,” Hill said in an interview of the program, which was announced April 9. The central bank received more than 2,000 comments on the program from April 9 to 30, and then announced that it would be broadened to include more businesses. Fed Chair Jerome Powell says the program will be operational by early June and disputed the notion that the central bank could be moving more quickly. “We are working literally around the clock and have been for weeks to have this ready,” Powell said. Both the Fed and the Trump administration have projected economic hardship at least through June as the U.S. copes with the coronavirus pandemic. Powell has warned of broad dangers to the economy, saying a recovery would take time and that the country was at risk of long-term economic damage. Trump’s economic advisers say the economy could contract 40% for the second quarter through June. More than 36 million people already have lost their jobs. The Fed and Congress have pumped trillions of dollars into the economy to stem the damage, but the central bank is still grappling with what Powell has called “complex and challenging” emergency facilities. “Main Street is in a class by itself,” he told senators Tuesday during a virtual hearing. “These are small and medium-sized businesses. They live in a world of bank lending. That’s a world of negotiated documents. We’re trying to enter that world and make loans to qualifying buyers.” The Fed, when it expanded the facility, said participants should make “commercially reasonable” efforts to refrain from laying off workers. Lawmakers say that while Congress did not place restrictions on retaining payroll levels in exchange for federal support that comes from the central bank, the Fed should still require it to follow the spirit of the law. Hill said he plans to ask Treasury and Fed officials what they mean by “commercially reasonable.” “The principal mission of the Main Street Lending Program is to bridge companies cash-flow needs across this coronavirus impact on the economy and keep as many Americans employed as possible,” Hill said in the interview. “That’s certainly the full intent of not only the the law but also the regulations.”
The Fed’s $600 Billion Middle Market Main Street Lending Facility Is A Total Disaster – The Fed is currently undertaking one of the trickiest projects it has ever taken on: lending $600 billion directly to companies that need it. It’s an area where the Fed hasn’t really ventured, as the WSJ points out, and one that puts them far closer to the realm of directing fiscal policy in the country than they have ever been. In other words, it’s a political and financial headache – even for the Fed. The goal of the program is to get cash to companies that are too large to get small business loans, but too small to benefit from the Fed’s other genius programs, like buying junk bond ETFs.The Fed’s middle market “Main Street” program instead allows companies to get loans from banks, who turn around and sell up to 95% of the debt to the Fed. In other words, the Fed is hell-bent on becoming the world’s worst counterparty. The move is part of a broader response by the Fed, who initially sought to un-freeze credit markets after the coronavirus pandemic started. According to former Fed chair Ben Bernanke, the Fed’s biggest challenge is now “making these programs work”. A major challenge is the obvious: how do you make the Fed’s balance sheet become more than just a dumping ground for toxic loans? Former Fed chair Janet Yellen even addressed that issue: “The Main Street program is going to be tremendously complicated. One of the problems with this program is that it may turn out to be insufficiently generous.”The Fed remains sensitive to political blowback, like the kind it faced after 2008, which could be prompting them to do far more than they need – or should – be doing. Regardless, the political buy-in remains key for the Central Bank. Chicago Fed President Charles Evans said: “It’s very important if you’re going to engage in this, that you get take-up.” The Fed says it is working to “fine tune” the program. “We’re learning as we go,” said Fed Chairman Jerome Powell last week. Meanwhile, the Fed has had to use “special powers granted by congress and the Hoover administration” to make these types of loans. The Main Street program, which is a result of discussions between Jay Powell and Steve Mnuchin, is open to companies with up to 15,000 employees or less than $5 billion revenue. More than 19,000 companies had between 500 and 15,000 employees in 2017 and they collectively employed between 30 and 40 million people. Under the program, banks can lend up to $25 million in new loans or refinance up to $200 million in an existing loan if a firm’s total debt. Senator Mark Warner has been advocating for loan forgiveness in the program – also known as just handing out billions of dollars in free money – but the Fed has pushed back. Barely.
Fed Chair Powell Promises “Transparency,” then Draws the Dark Curtain Tighter -Pam Martens – During his appearance before the Senate Banking Committee this past Tuesday, Federal Reserve Chairman Jerome Powell told Senator Jon Tester that the Fed “has committed to disclose all of the borrowers and the amounts in a timely way.” Powell was referring to the alphabet soup of emergency bailout programs for Wall Street that the Fed has established under Section 13(3) of the Federal Reserve Act. In a statement released by the Fed on April 23, it also said this on the subject of transparency: “…the Board will report substantial amounts of information on a monthly basis for the liquidity and lending facilities using Coronavirus Aid, Relief, and Economic Security, or CARES, Act funding, including the: Names and details of participants in each facility… on its website at least every 30 days and without redactions.” The Fed has a website page that publishes its reports to the public and Congress every 30 days. If you click on the PDFs for the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, and the Money Market Mutual Fund Liquidity Facility – three programs to benefit Wall Street – you will not find one iota of information on the names of borrowers or amounts they borrowed. (The Primary Dealer Credit Facility is not slated to use CARES Act money but it is established under the 13(3) emergency programs of the Fed.) The Primary Dealer Credit Facility and Money Market Mutual Fund Liquidity Facility showed up on the Fed’s balance sheet on March 25 of this year, with balances of $27.7 billion and $30.6 billion, respectively. As of yesterday, the Fed showed the following balances for those two programs: $7.5 billion and $36.4 billion, respectively. But when the Fed released its March 25 and April 24 reports on these two programs, there was not a scintilla of information on the names of borrowers or amounts borrowed.The Commercial Paper Funding Facility showed up on the Fed’s balance sheet on April 15 with a balance of $974 million. It currently has a balance of $4.29 billion. But when the Fed filed its report to Congress on April 24, there was zero information on names of borrowers or amounts borrowed. But one program that has been operational for the past eight months is the Fed’s Repurchase Agreement (repo loan) facility. It had funneled $6 trillion in emergency, below-market rate, revolving loans to Wall Street’s trading houses before the first case of coronavirus had appeared anywhere in the United States. It is likely to remain behind the Fed’s dark curtain forever under the excuse that it’s part of the Fed’s open market operations. That program started on September 17, 2019 when the overnight lending rate on repo loans shot up from around 2 percent to 10 percent – signaling that Wall Street banks were backing away from lending to other financial institutions, the precise activity that heralded the financial crisis of 2007 to 2010. By March 14, the Fed had pumped out more than $9 trillion in revolving repo loans to the trading houses on Wall Street that are known as its primary dealers. (See list below.) Almost all of these trading units are attached to giant commercial banks that trade publicly. The Fed has yet to provide the names of borrowers or amounts they individually borrowed. Shareholders of a publicly traded company have a legal right to know if a bank is experiencing a liquidity crisis and needs to borrow from the Fed. The public has a right to know if the Fed has once again failed the American people in its oversight role of the behemoth Wall Street banks.
Testimony by Chair Powell on the Federal Reserve’s response to the coronavirus and the CARES Act –Note: Chair Powell provides an overview of the actions taken so far by the Fed. From Fed Chair Jerome Powell: Coronavirus and CARES Act Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C. The Federal Reserve’s response to this extraordinary period has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote stability of the financial system. We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response. Congress’s passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was critical in enabling the Federal Reserve and the Treasury Department to establish many of the lending programs that I discuss below.
Powell says GDP could shrink more than 30%, but he doesn’t see another Depression – The U.S. economy could shrink by upwards of 30% in the second quarter but will avoid a Depression-like economic plunge over the longer term, Federal Reserve Chairman Jerome Powell told “60 Minutes” in an interview aired Sunday. The central bank chief also conceded that jobless numbers will look a lot like they did during the 1930s, when the rate peaked out at close to 25%, However, he said the nature of the current distress coupled with the dynamism of the U.S. and the strength of its financial system should pave the way for a significant rebound. Asked by host Scott Pelley whether unemployment would be 20% or 25%, Powell said, “I think there’re a range of perspectives. But those numbers sound about right for what the peak may be.” Pressed on whether the U.S. is headed for a “second depression,” he replied, “I don’t think that’s a likely outcome at all. There’re some very fundamental differences.” In a part of the interview that did not air, Powell said shrinkage of U.S. economic growth “could easily be in the 20s or 30s,” according to a CBS transcript. He said that growth could return in the third quarter. “I think there’s a good chance that there’ll be positive growth in the third quarter. And I think it’s a reasonable expectation that there’ll be growth in the second half of the year,” Powell said. “I would say though we’re not going to get back to where we were quickly. We won’t get back to where we were by the end of the year. That’s unlikely to happen.” Among the factors that he said are different from the Depression era are an activist Fed and a Congress that already has passed close to $3 trillion in rescue funds and is contemplating another round. Also, the cause of this downturn is not an asset bubble or another associated more fundamental reason but rather a self-induced economic freeze brought on by efforts to combat the coronavirus. Those efforts have led to 36.5 million Americans filing unemployment claimsover the past two months and an unemployment rate currently at 14.7% and headed higher. The Atlanta Fed estimated Friday that the data so far in the second quarter suggest a drop in GDP of 42%. That would be far and away the worst the U.S. has seen.
Powell cautions U.S. recovery could stretch through end of 2021 The U.S. economy will recover from the coronavirus pandemic, but the process could stretch through until the end of next year and depend on the delivery of a vaccine, said Federal Reserve Chairman Jerome Powell. “I think you’ll see the economy recover steadily through the second half of this year,” the U.S. central bank chief said in an excerpt of an interview conducted Wednesday and aired on Sunday on CBS’s “Face the Nation” show. “For the economy to fully recover people will have to be fully confident, and that may have to await the arrival of a vaccine,” he said. More than 36 million Americans have lost their jobs since February as the economy shuttered to limit virus spread. Countless companies, especially small businesses, are hurtling toward bankruptcy, while states and cities are confronting gaping budget shortfalls that could provoke a massive second wave of layoffs from the public sector. The Fed chief said people should never “bet” against the American economy, but he took care not to promise a swift, so-called V-shaped rebound. “This economy will recover. It may take a while,” he said. “It could stretch through the end of next year. We really don’t know.” Powell’s full interview will be broadcast at 7 p.m. Washington time on CBS’s “60 Minutes.” Powell’s remarks follow his grave warning Wednesday that the U.S. economy faces lasting harm from the pandemic if the government doesn’t step up. The comments add support to calls for more congressional spending as Democrats push for a fresh US$3 trillion in virus aid on top of a record US$2.2-trillion package agreed in March. On Friday, the House passed the measure, though it has no future in the Republican-led Senate.
Pandemic Poses Most Serious Threat to Fed’s Goals ‘In Our Lifetimes,’ Says Top Fed Official – WSJ The coronavirus pandemic poses the most serious threat “in our lifetimes” to the Federal Reserve’s goals of maintaining strong employment and stable prices, Federal Reserve Vice Chairman Richard Clarida said Thursday. Mr. Clarida said he expected the shock to demand for goods and services to be more severe than the hit to the economy’s capacity to supply them, putting downward pressure on inflation. “The Covid-19 shock is going to be disinflationary, not inflationary, both in the near term and the medium term,” Mr. Clarida said during a discussion that followed online remarks to the New York Association for Business Economics. Separately, New York Fed President John Williams said he sees little inflation risk right now and played down worries about a large increase in federal borrowing. “There is enormous global demand for U.S. Treasury securities,” Mr. Williams said. “I’m not so worried on long-term effects on U.S. interest rates because of higher deficits and debt right now.” Even before the pandemic crisis hit in mid-March, inflation was running below the central bank’s 2% target. The Fed has cut interest rates to near zero, and declining inflation would mean that short-term interest rates, adjusted for inflation, could rise, posing a challenge for Fed policy makers as they seek to provide more stimulus in the coming months. Federal Reserve officials began contemplating last month how to provide more monetary stimulus in the months ahead. Messrs. Clarida and Williams, who are top lieutenants to Fed Chairman Jerome Powell, suggested the central bank wasn’t feeling rushed to roll out new guidance. The next meeting of the Fed’s rate-setting committee is scheduled for June 9-10. “It’s going to take some time for us at the Fed to get a sense of what this economy, what the rebound potentially can look like,” Mr. Clarida said. The Fed would have a better handle on the economy’s path by September, he said.
Merrill: “Most of the slowdown occurred due to voluntary social distancing rather than lockdown policies” — This is an important note and suggests the economy is dependent on the course of the pandemic. Merrill Lynch economists put out a note this morning: Nordic Lessons. Here are a few brief excerpts: One of our core views is that both voluntary and mandated social distancing have significant impacts on the economy. A new academic paper out of the University of Copenhagen and CEBI quantifies the effect of each kind of social distancing on consumer spending during the COVID-19 pandemic. … Let us start with the facts. The outbreak began at the end of February in Denmark and Sweden. … Since then the two countries have diverged significantly in terms of health care outcomes. As of May 18, Denmark had 95 deaths per million people, while Sweden (363 per million) has had among the highest COVID-19 mortality rates in the world. This difference points to a large healthcare benefit from lockdown policies. What about the economic costs?The paper finds that consumer spending dropped by 25% in Sweden and by 29% in Denmark. The 4pp difference between the two declines quantifies the cost of lockdown policies. While 4% of consumer spending is not trivial, it is a small share of the total decrease in consumer spending. Therefore the data indicate that most of the slowdown occurred due to voluntary social distancing rather than lockdown policies….If the paper’s results are applicable to other countries, they have important implications for the economic outlook. … Even as restrictions are lifted, consumer spending will likely remain highly impaired, with services getting hit the hardest. Ending lockdowns might also limit the activity of more vulnerable people, further delaying the recovery. In summary, the economic downturn has been primarily because of the virus, not the policy response.
“This Is The Biggest Shock We’ve Had For Generations”: El-Erian Says ‘Buckle Up’ For Bumpy Ride – Mohamed El-Erian does not see a smooth, V-shaped recovery from the coronavirus pandemic in the cards – and instead says that it will probably look more like a series of Ws.”Think of a pendulum swinging, and we don’t know the magnitude of the swings, and we don’t know the duration of the swings or the settling point. So it really is an uncertain outlook,” he told Fox News‘ Chris Wallace in a Friday interview which aired on “Fox News Sunday.”We should not forget how bad this picture is. With the additional three million [unemployed], that is 36 million people who have signed up for jobless claims in 8 weeks. That’s one quarter of our labor force. So it’s an enormous shock,” he added.El-Erian also says that reopening the economy will be an uphill battle, and that until a vaccine is readily available, it will take time for people to resume normal activities.”It’s very difficult for me to convince you I’m healthy and for you to convince me I’m healthy until we get a vaccine,” he said, while noting that the pandemic has “shaken consumer confidence,” and that it will take a while before a public that “isn’t wired for social distancing” to adjust to the new normal.Another variable is that states are reopening on different timelines, and that it’s unclear how businesses will resume operations with “different states doing different things.””We have these three massive uncertainties all in play at the same time, and it’s very hard to say, oh everything’s going to be resolved overnight,” El-Erian added (via Fox Business). “We hope so, but I think we should buckle our seatbelt that it’s going to get bumpy still.”
A prolonged depression is guaranteed without significant federal aid to state and local governments — EPI Blog – Congress is currently debating a new relief and recover package – the HEROES Act – that would deliver significant amounts of fiscal aid to state and local governments – more than $1 trillion over the next two years, all told. This is a very welcome proposal. The incredibly steep recession we’re currently in is guaranteed to torpedo state and local governments’ ability to collect revenues . Further, nearly all of these governments are tightly constrained – both by law as well as by genuine economic constraints – from taking on large amounts of debt to maintain spending in the face of this downward shock to their revenues. The result will be intense pressure for large cutbacks in public spending by state and local governments in coming years. Such cutbacks would be absolutely devastating to the cause of restarting the economy and allowing people to find jobs, even if the virus has completely abated. We know how devastating these cutbacks would be because we have lived through the mistake of allowing them to drag on growth in the quite recent past. State and local governments became relentless anti-stimulus machines during most of the recovery from the Great Recession of 2008 – 09. This post highlights a couple of findings from that period that should inform policymakers’ decisions this time around.
- Growth in state and local spending was far slower during the recovery following the Great Recession than in any other post-World War II business cycle on record.
- This state and local spending austerity dragged heavily on growth during that time. If this spending had instead followed the trajectory it established following the recovery from the similarly steep recession of the early 1980s, pre-recession unemployment rates could have been achieved by early 2013 rather than 2017. In short, this austerity delayed recovery by over four years.
- Recent justifications for denying aid to state and local governments sometimes rest on claims that this spending has been profligate in recent years. This is absolutely not so – growth in state and local spending has been historically slow for nearly two decades. Given the importance of what this spending focuses on (education, health care, public order), this decades-long disinvestment should be reversed, not accelerated due to an unforeseen economic crisis.
- If federal aid is passed that is sufficient to close the enormous revenue shortfalls the economic crisis will cause for state and local governments, it will create or save roughly 5 – 6 million jobs by the end of 2021. Without this aid, we will remain at least that far away from a full economic recovery by then.
Maybe This Is Not (Technically) A Recession? – Here I am using what is the journalistic definition of a “recession,” also used in many nations although not officially in the US, where these things are determined ex post by an NBER committee. Anyway, that “journalistic” definition is that there be two consecutive quarters of negative GDP growth. Today in the Washington Post I saw a story on global carbon emissions, which are very closely correlated with GDP, if not perfectly. Anyway, it appears that global carbon emissions hit bottom on April 7 and have been slowly rising since then (not sure about US separately, although US somewhat behind most other nations on the covid curve and so on the economic impact as well). I note that April 7 is one week into the second quarter. This means it is very likely that at the global level we shall see positive economic growth in the second quarter, basically rising since the end of the first week of the quarter, although due to reporting lags in many countries this will not show up as positive growth in the data until later, possibly by the end of the month. This growth is slow, but it is positive, definitely not a V. So, assuming this slow growth continues,the world will have seen a massive shock in the first quarter, with most of that in a single month, March, the largest such short term shock in recorded history by far. But it looks that it may have hit bottom quite quickly, then to turn into a slow recovery shortly after the end of the first quarter. First quarter is certainly going to be negative, but second looks very well like it might be positive, at least at the global level, hence, not technically quite a “recession” according to this journalistic definition.
Q2 GDP Forecasts: Probably Around 40% Annual Rate Decline –Important: GDP is reported at a seasonally adjusted annual rate (SAAR). So a 40% Q2 decline is around 9% decline from Q1 (SA). From Merrill Lynch: We are tracking 2Q GDP at -40% qoq saar, down from -30% earlier. [SAAR May 22 estimate] From Goldman Sachs: We left our Q2 GDP forecast unchanged at -39% (qoq ar) but raised our estimate of the initial vintage by 0.3pp to -31.5% (released on July 30th). [May 22 estimate] From the NY Fed Nowcasting Report: The New York Fed Staff Nowcast stands at -30.5% for 2020:Q2. [May 22 estimate] And from the Altanta Fed: GDPNow; The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in thesecond quarter of 2020 is -41.9 percent May 19, up from -42.8 percent on May 15. [May 19 estimate]
America Has Opted for a Bad Recession – People keep saying that the coronavirus crisis has presented America with a difficult choice: the lives of our parents and grandparents versus the economic well-being of our children. I beg to differ. The real choice is, and has always been, between a sane national strategy for containing the pandemic and economic disaster.I don’t like getting sick. If you have a bad cold, I’d rather not shake your hand. Similarly, I’ll do a lot to avoid getting Covid-19, even if I’m pretty sure it won’t kill me. As a 45-to-64-year-old, my odds of being hospitalized if infected look to be about 1 in 25. 1 No thanks! I’ll pass on getting on a plane or going to a crowded restaurant.I’m not the only one. Millions of Americans are engaging in self-imposed austerity to stay on the safe side. As Federal Reserve Chairman Jerome Powell put it on Sunday, “for the economy to fully recover, people will have to be fully confident.” This is the challenge policy makers face: how to give people the level of security needed to support a real recovery.One option, which Powell emphasized, is to develop a vaccine for SARS-Cov-2, the virus that causes Covid-19. But this takes time. No vaccine for any disease has ever been rolled out in less than four years. It might never happen: SARS-Cov-2 is one of seven known human coronaviruses, none of which has a vaccine.The other option is herd immunity, in which so many people get the virus and develop antibodies that there aren’t many people left to infect. But, for you fans of Sweden out there, it’s not clear that infection confers immunity. Four of the known human coronaviruses can reinfect people relativelyquickly. Scientists don’t know about the rest.This leaves policy makers with two paths. The first, and best, is to devise an effective and comprehensive national testing, tracing and quarantining program, which would enable us all to feel a lot more confident that we’re not going to run into people with Covid-19. So far, though, the U.S. remains wedded to its local vision of public health governance, in which states largely do their own thing. The result will be a patchwork approach to contact tracing. Connections that cross state or even county lines will likely be missed, allowing recurring outbreaks to undermine consumers’ confidence.The second path: Let the economy evolve organically to provide the assurance that people demand. This would entail a vast transformation, as both workers and consumers demand considerably more space to ensure their safety. The process would probably be very slow, involving persistent unemployment and sluggish growth. Consider, for example, how long the U.S. economy struggled to adjust to high-priced oil in the 1970s.On the merits, the decision would seem a no-brainer: a vigorous national public health response versus a horrific recession. I hope for the former. Sadly, given the evidence so far, I expect the latter.
Dance Macabre – Kunstler – Western Civ’s most infamous encounter with pandemic disease, so far, was the big first wave of the Black Death that had a marathon run from 1346 to 1353. That bug was the real deal. It killed folks left and right, every age group, every social station, and it killed them ugly. Few who caught it survived. Up to half the population of Europe perished, along with a lot of their social and economic ways. Covid-19 seems rather a punk-ass illness compared to the Black Death. Its victims by far are people already on a fast track to the last roundup. We know exactly what causes it, if not so exactly its origin, and yet the response among our experts has been far more ambiguous than those long-ago bishops of Christendom to the Great Plague. The various scientists, physicians, public health officers, and politicians seem, to the casual observer, about equally divided between those who consider the corona virus a grave threat and those who insist it’s hardly worse than any annual flu. What is one to believe? Or do? Which brings us to the verge of the Great Opening-up. The current nostalgia for pre-Covid-19 business-as-usual is understandably intense. Gone especially from daily life are all the ceremonies of human togetherness, from gatherings of friends to the casual shoulder-rubbings of urban life to the crowded venues of the lively arts to the great moiling orgies of pro sports. The life of the perpetual jigsaw puzzle, YouTube, and Netflix has proved inadequate to human aspiration. Gone, too, are livelihoods, revenue streams, and rewarding roles in everyday existence. The itch to get out and do, get out and make, get out and be, is overwhelming. Behind those plain yearnings, though, looms the specter of a system that appeared to be already foundering before Covid-19 entered the scene. There is, at least, considerable agreement that the disease catalyzed the disorders of finance and economy and accelerated the damage – just not among the people most responsible for engineering the fragilities that actually crashed things Jerome Powell, Pope of the Church of the Federal Reserve, went on the 60-Minutes show last night to reassure the nation that things will eventually get back to normal. “I think you’ll see the economy recover steadily through the second half of this year.” Yessir, if you say so. Were his fingers crossed? You couldn’t tell because the camera had him framed in a head-shot. Personally, I think the Fed Chairman was blowing smoke up the nation’s wazoo. Spooky as it’s been, the Covid-19 virus has also been a great cover-story for the natural collapse of a severally unbalanced, ecologically unsound, and dishonestly represented set of arrangements that are now unspooling at horrifying speed. The car industry is dying. The airline industry is laying out its fleet of big birds in desert graveyards. The college racketeering operation went off a cliff, along with medical profiteering. Agribusiness no longer has a business model. Hundreds of kinds of services no longer have customers who can afford their offerings from acupuncture to zymurgy. None of that will be fixed by injections of miracle money borrowed from ourselves in quantities that would turn every US citizen into a millionaire – if it wasn’t just pounded down the rat-holes of the stock and bond markets. The big question about the Great Opening-up is when the recognition of all that turns to raw emotion. Covid-19 may still be with us then, but it will be the least of our problems. The masks will come off. The dance will commence.
What Could Go Wrong? – (dozens of graphs) – In 2019, US population growth fell to +1.55m or +0.5%…this was due to a trifecta of declining births, lower immigration, and higher deaths than anticipated. However, as with everything “2020”, all three trends are only intensifying to blow away 2019. Births are falling faster and further, deaths moving higher with Corona-virus and drug related overdoses, and immigration nearly non-existent. Thus, US population growth will likely dip to “just” 1 million or +0.3% this year. And while I anticipate (or think it feasible) that immigration could return to 2019 levels eventually, births will almost surely continue falling and deaths rising more than anticipated. The simple outcome of this is an ongoing collapse in US population growth which is far larger than in scope than the current Corona-virus pandemic. Census Population Estimates…Wildly Overstating Growth The chart below shows the 2008, 2014, and 2017 Census US total population projections through 2050. Some quick math shows that in 9 years time from ’08 to ’17, the Census downgraded US population growth through 2050 by 50 million persons. But due to the factors mentioned above, the 2020 Census projection through 2050 will need another massive downgrade…I’d suggest something on the order of another 29 million person downgrade. The most significant contributor to decelerating population growth is declining births. This is true among the native population and true among immigrants. On average, they are all having significantly fewer children than anticipated. As the Census estimates from ’00, ’08, ’12, ’14, and ’17 show…the Census models just can’t fathom the fast declining births taking place in the US. But each Census estimate is still far too high, and perhaps in ’20 the Census will “fix” their models and portray reality (ok, not likely)…but I offer a more realistic picture below. However, the downgrades in population are specifically among the younger populations. Obviously, declining births and immigration means declining young. The about face from ’08 to ’20 is stunning in the suggestion that the US truly is far more Japanese than immune to depopulation. Supporting the decline of young is the flattening and eventual decline of the childbearing population. Again, the ongoing declines in projections means that a flat childbearing population with declining fertility rate will continue having fewer children unless something intercedes. One place that will not see significant downgrades in population growth are the elderly. Despite Corona-virus, the elderly population is likely to continue swelling. Below, the rising fertility and births amid “better” economic times and declining among “worse” economic times. The clear insinuation is that the “recovery” since ’07 has been no recovery for those young adults of childbearing age as their willingness / capability to undertake childbearing has continued to wane. Below, annual births again but including the cost of money (FFR%), marketable federal debt, and the Federal Reserve Balance sheet (QE). Ever more debt to be repaid/serviced/monetized by ever fewer…what could go wrong?
China Pledges to Implement U.S. Trade Deal Amid Rising Tensions — China reiterated a pledge to implement the first phase of its trade deal with the U.S. despite setbacks from the coronavirus outbreak, and as tensions escalate between the world’s two biggest economies. “We will work with the United States to implement the phase one China-U.S. economic and trade agreement,” Premier Li Keqiang told an annual gathering of lawmakers in Beijing on Friday. “China will continue to boost economic and trade cooperation with other countries to deliver mutual benefits.” Li Keqiang bows after delivering his speech during the opening session of the National People’s Congress in Beijing on May 22. Over the past two years, the Trump administration had imposed punitive duties on roughly $360 billion in Chinese goods, and China retaliated by raising levies on more than half of America’s exports. The two sides signed a phase-one trade pact on Jan. 15 and rolled back some of the tariffs, but the agreement has come under threat as the two nations escalate disputes on many fronts. The centerpiece of the January agreement was China’s promises to buy more U.S. goods and services, but even before the coronavirus hit analysts were questioning whether those targets were realistic. Now, with both Chinese demand and U.S. manufacturing and transport capacity down due to the virus — and prices falling for energy and other goods — those promises look even further out of reach. Chinese Vice Premier Liu He, and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin earlier this month pledged to create favorable conditions for implementing the trade deal and cooperating on the economy and public health. But President Donald Trump said later in an interview that he is having “a very hard time with China” and last week said the U.S. would “save $500 billion” if it cut off ties with China. China on Friday also abandoned its usual practice of setting a numerical target for economic growth this year due to the turmoil caused by the virus, breaking with decades of Communist Party planning habits in an admission of the deep rupture that the disease has caused. Beijing is using the legislative session to pass a bill establishing “an enforcement mechanism for ensuring national security” for Hong Kong, setting up a potential showdown with Trump, who has come under pressure in Washington to reconsider the city’s special trading status. Secretary of State Michael Pompeo has delayed an annual report on whether the city still enjoys a “high degree of autonomy” from Beijing, telling reporters Wednesday that he was “closely watching what’s going on there.”
Fed’s Powell, Treasury’s Mnuchin show bipartisan support for corporate bailout and back-to-work drive – US Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin testified Tuesday before the Senate Banking Committee on the government response to the coronavirus pandemic. The event demonstrated the bipartisan support of Democrats and Republicans for the massive bailout of the banks and corporations as well as the back-to-work drive that threatens hundreds of thousands of workers with disease and death. At the end of March, the Senate voted unanimously for the CARES Act, which nominally allocated $2.2 trillion to cover the losses of wealthy investors and speculators, but actually authorized the pumping of more than $6 trillion of virtually free money into the financial markets. That unprecedented transfer of wealth to the financial aristocracy halted the stock market plunge triggered by the spread of the pandemic and fueled a record 35 percent rise in the Dow Jones Industrial Average over the past seven weeks. Over the same period, more than 36 million workers have been laid off, official unemployment has reached Depression levels, and mile-long food lines have appeared across the country. The failure of the government to organize comprehensive testing, tracing and quarantining has resulted to date in over 1.5 million infections and more than 91,000 deaths, and health experts agree that these official figures are a substantial underestimation. Yet despite rising infections and deaths, all 50 US states have begun “reopening,” manufacturing is resuming, and workers are being told if they do not return to work they will be cut off of unemployment and other benefits, threatening them with homelessness and destitution. In the hearing, a number of Democrats and Republicans on the Banking Committee criticized Mnuchin for moving too slowly to distribute the bailout money allocated by the CARES Act to businesses, a few Democrats complained that not enough was being done to prevent layoffs and provide income to displaced workers, and others sought to nudge Powell to call on Congress to pass a new bill to provide aid to states and cities being bankrupted by the collapse of tax revenues. None of them, however, called for the repeal of the CARES Act or opposed the ongoing corporate bailout, and none called for a halt to the premature return to work being imposed on the working class. There were no proposals for a comprehensive, nationally coordinated program of testing, contact tracing, quarantining and treatment to contain and halt the pandemic and save lives. Nor did any senator oppose the push to provide legal immunity to private companies, including senior living facilities, from suits filed in behalf of workers sickened or killed due to a lack of protection from the coronavirus. The unstated premise accepted by both parties as well as those giving testimony was the abandonment of any centrally directed effort to combat the virus and the rapid restarting of business operations to resume the extraction of corporate profit from the working class. Underscoring that the Fed would guarantee the wealth of the ruling elite, he said, “There’s a lot more we can do … I will say that we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have. So there’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.”
4 takeaways from Senate grilling of Mnuchin, Powell on relief plans – – Democrats on the Senate Banking Committee urged Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin to ensure companies receiving coronavirus relief loans use the funds to pay employees, while Republicans zeroed in on aspects of the Fed’s emergency liquidity facilities. The hearing Tuesday was Powell and Mnuchin’s first quarterly update to Congress on the implementation of the Coronavirus Aid, Relief, and Economic Security Act, which was signed into law in March. Senators grilled Powell and Mnuchin on the deployment of CARES Act funds, while also seeking feedback on potential future measures Congress could take to stabilize the economy in the midst of the pandemic. The hearing came less than a week after House Democrats passed the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, without any Republican support. Democrats on the Banking Committee emphasized the need for additional economic stimulus, while Republicans were hesitant to support more relief until the funds from the CARES Act were fully dispersed. Sen. Sherrod Brown of Ohio, the top Democrat on the committee, and Sen. Elizabeth Warren, D-Mass., pushed Mnuchin to ensure that companies are accountable for how they use CARES Act funds.“You’ve set up CARES act programs that will lend trillions of dollars to companies,” Brown told Mnuchin. “Am I right that you are not requiring companies to use the money they borrow to keep their workers on the payroll?” Without saying whether companies are required to keep workers on payroll, Mnuchin said the Treasury Department is implementing the CARES Act appropriately. Warren further pressed Mnuchin on whether corporations will be criminally charged for misusing CARES Act funds or providing false information on how they are using funds. Powell also provided an update on the much-anticipated Main Street Lending Program, saying it is expected to be propped up before the end of May or early June. Lawmakers have been pushing for the Fed to move quickly to make the program operational. While the Paycheck Protection Program was intended to help primarily small businesses, the MSLP will be focused on middle-market relief. Sen. Thom Tillis, R-N.C., said he was concerned that some businesses won’t qualify for loans in any of the programs. Mnuchin said the administration is focused on helping as many companies as possible. The Fed’s Municipal Liquidity Facility has sparked bipartisan concerns. Both committee Chairman Mike Crapo, R-Idaho, and Sen. Catherine Cortez Masto, D-Nev., said the population thresholds set by the Fed for cities to qualify have made certain communities ineligible to receive aid. The thresholds “are established at such a level that many of the small cities and counties across the United States cannot apply for individual loans,” Crapo said in questioning Powell. “You have indicated that it would be contemplated that the states be able to apply for loans for these smaller cities and counties and there’s a lot of concern out there about this.” Democrats argued that Congress must pass additional coronavirus relief. They cited comments Powell made last week in which he called for more fiscal measures and said “the passage of time can turn liquidity problems into solvency problems.”“So Congress needs to think about more than just the national debt right now,” Brown said. “It’s less costly to act today to help people than to pay for our failure to act in the future. Is that right, Mr. Chairman?” But Powell tried to walk back his previous comments to some extent, saying, “This is really a question for Congress to weigh.”
Senators Express Outrage at Hearing over Mnuchin’s Sneakiness with $500 Billion of Taxpayers’ Money – Pam Martens — Both Republicans and Democrats lashed out at Treasury Secretary Steve Mnuchin for effectively cooking up a deal that put him in charge of $500 billion of taxpayers’ money under the stimulus bill known as the CARES Act and has now left Congress in the dark about how that money is being spent. During the hearing, which was held virtually, Senator Elizabeth Warren of Massachusetts summed up the situation to Mnuchin like this: “You are boosting your Wall Street buddies and leaving Americans behind.”The hearing was called to hear from both Mnuchin and Fed Chair Jerome Powell. The CARES Act, irresponsibly, gave Mnuchin control of $500 billion, of which $454 billion was earmarked to go to the Fed to be leveraged into a $4.54 trillion bailout program. Apparently, Democrats were promised the money would go to help Main Street while the actual crafters of the legislation conveniently forgot to put that language in the bill. The bulk of the numerous programs set up by the Fed, which will use CARES Act money to absorb losses, are structured as bailout programs for Wall Street or the fossil fuels industry. During the hearing yesterday, Democratic Senator Elizabeth Warren derided the $500 billion as a “slush fund” while Republican Senator John Kennedy of Louisiana described it as a backroom deal put together by Mnuchin, Mitch McConnell, Nancy Pelosi, Kevin McCarthy, and Chuck Schumer and then forced on other members of Congress who didn’t get to participate in the negotiations. Kennedy said Congressional members “moan and groan and complain and then moo and follow their leaders in the shoot like cattle.” Kennedy promised Mnuchin that the next deal he attempts to bring to Congress on this basis is going to receive “serious pushback from Republicans and Democrats in both houses.” Senator Bob Menendez of New Jersey and other Senators sent a letter to Powell asking him to expand the Fed’s emergency programs to include buying longer-term municipal bonds in order to bring down the costs of borrowing for state and local governments. Powell said he would take a look at the proposal. Mnuchin told Senator Jon Tester of Montana that he has complied fully with releasing information on who is getting the money from the CARES Act and said it has been posted online at the Treasury’s website. Tester told him that “I’m not seeing any of it.” (Wall Street On Parade also could find no list of recipients of the $500 billion on the Treasury’s website.) Tester asked Powell how much money from its leveraged facilities has already been spent to help the U.S. economy. Powell said the largest facilities “are just coming on line,” so “it’s all ahead of us.” Powell added that the amount of money thus far is “fairly modest.” Powell told Tester that the Fed “has committed to disclose all of the borrowers and the amounts in a timely way.” Wall Street On Parade, using the Fed’s own weekly balance sheet report, tallied up that the Fed Hasn’t Spent a Dime Yet for Main Street Versus $735 Billion for Wall Street. Thus far, the Fed has not released the name of any recipient of funds that went to Wall Street banks or trading houses.
What did eight weeks and $3 trillion buy the U.S. in the fight against coronavirus? – (Reuters) – Unemployment checks are flowing, $490 billion has been shipped to small businesses, and the U.S. Federal Reserve has put about $2.5 trillion and counting behind domestic and global markets. Fears of overwhelmed hospitals and millions of U.S. deaths from the new coronavirus have diminished, if not disappeared. Yet two months into the United States’ fight against the most severe pandemic to arise in the age of globalization, neither the health nor the economic war has been won. Many analysts fear the country has at best fought back worst-case outcomes. For every community where case loads are declining, other hotspots arise and fester; for states like Wisconsin where bars are open and crowded, there are others such as Maryland that remain under strict limits. There is no universal, uniform testing plan to reveal what is happening to public health in any of those communities. Between 1,000 and 2,000 people a day continue to die from the COVID-19 disease in the United States, and between 20,000 and 25,000 are identified as infected. If there is consensus on any point, it is that the struggle toward normal social and economic life will take much more time, effort and money than at first thought. The risks of a years-long economic Depression have risen; fact-driven officials have become increasingly sober in their outlook; and the coming weeks and coming set of choices have emerged as critical to the future. Faced with two distinct paths – a cavalier acceptance of the mass deaths that would be needed for “herd immunity” or the truly strict lockdown needed to extinguish the virus – “we are not on either route,” Harvard University economist James Stock, among the first to model the health and economic tradeoffs the country faces, said last week. That means no clear end in sight to the economic and health pain.
Congress Eyes Military-Style Budget Carve-Out for Pandemic Prep – WSJ – CONGRESS LOOKS TO MAKE PANDEMIC PREP PERMANENT through an appropriations mechanism used for some military funding. The relatively quiet effort by senior appropriators, endorsed by senior members of both parties, is playing out below the din of recrimination between the Trump administration and members of the Obama administration about who is to blame for shortcomings in the U.S. coronavirus pandemic response. A House Appropriations health subcommittee is working out the details of a proposal that would set up health funds exempt from discretionary spending caps – meaning the money would flow every year regardless of the political or budgetary climate – similar to the Defense Department Overseas Contingency Operations account. The idea could run into some resistance, however: Budget and transparency hawks in both parties have criticized the Pentagon account as a slush fund.For now, though, top health appropriators Reps. Rosa DeLauro (D., Conn.) and Tom Cole (R., Okla.) continue to discuss the idea ahead of the expected beginning of 2021 appropriations negotiations next month. DeLauro has pushed a version of the bill for years, including in the aftermath of the Ebola and Zika outbreaks – she reintroduced the legislation in late January, before the first known coronavirus death in the U.S. The pandemic “has made clear the necessity for this type of account,” DeLauro told the Journal. The negotiations are taking place amid a bitter partisan blame game over pandemic preparations. Senate Majority Leader Mitch McConnell accused the Obama administration of not leaving behind “any kind of game plan for something like this.” The Biden campaign responded by posting the 2014 Obama administration “Playbook for Early Response to High-Consequence Emerging Infectious Disease Threats.” McConnell later conceded that the Obama administration had indeed left behind a plan: “I clearly made a mistake.”
U.S. COVID-19 Contact Tracing Programs Designed for Failure, Despite Bloomberg Money; Why Can’t the U.S. Copy the Lessons of Hong Kong’s Success? – Jerri-Lynn Scofield – After weeks of voluntary national lockdown, some states are easing their social distancing requirements.The new magical thinking for U.S. management of this pandemic: contact tracing. Michael Bloomberg has made a significant investment in this strategy. According to Wired: As with testing and acquiring personal protective equipment, the federal government has left the challenge of recruiting and training an army of new contact tracers up to state and local public health departments. Absent a national plan, epidemiologists at the Johns Hopkins Bloomberg School of Public Health stepped in to create a crash course that they hope will help public health departments rapidly expand their workforce. Their first remote students will be the thousands of people who’ve already applied to be contact tracers in New York state, the American epicenter of Covid-19. “To be honest, we’ve never done contact tracing at this scale in our living memory,” says Emily S. Gurley, an infectious disease epidemiologist who is leading the program. “So a lot of this is brand new.” In late April, New York Governor Andrew Cuomo and former New York City Mayor Michael Bloomberg announced plans to hire as many as 17,000 tracers for the state. Bloomberg’s philanthropic organization donated $10.5 million to the effort. Some of that money went to funding the creation of the Johns Hopkins course, which – in addition to further training – will be a requirement for anyone hoping to be hired into the New York tracing corps. Cuomo told The Washington Post this week that the online course is a “key component of our program that will provide tracers with the tools to effectively trace Covid-19 cases at the scale we need to fight this pandemic.” Incredibly, U.S. states are only now rolling out contact tracing programs, many months after places that have successfully managed the pandemic: Hong Kong (4 deaths, 1056 cases), South Korea (11,065 cases, 263 deaths), Taiwan (440 cases, 7 deaths), Thailand (3031 cases, 56 deaths), Vietnam (320 cases, 0 deaths) – have run test, trace, and isolate programs. I have written three previous posts (see here, here, and here) on what has made Hong Kong’s approach so successful. For each of these, I’ve been able to draw on the wisdom of my old Oxford friend, Dr. Sarah Borwein, a Canadian who has practiced medicine in Hong Kong for fifteen years, and before that, in Beijing. Densely-populated Hong Kong has 7.5 million residents, and so far, has recorded four deaths, and just over 1000 cases, despite a slow and bungled initial response by chief executive Carrie Lam and by eschewing misplaced reliance on any techno-fix apps that carry significant risks to civil liberties (see here, where I discuss these points in detail; and this FT article discussing the limitations of contact tracing apps, Coronavirus contact tracing apps struggle to make an impact). And I turn to Sarah again to discuss some necessary conditions for successful contact tracing…
U.S. mulls paying companies, tax breaks to pull supply chains from China – (Reuters) – U.S. lawmakers and officials are crafting proposals to push American companies to move operations or key suppliers out of China that include tax breaks, new rules, and carefully structured subsidies. Interviews with a dozen current and former government officials, industry executives and members of Congress show widespread discussions underway – including the idea of a “reshoring fund” originally stocked with $25 billion – to encourage U.S. companies to drastically revamp their relationship with China. President Donald Trump has long pledged to bring manufacturing back from overseas, but the recent spread of the coronavirus and related concerns about U.S. medical and food supply chains dependency on China are “turbocharging” new enthusiasm for the idea in the White House. On Thursday, Trump signed an executive order that gave a U.S. overseas investment agency new powers to help manufacturers in the United States. The goal, Trump said, is to “produce everything America needs for ourselves and then export to the world, and that includes medicines.” But the Trump administration itself remains divided over how best to proceed, and the issue is unlikely to be addressed in the next fiscal stimulus to offset the coronavirus downturn. Congress has begun work on another fiscal stimulus package but it remains unclear when it might pass. The push takes on special resonance in an election year. While anti-China, pro-American job proposals could play well with voters, giving taxpayer money or tax breaks to companies that moved supply chains to China at a time when small business is flailing may not.
Democrats Split Over Scope of Coronavirus Oversight – WSJ – HOUSE CORONAVIRUS OVERSIGHT responsibilities get chopped up and spread among committees. Speaker Nancy Pelosi and newly designated chairman Jim Clyburn of the special coronavirus committee say that panel will be used for oversight of the $2 trillion stimulus package and its many loan programs. Many Democrats and progressive groups have been distressed by Clyburn’s comment that the committee wouldn’t “be looking back on what the president may or may not have done back before this crisis hit.” Intelligence Committee Chairman Adam Schiff wants a 9/11-style independent commission to review the administration’s response to the coronavirus pandemic. The House Oversight Committee has started some reviews, including an inquiry into the Federal Emergency Management Agency’s medical equipment stockpiles. Rep. Katie Porter has begun her own investigations; this week her office released a report on the Defense Production Act and medical equipment exports to China during the first months of the pandemic.
Nancy Pelosi’s Lobbying Ban in Stimulus Package Quickly Nixed by K Street and Senate – WSJ – NANCY PELOSI TRIED TO BAN LOBBYING by firms that receive funds as part of the coronavirus stimulus package, but the provision tucked into page 728 of House Democrats’ draft proposal quickly caught the eye of lobbyists who were assured by Hill contacts that the provision had no chance of being included in the final legislation hammered out by the Senate. “The corporation may not carry out any Federal lobbying activities,” the House draft said.It was one of several conditions on federal aid to corporations in Pelosi’s bill. Others included bans on stock buybacks, restrictions on executive pay and a ban on paying dividends to shareholders until the federal assistance was fully repaid. Some of those corporate-accountability conditions were ultimately included in the Senate legislation.Some legal experts saw the lobbying provision as a Democratic messaging effort that wouldn’t have survived legal scrutiny. “It’s highly likely to be struck down as unconstitutional under the ‘unconstitutional conditions’ doctrine,” because it violates corporations’ First Amendment rights to petition the government, said Robert Kelner, a partner at Covington & Burling who advises companies on lobbying-disclosure rules. Lobbying by firms that receive bailout money was controversial during the financial crisis, too, and had uneven outcomes: Major banks continued to employ lobbyists, while American International Group took a yearslong break from lobbying after feeling pressure from Congress. It restarted in 2014 after it had repaid its $182 billion bailout.
As Congress Weighs COVID Liability Protections, States Shield Health Providers –Coronavirus patients and their families who believe a doctor, nurse, hospital or other provider made serious mistakes during their care may face a new hurdle if they try to file medical malpractice lawsuits.Under pressure from health provider organizations, governors in Connecticut, Maryland, Illinois and several other states have ordered that most providers be shielded from civil ― and, in some cases, criminal – lawsuits over medical treatment during the COVID-19 health emergency. In New York and New Jersey, immunity is now part of state law. In California, six hospital, physician and long-term care provider groups are pressing Gov. Gavin Newsom to also issue an order assuring immunity.The efforts are attracting congressional attention as well and threatening to derail the next federal coronavirus stimulus package on Capitol Hill. Senate Majority Leader Mitch McConnell is demanding that Congress include liability protections against COVID-related suits for businesses and health care providers. The contentious issue of legal liability claims in health care has divided congressional Republicans and Democrats for years. “We are not going to let health care heroes emerge from this crisis facing a tidal wave of medical malpractice lawsuits so that trial lawyers can line their pockets,” the Kentucky Republican said in the Senate on Tuesday. “This will give our doctors, nurses and other health care providers a lot more security as they clock in every day and risk themselves to care for strangers.”A coalition of 36 physician and hospital associations has appealed as well to congressional leaders for federal legislation.Some legal experts and seniors’ advocates worry that the state immunity guarantees go too far, leaving patients with no way to hold providers accountable. Supporters argue that health care providers and facilities deserve protection from lawsuits as they battle a deadly virus during an unprecedented public health emergency.
Trump expresses opposition to extending coronavirus unemployment benefits enacted in response to pandemic – President Trump on Tuesday privately expressed opposition to extending a weekly $600 boost in unemployment insurance for laid-off workers affected by the coronavirus pandemic, according to three officials familiar with his remarks during a closed-door lunch with Republican senators on Capitol Hill.The increased unemployment benefits – paid by the federal government but administered through individual states – were enacted this year as part of a broader $2 trillion relief package passed by Congress. The boost expires this summer, and House Democrats have proposed extending the aid through January 2021. But congressional Republicans have said they are concerned that some workers are making more money on unemployment insurance than if they were on a payroll and therefore have less incentive to return to work or find a new job.“You can extend some assistance, but you don’t want to pay people more unemployed than they’d make working. You should never make more than your actual wages,” said Sen. Lindsey O. Graham (R-S.C.), who said he raised the issue with Trump during the lunch. While Trump did not explicitly say he would not sign another bill if it contained a benefit boost, Graham said “he agrees that that is hurting the economic recovery.”Many economists fear cutting off the benefit extension could hamper the economic recovery. Government spending on unemployment benefits rose by $45 billion from February to April, offsetting slightly more than half of the decline in private wages and salary, according to a recent study by the Brookings Institution. Republicans have maintained that the higher benefit will give workers an incentive to stay at home rather than go to work, but eliminating the massive cash infusion could further depress demand amid fears consumers are already cutting back dramatically on spending. Trump’s advisers have expressed confidence the economy will quickly recover, a view at odds with many economists.
Nancy Pelosi’s Lobbying Ban in Stimulus Package Quickly Nixed by K Street and Senate – WSJ – NANCY PELOSI TRIED TO BAN LOBBYING by firms that receive funds as part of the coronavirus stimulus package, but the provision tucked into page 728 of House Democrats’ draft proposal quickly caught the eye of lobbyists who were assured by Hill contacts that the provision had no chance of being included in the final legislation hammered out by the Senate. “The corporation may not carry out any Federal lobbying activities,” the House draft said.It was one of several conditions on federal aid to corporations in Pelosi’s bill. Others included bans on stock buybacks, restrictions on executive pay and a ban on paying dividends to shareholders until the federal assistance was fully repaid. Some of those corporate-accountability conditions were ultimately included in the Senate legislation.Some legal experts saw the lobbying provision as a Democratic messaging effort that wouldn’t have survived legal scrutiny. “It’s highly likely to be struck down as unconstitutional under the ‘unconstitutional conditions’ doctrine,” because it violates corporations’ First Amendment rights to petition the government, said Robert Kelner, a partner at Covington & Burling who advises companies on lobbying-disclosure rules. Lobbying by firms that receive bailout money was controversial during the financial crisis, too, and had uneven outcomes: Major banks continued to employ lobbyists, while American International Group took a yearslong break from lobbying after feeling pressure from Congress. It restarted in 2014 after it had repaid its $182 billion bailout.
Senate Adjourns Without Approving Deal to Extend PPP Spending Window – WSJ The Senate was unable to finalize a deal to extend the amount of time companies have to spend loans obtained through the Paycheck Protection Program, putting off the likely passage of revised small-business aid rules to next month.Amid broad bipartisan support, senators worked on Thursday to coalesce around a plan to double the time period to 16 weeks, but failed to garner unanimous consent on the agreement before leaving for a Memorial Day recess. The PPP is intended to help small businesses keep workers employed and pay other expenses during the coronavirus pandemic.Under the current rule, the earliest recipients of PPP funds must finish using them by May 29. Senators also sought to extend the deadline for program applications to Dec. 31 from June 30, and allow businesses to use funds to pay for investments needed to reopen safely and buy personal protective equipment for employees.”I don’t think we’re going to have a problem getting something done one way or the other on it,” said Sen. Marco Rubio (R., Fla.), the chairman of the small-business committee.Some senators had hoped to pass new PPP legislation before the break, even as GOP leaders have urged a go-slow approach on a broader aid package.On Wednesday, Sen. Cory Gardner (R., Colo.) said it was “unfathomable” for the Senate to leave for recess without passing coronavirus-related legislation, adding that he would block the Senate from adjourning. Mr. Gardner, who faces a tough re-election fight, said Thursday that the Senate was “very close to a number of things that are needed” and didn’t object to the Senate adjourning.Separately, House Democrats are expected next week to vote on a bill to change the $660 billion program’s time frame, and change some of the repayment terms. The House proposal has support from the U.S. Chamber of Commerce, the National Restaurant Association, the National Retail Federation and several other outside groups.As states across the country start to loosen restrictions on non-essential businesses, shopping malls in some states were open this weekend and provided a look at the desire for in-store shopping during the pandemic. Photo: Elizabeth FindellTo become law, either bill would have to pass both chambers and be signed by the president. The program requires businesses to put 75% of its funding toward keeping workers on the payroll for the loan to be forgiven, and to do so within eight weeks. But that has proven difficult for many businesses – such as restaurants and hair salons – that have remained closed and have little or no work to offer employees.
Mnuchin: Strong Likelihood We’ll Need Another Stimulus Package – WSJ – Treasury Secretary Steven Mnuchin said the U.S. economy “will be great again” in 2021, a day after the Congressional Budget Office forecast that unemployment will remain elevated through the end of next year. Mr. Mnuchin said Thursday that the recession caused by efforts to contain the novel coronavirus will likely bottom out in the second quarter – a view shared by many economists – and predicted a “gigantic increase” in output in the fourth quarter. He reiterated the preference of the Trump administration and Senate Republicans to hold off on approving additional support for the economy, though he said there’s a “strong likelihood” more will be needed. “With the great advancement in medical progress in killing this virus we expect our economy will be great again next year,” Mr. Mnuchin said in a virtual event hosted by The Hill. The Treasury secretary’s comments came as economists and other policy makers grow increasingly somber about the economic outlook beyond the current quarter, which is widely expected to see the largest decline in output since the Great Depression. The Congressional Budget Office projected Wednesday that the unemployment rate, which shot up to 14.7% last month, would remain at 8.6% at the end of 2021. That’s more than double the 3.5% level seen in February. Since March, Congress has passed economic-relief packages expected to inject more than $3 trillion into the economy. But with health experts cautioning against a full-fledged reopening of restaurants, stores and tourism, many economists believe more aid will be needed to prevent further layoffs by businesses and governments hit by declining tax revenues. The Democratic-controlled House of Representatives passed an additional $3 trillion relief package last week that Republicans say they are unlikely to take up in the Senate. Mr. Mnuchin said Thursday the House bill “obviously is a partisan bill, so that’s not something we’re focusing on at the moment.” He suggested the Trump administration would want to modify a provision in the Cares Act that provides an additional $600 a week in unemployment benefits to laid-off workers because it allows many low-income employees to receive more money than they did working.
Farmers won’t see coronavirus money until June as bankruptcies soar – Struggling farmers and ranchers, many of whom have seen their markets collapse as the pandemic upended supply chains, won’t see coronavirus relief money until June — about two months after Congress appropriated the funds.The US Department of Agriculture said this week that farmers can begin applying for the money next Tuesday. Secretary Sonny Perdue said he expects the checks to be sent a week to 10 days after a farmer signs up.Farmers who saw at least a 5% drop in price loss due to the pandemic will be eligible for payments worth up to $250,000.As demand from restaurants and schools disappeared, farmers have already had to dump milk,euthanize hogs and destroy fresh produce as suppliers try to reconfigure the supply chain and get more food to grocery stores and food banks.”This aid can’t arrive soon enough as many farmers file for bankruptcy, facing unprecedented losses,” said American Farm Bureau Federation President Zippy Duvall in a statement.Farm bankruptcies are up 23% over the past year and are likely to keep rising because of the pandemic, according to the group.Farmers were already suffering before the coronavirus outbreak. They became a specific target of President Donald Trump’s trade war with China, which has been ongoing for two years. The Trump administration gave $28 billion in direct payments to farmers hurt by China’s tariffs, but it didn’t make them whole.New agricultural purchase commitments made by Beijing in February in a preliminary trade deal have mostly failed to come to fruition as the pandemic slowed global trade.”After several difficult years of trade disputes, depressed prices, and extreme weather, the agricultural economy was finally starting to recover,” said National Farmers Union President Rob Larew in a statement sent to CNN. But he added that now “it’s clear that this is going to be yet another bad year for family farmers and ranchers.”
Medicaid Providers At The End Of The Line For Federal COVID Funding – Casa de Salud, a nonprofit clinic in Albuquerque, New Mexico, provides primary medical care, opioid addiction services and non-Western therapies, including acupuncture and reiki, to a largely low-income population. And, like so many other health care providers that serve as a safety net, its revenue – and its future – are threatened by the COVID-19 epidemic. “I’ve been working for the past six weeks to figure out how to keep the doors open,” said the clinic’s executive director, Dr. Anjali Taneja. “We’ve seen probably an 80% drop in patient care, which has completely impacted our bottom line.” In March, Congress authorized $100 billion for health care providers, both to compensate them for the extra costs associated with caring for patients with COVID-19 and for the revenue that’s not coming in from regular care. They have been required to stop providing most nonemergency services, and many patients are afraid to visit health care facilities. But more than half that money has been allocated by the Department of Health and Human Services, and the majority of it so far has gone to hospitals, doctors and other facilities that serve Medicare patients. Officials said at the time that was an efficient way to get the money beginning to move to many providers. That, however, leaves out a large swath of the health system infrastructure that serves the low-income Medicaid population and children. Casa de Salud, for example, accepts Medicaid but not Medicare. State Medicaid directors say that without immediate funding, many of the health facilities that serve Medicaid patients could close permanently. More than a month ago, bipartisan Medicaid chiefs wrote the federal government asking for immediate authority to make “retainer” payments – not related to specific care for patients – to keep their health providers in business. “If we wait, core components of the Medicaid delivery system could fail during, or soon after, this pandemic,” wrote the National Association of Medicaid Directors. So far, the Trump administration has not responded, although in early April it said it was “working rapidly on additional targeted distributions” for other providers, including those who predominately serve Medicaid patients. In an email, the Centers for Medicare & Medicaid Services said officials there will “continue to work with states as they seek to ensure continued access to care for Medicaid beneficiaries through and beyond the public health emergency.” In the administration’s explanation of how it is distributing the relief funds, Medicaid providers are included in a catchall category at the very bottom of the list, under the heading “additional allocations.”
Federal Government Buys Riot Gear, Increases Security Funding, Citing Pandemic — THE FEDERAL government has ramped up security and police-related spending in response to the coronavirus pandemic, including issuing contracts for riot gear, disclosures show.The purchase orders include requests for disposable cuffs, gas masks, ballistic helmets, and riot gloves, along with law enforcement protective equipment for federal police assigned to protect Veterans Affairs facilities. The orders were expedited under a special authorization “in response to Covid-19 outbreak.” The CARES Act, the $2.2 trillion stimulus legislation passed in late March, also authorized $850 million for the Coronavirus Emergency Supplemental Funding program, a federal grant program to prepare law enforcement, correctional officers, and police for the crisis. The funds have been dispensed to local governments to pay for overtime costs, purchase protective supplies, and defray expenses related to emergency policing.The CESF funding may be used for a range of coronavirus response efforts by law enforcement, including medical personal protective equipment, overtime for police officers, training, and supplies for detention centers. The grants may also be used for the purchase of unmanned aerial aircraft and video security cameras for law enforcement. Motorola Solutions, a major supplier of police technology, has encouraged local governments to use the new money to buy a range of command center software and video analytics systems.While the pandemic has coincided with a historic drop in violent crime across the country, analysts have expressed concern that the rapid spread of the virus will fuel confrontations.There have been multiple inmate riots in response to Covid-19 outbreaks in prisons and jails, which have become dangerous hotspots for the disease. The economic upheaval and disagreements over coronavirus-related policy have also fueled demonstrations across the country.The federal funding requests contrast sharply with the rosy rhetoric from President Donald Trump, who has lavished himself with praise for his response to the crisis and issued optimistic predictions that recovery is around the corner. Last month, the federal government secured a contract to purchase 100,000 body bags to dispose of deaths related to the Covid-19 outbreak.
US courts revoke emergency protections in coronavirus pandemic – Over the past week, the US Supreme Court and the Texas Supreme Court have issued a series of antidemocratic decisions that place countless lives at risk and increase the hardships faced by workers in the coronavirus pandemic. On Thursday, the US Supreme Court declined to reinstate an order requiring Texas prisons to provide proper safeguards against the coronavirus. Two prisoners, Laddy Valentine, 69, and Richard King, 73, filed a class action lawsuit on behalf of inmates against a geriatric prison in Grimes County, Texas. Valentine and King argued that the prison’s lack of safeguards violated the constitutional ban against cruel and unusual punishment. The prison, Wallace Pack Unit, holds over 1,200 inmates, 827 of whom are over 65. Leonard Clerkly, an inmate at the prison, died last month of complications from COVID-19. Since then, other prisoners have tested positive for the virus. A district court had ruled in favor of the prisoners and ordered the prison to implement multiple safety measures, including access to hand soap and hand sanitizer in public areas. Additionally, the prison was required to provide a detailed plan to test all inmates. The court also mandated cleaning and disinfecting protocols and ordered the prison to educate inmates on the pandemic. In issuing the decision last month, District Judge Keith P. Ellison said, “The government has a constitutional duty to protect those it detains from conditions of confinement that create a substantial risk of serious harm.” A week later, the US Court of Appeals for the Fifth Circuit, based in New Orleans, put Ellison’s order on hold pending an appeal. A three-judge panel argued that the district court’s requirements went further than the recommended guidelines issued by the US Centers for Disease Control and Prevention (CDC). While the panel admitted that COVID-19 poses a risk of “serious or fatal harm,” it asserted that many of the protective measures already taken by the prison already matched the district court’s order. Valentine and King asked the US Supreme Court to reinstate the district court order, but the justices denied the request. In court briefs, Texas argued that its Department of Criminal Justice (TDCJ) had worked “diligently” to protect prisoners from the pandemic. “Much of the relief plaintiffs sought involved safety measures already in place,” Texas Attorney General Ken Paxton told the Supreme Court. He added, “Plaintiffs have not shown any irreparable harm because there is no evidence that TDCJ’s COVID-19 measures are inadequate, nor is there any evidence that the district court’s laundry list of commands will protect them any better than what Defendants are already doing.” None of the “liberal” justices on the Supreme Court dissented from the decision. Justices Sonia Sotomayor and Ruth Bader Ginsburg wrote that they supported the court’s decision but held reservations on certain “disturbing” details of the case. In another attack on democratic rights, the Texas Supreme Court ruled Friday to place a hold on an expansion of voting by mail-in ballots during the pandemic. The court blocked a lower court’s decision allowing voters without immunity to the coronavirus to qualify for absentee ballots by claiming a disability. Efforts to curb mail-in voting, spearheaded by the Trump administration and the Republican Party, are justified with false claims that mail ballot fraud is rampant.
Immigrant Advocates See Fatal Flaws in Detention Centers – From its very beginning the Trump administration has aggressively used detention as part of its immigration enforcement strategy. Between 2016 and 2019, immigration detention in the U.S. grew by 45 percent, according to figures based on Immigration and Customs Enforcement’s annual reports. ICE’s use of detainer requests – 165,487 last year – requires the cooperation of local or state law enforcement to transfer people into prolonged detention in the country’s immigration detention facilities. Transfers of people from criminal custody to immigration detention facilities already constituted a detention-to-deportation pipeline prior to the coronavirus pandemic, but advocates now worry that ICE is transferring people into virus hotbeds. While local and state authorities have granted incarcerated people early release from jails and prisons, people are being caught by ICE’s dragnet use of detainers, further risking the spread of the virus. ICE detention facilities have already become hotspots for the virus throughout the country. Some, like Sonoma County resident Coraima Sanchez Nuñez, were transferred to an immigration detention facility before the pandemic. Nuñez was arrested for a probation violation last July, and said she planned, upon release from Sonoma County Jail, to take up her reserved spot in a rehabilitation center. But ICE issued a detainer, a request to state and local law enforcement agencies to notify them of a person’s release date and to facilitate the transfer of custody, which officials aren’t required by state law to comply with. Nuñez was moved to a facility in San Francisco, then transferred to the Mesa Verde immigration detention facility in Bakersfield, California, where she was held for eight months. As an asthmatic, Nuñez is particularly vulnerable to the virus, but said poor sanitary conditions in Mesa Verde put everyone detained there at risk of getting COVID-19. For weeks, according to Nuñez, soap dispensers were absent in communal restrooms, and only around mid-April – long after local and national public health officials had issued physical distancing and sanitation recommendations – did Mesa Verde staff finally install one at the entrance to the women’s dorm, after detainees went on a hunger strike. Immigration officials provide one small shampoo bottle and one bar of soap every other day for personal hygiene, including washing hands, bathing and cleaning personal products. Nuñez said detainees, responsible for cleaning the dorm and restrooms, used shampoo, toothpaste and lotion to clean common spaces. Nuñez went on a two and a half week hunger strike to demand access to protective equipment and testing. “It was like no virus ever existed,” she said. She added that when people exhibited coronavirus symptoms, they were not isolated from other detainees at Mesa Verde.
Trump Says Places of Worship Are Essential Services – WSJ – President Trump called on governors to reopen the nation’s places of worship as essential services Friday, pointing to new safety guidelines from the Centers for Disease Control and Prevention and declaring that he would “override” any state leaders who don’t agree.The president said some governors have deemed abortion clinics and liquor stores as essential but hadn’t put churches and other places of worship in that category. Mr. Trump, who since the coronavirus crisis began has asserted that he has authority over state governors only to walk back his position, didn’t say how he would overrule the states, which have set their own rules in the crisis.“I call upon the governors to allow our churches or places of worship to open,” Mr. Trump said at a hastily scheduled appearance in the White House briefing room Friday. “If they don’t do it, I will override the governors.”“The ministers, pastors, rabbis, imams and other faith leaders will make sure their congregations are safe as they gather and pray,” he said.The president’s announcement came as he is pushing for the country to reopen. It reflected his close ties to evangelical Christians, a group that has voiced frustration about the lockdowns due to the coronavirus pandemic, and one that Mr. Trump sees as key to his re-election bid in November.Most U.S. churches have closed their doors for now and moved to virtual services amid concerns over the virus, but others have sought to continue to bring congregants together physically in some way, prompting some litigation and tensions with local authorities.
Trump Declares Houses Of Worship Essential, Says Governors Must Allow Services Or ‘I Will Overrule Them’ – President Trump on Friday declared churches to be ‘essential’, and says he will ‘overrule’ governors who don’t allow them to open “right now.””Some governors have deemed liquor stores and abortion clinics as essential, but have left out churches and other houses of worship. It’s not right,” he said.BREAKING: President @realDonaldTrump announces that the CDC will be issuing guidance declaring places of worship ESSENTIAL, allowing them to re-open as of this weekend! pic.twitter.com/G9TzIq1npK – Team Trump (Text TRUMP to 88022) (@TeamTrump) May 22, 2020 According to Axios, the announcement comes after a disagreement between the Centers for Disease Control and the White House over the specifics regarding reopening the country, after the CDC released a 60-page roadmap.
Inside Trump’s coronavirus meltdown – When the history is written of how America handled the global era’s first real pandemic, March 6 will leap out of the timeline. That was the day Donald Trump visited the US Centers for Disease Control and Prevention in Atlanta. His foray to the world’s best disease research body was meant to showcase that America had everything under control. It came midway between the time he was still denying the coronavirus posed a threat and the moment he said he had always known it could ravage America.Shortly before the CDC visit, Trump said “within a couple of days, [infections are] going to be down to close to zero”. The US then had 15 cases. “One day, it’s like a miracle, it will disappear.” A few days afterwards, he claimed: “I’ve felt it was a pandemic long before it was called a pandemic.” That afternoon at the CDC provides an X-ray into Trump’s mind at the halfway point between denial and acceptance.We now know that Covid-19 had already passed the breakout point in the US. The contagion had been spreading for weeks in New York, Washington stateand other clusters. The curve was pointing sharply upwards. Trump’s goal in Atlanta was to assert the opposite.Wearing his “Keep America Great” baseball cap, the US president was flanked by Robert Redfield, head of the CDC, Alex Azar, the US secretary of health and human services, and Brian Kemp, governor of Georgia. In his 47-minute interaction with the press, Trump rattled through his greatest hits. He dismissed CNN as fake news, boasted about his high Fox News viewership, cited the US stock market’s recent highs, called Washington state’s Democratic governor a “snake” and admitted he hadn’t known that large numbers of people could die from ordinary flu. He also misunderstood a question on whether he should cancel campaign rallies for public health reasons. What caught the media’s attention were two comments he made about the disease. There would be four million testing kits available within a week. “The tests are beautiful,” he said. “Anybody that needs a test gets a test.” Ten weeks later, that is still not close to being true. Fewer than 3 per cent of Americans had been tested by mid-May. Trump also boasted about his grasp of science. He cited a “super genius” uncle, John Trump, who taught at the Massachusetts Institute of Technology and implied he inherited his intellect. “I really get it,” he said. “Every one of these doctors said, ‘How do you know so much about this?’ Maybe I have a natural ability.” Historians might linger on that observation too.
As death toll mounts, White House steps up efforts to scapegoat China for pandemic –In a round of interviews on US television talk shows, the top Trump trade adviser and anti-China hawk, Peter Navarro, stepped up the White House attack on Beijing, suggesting that it had purposely started the global COVID-19 pandemic. Making China the scapegoat for the outbreak not only serves to deflect attention from the Trump administration’s criminal responsibility for the horrific death toll in the United States but feeds directly into the anti-China trade war measures for which Navarro has aggressively advocated. Speaking on the “This Week” program on ABC News, Navarro repeatedly referred to COVID-19 in xenophobic terms as the “China virus” – a patently unscientific term intended to blame Beijing for the pandemic. While declaring he did not say that China deliberately unleashed the virus on the world, he immediately made clear that was exactly what he was implying. Claiming to present “the facts,” Navarro stated: “The virus was spawned in Wuhan province. Patient zero was in November. The Chinese, behind the shield of the World Health Organization, for two months hid the virus from the world, and then sent hundreds of thousands of Chinese on aircraft to Milan, New York, and around the world to seed that.” In another demonstration that the entire US media and political establishment is on board the anti-China campaign, ABC presenter George Stephanopoulos did not dispute any of these so-called “facts.” In reality China was wrestling with the sudden emergence of a previously unknown disease: its causes, let alone the means for testing and treating it, had to be identified and developed. Any objective examination of the record shows that Chinese authorities provided information as it became available to the World Health Organization (WHO) and other countries, including the Centres for Disease Control and Prevention (CDC) in the United States.
In Latest Escalation, President Trump Blames China For “Mass Worldwide Killing” – A day after the WHA approved a resolution authorizing a WHO-led investigation to the origins of the coronavirus in China, President Trump just lashed out at China’s state-approved conspiracy-peddlers who are desperately trying to convince the Chinese people that the virus didn’t come from China – but actually originated in the US.Some wacko in China just released a statement blaming everybody other than China for the Virus which has now killed hundreds of thousands of people. Please explain to this dope that it was the “incompetence of China”, and nothing else, that did this mass Worldwide killing! – Donald J. Trump (@realDonaldTrump) May 20, 2020The rhetorical tit-for-tat between the US and China has intensified in recent days, as the White House lambasted President Xi’s promise to share a vaccine “with the world” and pump $2 billion into the WHO’s effort to help the poorest countries as a “token” gesture to try and obviate China’s obvious culpability.Trump and many members of his administration have bashed the WHO for uncritically accepting information provided by the CCP – despite having an office on the ground in Beijing – and writing glowing reports praising China’s early response while the government knowingly withheld information that could have inspired a more stringent response.Instead, the organization hemmed and hawed, playing down the virus’s destructive potential, and celebrating China’s response as “a model” for other developing nations.Twitter blue checks immediately pounced on the comment, reminding the world of the Trump Administration’s “failings”.Some wacko in the White House is blaming everyone but himself for the disastrous spread of the COVID-19 coronavirus in America. The original sin is China’s but the Trump administration had plenty of time to deal with the gathering storm. It’s not like it arrived unannounced. https://t.co/ZMltpmHhcB – Khaled Diab (@DiabolicalIdea) May 20, 2020
White House Weighs Economic Retaliation Against China As Hassett Warns “All Options Are On The Table” – While Secretary of State Mike Pompeo slams China over its planned ‘National Security’ law, which clearly aims to suppress all political dissent and “foreign influence” in Hong Kong, while hinting that the special trade status enjoyed by the city-state might soon be revoked, White House economic advisor Kevin Hassett appears on CNN Friday to play ‘bad cop’ to Pompeo’s ‘good cop’. As Huawei scrambles to find suppliers not based in the US, Hassett insisted that the White House is “absolutely not going to give China a pass” and is already considering any and all forms of economic punishment, including, presumably, more laws to force the de-listing of Chinese companies on US exchanges, or even the cancellation of US debt held by Beijing.“We’re absolutely not going to give China a pass. All the options are on the table,” Hassett said.He added that the new law was a “scary move” as it shows Beijing is starting to care less and less about the objections of the West.“And that’s going to be very costly to China and the people of Hong Kong. So, yeah, I think it is a very difficult, scary move and that it is something that people need to pay close attention to,” he said.Ultimately, a less-free Hong Kong will hurt the city-state’s status as a financial hub. “If Hong Kong stops being Hong Kong, the open place it is, then it is no longer going to be the financial center that it is.”
Trump official blames high US coronavirus death toll on the diversity that “unfortunately” exists in the population – During an interview on CNN’s “State of the Union” with Jake Tapper on Sunday, Health and Human Services Secretary (HHS) Alex Azar implied that the reason the US leads the world in COVID-19 deaths is due to the “diverse” nature of the US population and not the government’s inability to implement an effective testing and contact tracing program in the early months of the outbreak. Azar’s comments are indicative of the attitude of the ruling class as a whole towards the pandemic. Unable to mask their criminal indifference to mass suffering and death, their only recourse is to blame those suffering the brunt of the fatalities and disease, while at the same time revealing their own backward thinking. Tapper had asked the HHS secretary about the US having the highest death toll: “But it’s worse for us than it is for anyone else.” Azar protested, citing “mortality rates,” which Tapper replied, “I’m just looking at the number of dead bodies.” To which Azar responded: “Unfortunately, the American population is a very diverse and – and it is a – it is a population with significant unhealthy comorbidities that do make many individuals in our communities, in particular African-American, minority communities, particularly at risk here because of significant underlying disease health disparities and disease comorbidities.” This statement leaves little to the imagination. If African-Americans and other minorities suffer disproportionately from coronavirus, Azar is saying, it’s their own fault, not Trump’s. As the WSWS has explained, the reason for the increase in death rates among urban populations, regardless of skin color, is due to mass poverty and inequality. The fact that so many deaths have been among African-Americans suffering from “comorbidities,” that is, multiple underlying health conditions, is a product of the capitalist system, which Azar defends.
‘All the psychoses of US history’: how America is victim-blaming the coronavirus dead – Why do Americans represent less than 5% of the world’s population but nearly a third of the known coronavirus death toll? Not because of government incompetence, the Trump administration is arguing, but because Americans are very unhealthy. The United States’ organized response to the pandemic had been “historic”, Trump’s health secretary, Alex Azar, told CNN on 17 May, but America “unfortunately” has a “very diverse” population, and black Americans and minorities “in particular” have “significant underlying disease”. Jake Tapper, the CNN anchor interviewing Azar, paused and squinted. Surely, he asked, Azar was not arguing that “the reason that there were so many dead Americans is because we’re unhealthier than the rest of the world?” Azar doubled down: “These are demonstrated facts.” “That doesn’t mean it’s the fault of the American people that the government failed to take adequate steps in February …” Tapper said. “This is not about fault. It’s about simple epidemiology,” Azar said, adding in a pious tone: “One doesn’t blame an individual for their health condition. That would be absurd.” Blaming black Americans for dying from a novel virus because they had diabetes or high blood pressure was precisely what Azar was doing. Someone had to be held responsible for an American death toll approaching 100,000 people, worse than any other country’s reported deaths. In order for the Trump administration to remain blameless, someone else had to be blamed, and the administration was now blaming the dead.
Trump tears into ’60 Minutes’ after segment with whistleblower Bright – President Trump took aim at CBS News and its flagship news magazine program, “60 Minutes,” on Sunday after the program interviewed whistleblower Rick Bright, former head of the Biomedical Advanced Research and Development Authority. In a tweet, the president excoriated CBS and its “third place anchor, @NorahODonnell,” whom he accused of “doing everything in their power to demean our Country, much to the benefit of the Radical Left Democrats.” “Tonight they put on yet another Fake ‘Whistleblower’, a disgruntled employee who supports Dems, fabricates stories & spews lies. @60Minutes report was incorrect, which they couldn’t care less about. Fake News!” he tweeted. “This whole Whistleblower racket needs to be looked at very closely, it is causing great injustice & harm. I hope you are listening @SenSusanCollins I also hope that Shari Redstone will take a look at her poorly performing gang. She knows how to make things right!” Trump added, tagging Sen. Susan Collins (R-Maine). Redstone is the chairwoman of ViacomCBS. The Hill has reached out to CBS News for comment. Bright, who last week slammed the Trump administration’s response to the COVID-19 crisis during testimony before the House Energy and Commerce Committee, told CBS News that he was not “disgruntled,” as Trump has described him, but instead was frustrated with the administration’s response to the virus threat. “Remember, the entire leadership was focused on containment. There was a belief that we could contain this virus and keep it out of the United States,” he said. “Containment doesn’t work. Containment does buy time. It could slow. It very well could slow the spread. But while you’re slowing the spread, you better be doing something in parallel to be prepared for when that virus breaks out. That was my job.”
CNN’s Kaitlan Collins clashes with Trump over her mask removal, evokes coronavirus death toll – CNN’s Kaitlan Collins clashed with President Trump after he called her a “CNN Faker!” in a tweet that included video of the White House correspondent removing her mask in the James S. Brady briefing room immediately after a press conference ended on Friday. The back-and-forth came after a C-SPAN video feed showed Collins removing her protective mask as other reporters in the room kept theirs on while exiting the indoor briefing room. The video quickly went viral on social media, with Eric Trump also sharing it. “A CNN Faker!” President Trump tweeted to his 80 million followers. Collins responded by evoking the death toll in the U.S. as a result of the coronavirus pandemic. “Nearly 90,000 Americans have been killed by coronavirus, and the president is tweeting about me pulling my mask down for six seconds on Friday,” Collins said in a tweet that tallied nearly 57,000 likes as of Monday morning.
Trump Admits To Taking Hydroxychloroquine With Zinc As Preventative Measure President Trump admitted on Monday taking Hydroxychloroquine with zinc as a precaution against coronavirus – telling reporters “I happen to be taking it,” and “I’m not going to get hurt by it.”Trump said that while he hasn’t been exposed to the virus, he was given permission by the White House doctor to take the controversial treatment, and began taking it approximately 10 days ago – right around the time Mike Pence’s press secretary, Katie Miller, tested positive for the virus.“I happen to be taking it,” says @POTUS of hydroxychloroquine . “I’m not going to get hurt by it.” “A lot of front-line workers” are also taking hydroxychloroquine. “I’m taking the two — zinc and hydroxy.” “I just want to open with the American public. I happen to think it’s good,” adds @POTUS. – Steve Herman (@W7VOA) May 18, 2020 “A lot of good things have come out about the hydroxy. A lot of good things have come out. You’d be surprised at how many people are taking it,” said Trump.While medical experts – including Dr. Anthony Fauci of the White House coronavirus task force have cautioned against taking the drug, Hydroxychloroquine and Zinc has been successfully used by doctors around the world, who claim dramatic improvement in patients with coronavirus. “Every patient I’ve prescribed it to has been very, very ill and within 8 to 12 hours, they were basically symptom-free,” said Los Angeles doctor Dr. Anthony Cardillo, adding “So clinically I am seeing a resolution.” Cardillo, CEO of Mend Urgent Care, says that the drug must be used in conjunction with Zinc, as the hdroxycholoroquine opens a ‘channel’ for the mineral to enter cells and prevent the virus from replicating. That said, the drug has been shown to raise heart risks and rates of death when combined with the antibiotic azithromycin, according to Bloomberg, which notes that it can interfere with the heart’s electrical signals in extremely rare cases.
Trump describes medical researchers as enemies because he doesn’t like their results – There was a specific reason for President Trump’s sudden announcement on Monday that he was taking the antimalarial drug hydroxychloroquine. His goal was to undermine a whistleblower who had raised questions about the administration’s handling of the coronavirus pandemic, a whistleblower who claimed that it was his skepticism about the utility of the drug that led to his firing. How could hydroxychloroquine be as dangerous as former top vaccine official Rick Bright suggested, Trump offered, given that he himself was using it?The revelation quickly prompted reporters to ask what evidence Trump had that the drug was at all efficacious in addressing the virus and disease it causes, covid-19. Simple, Trump replied: Lots of people called him and said it worked. “The only negative I’ve heard was the study where they gave it – was it the VA?” Trump said, referring to the Department of Veterans Affairs. “With, you know, people that aren’t big Trump fans gave it.” This idea that there was this study undercutting the utility of the drug Trump has been championing for two months clearly stuck with the president. Speaking to reporters Tuesday afternoon after a meeting with Republican senators, he again disparaged the study.“If you look at the one survey, the only bad survey, they were giving it to people that were in very bad shape. They were very old. Almost dead,” Trump said. He described the study as “a Trump-enemy statement.” A few hours later, again pressed on his use of the drug for an unproven purpose, Trump again suggested that opposition to it was simply political. “There was a false study done where they gave it to very sick people, extremely sick people, people that were ready to die,” he said. “It was given by obviously not friends of the administration.” He later added that it “was a phony study and it’s very dangerous to do it.” As is often the case, Trump is repeating one of his go-to lines even in a situation where it doesn’t really make sense. Every time someone on television criticizes him, that person is necessarily a never-Trumper.. And, now, this study – necessarily a product of opposition to him and his administration. It’s a bizarre claim in general, that a team of seven doctors would conspire to study the efficacy of an antimalarial drug to undermine the president politically. But it’s an even more ridiculous claim when you consider how the study was completed.
Hydroxychloroquine drug promoted by Trump as coronavirus ‘game changer’ increasingly linked to deaths – For two months, President Trump repeatedly pitched hydroxychloroquine as a safe and effective treatment for coronavirus, asking would-be patients “What the hell do you have to lose?”Growing evidence shows that, for many, the answer is their lives.Clinical trials, academic research and scientific analysis indicate that the danger of the Trump-backed drug is a significantly increased risk of death for certain patients. Evidence showing the effectiveness of hydroxychloroquine in treating covid-19 has been scant. Those two developments pushed the Food and Drug Administration to warn against the use of hydroxychloroquine outside of a hospital setting last month, just weeks after it approved an emergency use authorization for the drug. Alarmed by a growing cache of data linking the anti-malaria drug to serious cardiac problems, some drug safety experts are now calling for even more forceful action by the government to discourage its use. Several have called for the FDA to revoke its emergency use authorization, given hydroxychloroquine’s documented risks. “They should say, ‘We know there are harms, and until we know the benefits, let’s hold off,’ ” said Joseph Ross, a professor of medicine and public health at Yale University, who added that the original authorization may have been warranted but new evidence has emerged about the drug’s risks. “I’m surprised it hasn’t been revoked yet,” said Luciana Borio, who served as director for medical and biodefense preparedness of the National Security Council and was acting chief scientist at the FDA. Testimony this week from a former top vaccine official removed from his post last month further highlighted allegations that Trump’s White House pressured government scientists to quickly sign off on the untested drug in March, at the same time the president was pitching it as a “game changer.” Rick Bright, former director of the Biomedical Advanced Research and Development Authority, told Congress on Thursday that political pressure forced “dozens of federal scientists” to spend a harried 48-hour stretch rushing to put together a protocol for approving hydroxychloroquine for widespread use in covid-19 patients. Ultimately, that approach wasn’t taken. The FDA issued an emergency authorization for hospitalized covid-19 patients who cannot participate in a clinical trial.
White House Vaccine Czar Sells $12 Million Slug Of Moderna Options For Massive Profit -Last night, as dozens of biotech companies rushed to issue stock following the massive spike in Moderna shares on some extremely preliminary trial results inspired the biggest short-squeeze in US equities since the beginning of May, we warned that Moderna shareholders might be in for a bruising “bait-and-switch” as reports about insider share sales emerged, and Moderna, along with dozens of other biotech companies the company, seized on the demand to issue more shares.But it’s not only Moderna’s billionaire founder/CEO Stephane Bancel – once compared to a post-scandal Elizabeth Holmes – who stands to profit from the action: the White House’s new vaccine czar also holds – or rather, held – more than 150,000 options contracts on Moderna shares worht more than $12 million, and had resisted pressure to divest them despite the blatant conflict of interest. We were joking yesterday when we speculated that he would probably be glad to exercise these options at current prices. But just as every joke contains a nugget of truth, that one turned out to be prophetic, too. As Moderna shares rallied yesterday, the White House said the new vaccine czar, Moncef Slaoui, who had resigned from the biotech company’s board just days before, planned to sell his options. A press release touting the sale hit newswires this morning at around 530amET. Most members of the Washington Press Corps are still sleeping off their hangovers at that hour, so it’s hardly surprising that the news seems to have attracted little, if any, media attention on Tuesday.White House COVID-19 Vaccine Chief to Divest $10 Million Stock Options in Moderna $MRNA pic.twitter.com/8ZDTADOYBX – Steven Spencer (@sspencer_smb) May 19, 2020Slaoui brushed off accusations that he might be biased about the efficacy of Moderna’s vaccine. Still, considering that Moderna is already working with the NIH, we certainly found it surprising that such preliminary results involving a group of just 8 patients could have such an outsize impact on the market.
Bankers expect recession to last into 2021 – Even as states begin to lift stay-at-home orders in hopes of jump-starting their sagging economies, many banking executives are bracing for a prolonged slowdown that could last at least into the first quarter of next year.As such, banks are considering a number of belt-tightening steps that include freezing salaries and delaying investments in technology and product development, according to survey of executives released Monday by Promontory Interfinancial Network. The survey results provide a snapshot of how community banks are responding to the coronavirus pandemic and how executives see federal and state efforts to contain its spread playing out over the next several quarters. The survey of 515 senior leaders at banks with less than $10 billion of assets was taken between April 2 and April 15, while much of the economy was still locked down. Several states have since begun to slowly reopen their economies, but tens of millions of Americans remain unemployed as stay-at-home orders remain in effect in most urban areas.Roughly 81% of those surveyed said the economy was worse at the end of the first quarter than it was 12 months prior, compared with 12% who reported such a decline when asked at the end of last year, according to Promontory.”It fell quite dramatically, through the floor almost,” Paul Weinstein, a senior policy adviser for Promontory, said in an interview.The outlook for the year ahead is bleak as well. Three in four executives surveyed expect the economy to sour further, with barely one in 10 expecting the economy to improve by the end of next year’s first quarter. One bright spot for banks has been deposit growth. Banking executives report that the race for deposits has cooled off as workers fearing their job security are socking away more savings and businesses that have drawn down their lines of credit are holding that money in their accounts.Deposits at commercial banks made an unprecedented jump from $13.2 trillion at the start of the year to roughly $15.1 trillion at the end of April, according to Federal Reserve data. About 20% of executives reported stronger competition for deposits in the first quarter, down from 55% at the end of last year and 86% at the end of 2018, according to the survey.”People are seeking safety right now,” Weinstein said. “Even those who still have jobs, they’re nervous that they might not have a job at some point down the road, so they are putting away money.” With their banks flush with deposits, about 83% of executives said that funding costs had declined from one year ago, and 30% reported a “significant decrease,” according to Promontory.Many banks have seen loan demand increase in recent months as companies drew down credit lines or sought emergency relief through the Small Business Administration’s Paycheck Protection Program.Nearly three-fourths of executives surveyed said that their banks have offered emergency loans to customers whose finances have been upended by the pandemic. Nearly all those surveyed said they have offered some sort of loan mitigation to existing borrowers.Looking ahead, though, nearly half of executives expect loan demand to fall through March 2021, according to the survey, with the rest split over whether demand will stay the same or increase some.
Fed warns of ‘significant’ hit to asset prices if pandemic grows – The Federal Reserve issued a stark warning Friday that stock and other asset prices could suffer significant declines should the coronavirus pandemic deepen, with the commercial real estate market being among the hardest-hit industries. The Fed made the assertion in its twice-yearly financial stability report, in which it flags risks to the U.S. banking system and broader economy. The document highlighted the central bank’s race to intervene in markets and temporarily dial back regulations on financial firms amid the COVID-19 crisis. “Asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course, the economic fallout prove more adverse, or financial system strains reemerge,” the Fed said in the report. It cited commercial real estate as being particularly susceptible to falling valuations because “prices were high relative to fundamentals before the pandemic.” Though regulations put in place after the 2008 financial crisis have helped make Wall Street more resilient, vulnerabilities in the financial system still worked to amplify the economic shock from the virus, according to the report The review also found that “prices of commercial properties and farmland were highly elevated relative to their income streams on the eve of the pandemic, suggesting that their prices could fall notably.” The abrupt shutdown of the global economy triggered uncertainty in financial markets that upended trading in everything from Treasury securities to junk bonds and caused dramatic swings in stock prices. Markets settled down as the Fed flooded the financial system with liquidity, but Chairman Jerome Powell said in a speech this week that the economy still faces unprecedented risks if fiscal and monetary policy makers don’t continue to act. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said in remarks for a virtual event hosted by the Peterson Institute for International Economics. In a bid to cushion the economy from against the ravages of the coronavirus crisis, the Fed has cut short-term interest rates effectively to zero, bought about US$2 trillion worth of Treasury and mortgage-backed securities, and announced plans for nine emergency lending programs, five of which are up and running. It’s also funneled hundreds of billions of dollars to foreign central banks via swap lines and temporary Treasury securities purchases. The Fed has also eased some rules to encourage banks to increase lending to households and businesses crippled by the pandemic. “Forceful early interventions have been effective in resolving liquidity stresses, but we will be monitoring closely for solvency stresses among highly leveraged business borrowers, which could increase the longer the COVID pandemic persists,” Governor Lael Brainard said in a Friday statement.
Margin pressure could dog banks into 2022 – The coronavirus pandemic has so devastated the economy that there has been little time for hand-wringing in the banking industry over near-zero interest rates. But with rates so low – after steep emergency Federal Reserve cuts in response to the pandemic’s fallout – banks will struggle to generate bread-and-butter interest income and asset-sensitive lenders will face substantial net interest margin contraction this year and next, analysts say.“All the stars are lining up negatively right now for the banks,” said Ron Shevlin, director of research at Cornerstone Advisors. Piper Sandler analysts estimated that, across their coverage universe of 200 banks, the median net interest margin will shrink 18 basis points in 2020, falling below the century’s 2009 trough reached in the wake of the financial crisis, and then shrink another 11 basis points next year to 3.30%.“We hope NIMs can begin to bottom as we get into next year,” the Piper Sandler analysts wrote in a report. They project that interest income will grow by about 3% this year, driven by large draws on commercial lending lines made by business owners to bolster liquidity as the pandemic took hold late in March and in April. But that growth would still be half of what banks generated last year, and the Piper Sandler analysts look for interest income to be flat in 2021.Most community banks – and many regionals – earn more than half of their income on interest. With the sudden and severe drop in rates this year, floating-rate loans quickly reset lower and new fixed-rate loans will come on the books with rates lower than older loans getting paid off. Deposit rates come down, too, but based on history, analysts broadly expect the interest banks pay depositors to come down gradually – over several quarters. The result: The margin between what banks pay for deposits and earn on loans gets squeezed.
Bankers seek clearer guidance on forgiving PPP loans – New forgiveness guidance for the Paycheck Protection Program has provided some clarity for bankers eager to know all the ground rules.The Small Business Administration and Treasury Department released partial directions, along with an application, late Friday. That should help lenders and borrowers begin the process of having PPP loans converted into grants.Still, lenders want more protections when it comes to verifying borrower data. And they are pushing for more flexibility securing forgiveness for nonpayroll expenses. But any progress after weeks of delays is welcome news.“We were definitely excited to receive that guidance,” said Christopher Chapman, the chief operating officer and chief information officer for national banking at the $49 billion-asset TCF Financial in Detroit. “It’s certainly a good start,” Chapman added. “We have been thinking about forgiveness for several weeks now, so it starts to fill in some of the pieces.” Lenders have made more than 4.3 million PPP loans for $513.2 billion, making the program one of the government’s signature responses to the coronavirus crisis. Paycheck Protection loans have a 1% interest rate and two-year duration, but proceeds spent on payroll costs and basic operating expenses such as rent, mortgage interest and utilities are eligible for forgiveness by the government. The coronavirus stimulus package, which authorized the PPP, directed the SBA and Treasury to publish forgiveness guidelines “not less than 30 days after the date of enactment,” a deadline that passed on April 27. In an indication of just how determined lenders are to start submitting forgiveness applications, the American Institute of Certified Public Accountants said a forgiveness calendar it unveiled Thursday and revised Monday is receiving heavy interest. Interest in the calendar is on par with the association’s application calculator, which has had more than 70,000 downloads.“We’re already getting feedback from members who’ve been anxiously awaiting some kind of tool to help them work with their clients,” said Lisa Simpson, the institute’s director of firm services.The SBA and Treasury released an 11-page application form containing a template intended to help borrowers calculate their forgiveness amounts. Accompanying instructions answered some outstanding questions. Still, Friday’s guidance left several vital issues unaddressed.
Regulators unite on small-dollar loan principles for banks, credit unions – Four federal regulatory agencies released new guidance Wednesday that provides a uniform framework for banks and credit unions on how to offer small-dollar consumer loans without raising red flags in Washington.The Federal Deposit Insurance Corp. also announced plans to rescind two older letters that banks had blamed for their reluctance to offer more credit options to cash-strapped consumers. The long-awaited guidance – issued by the FDIC, the Office of the Comptroller of the Currency, the Federal Reserve Board and the National Credit Union Administration – is meant to encourage banks to provide more small-dollar loans. It offers broad principles rather than prescriptive rules. For example, the guidance states that the price of small-dollar loans should be “reasonably related to the financial institution’s product risks and costs.” That language suggests regulators would frown upon a loan product that carries a sky-high interest rate while costing little money to originate and bringing little risk to the lender. But it stops well short of more concrete restrictions, such as a 36% interest rate cap, which many consumer advocates favor. A regulatory official who spoke on condition of anonymity during a call with reporters said that the agencies did not believe it was appropriate to create a rate cap, or even to suggest the existence of such a ceiling, since none exists in federal law outside of restrictions on the price of loans to members of the military and their relatives. The joint announcement Wednesday could help open the door for the return of so-called deposit advances, which a handful of banks offered until a crackdown during the Obama administration, though likely under modified terms. Banks that offered deposit advances up until 2013 typically charged a $1.50 to $2 fee for every $20 borrowed, with the repayment often coming out of the borrower’s next direct deposit check. Much like in the payday loan industry, borrowers frequently rolled over their old loans into new ones, a debt cycle that drew criticism from consumer advocates. The FDIC announced plans Wednesday to rescind its restrictive 2013 guidance on deposit advances, following the lead of the OCC, which took the same step in 2017. The deposit insurance agency also said that it will withdraw a 2007 letter to financial institutions that encouraged loans with annual percentage rates no higher than 36%. The four-page joint guidance issued Wednesday offers principles that apply to “shorter-term single payment structures,” a description that fits the deposit advance product. But the new guidance also contains language that may require banks to make changes to the discontinued version of the deposit advance product. For example, it states that product structures should “support borrower affordability and successful repayment” in a “reasonable time frame rather than reborrowing, rollovers, or immediate collectability in the event of default.” Another complication for banks that are interested in reviving the deposit advance is the status of the Consumer Financial Protection Bureau’s payday loan rule, which put restrictions on loans of 45 days or less. Though the bureau is expected to rescind much of the rule, its ultimate fate could be tied up in court for some time.
Warren wants CEOs held criminally liable for bailout violations Sen. Elizabeth Warren is calling on the Federal Reserve to hold corporate executives personally liable if they take bailout money intended to bolster credit markets and fail to meet all the certification requirements. Executives should be subject “to civil and criminal penalties, including disgorgement, if they provide fraudulent or misleading information or misuse funds, and should be required to immediately repurchase their bonds for the full amount when eligibility criteria are breached,” Warren said in a letter to central bank officials. Warren is likely to raise the issue when Fed Chairman Jerome Powell and U.S. Treasury Secretary Steven Mnuchin appear by videoconference before the Senate Banking Committee on Tuesday morning. Warren is also asking that corporate executives regularly recertify that they meet the requirements for two of the Fed’s bond-buying emergency lending programs – the Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility. Limitations on eligibility for the corporate credit lending facilities has been a key focus of a congressional watchdog panel that Warren pushed to have created to oversee the Fed and Treasury response to the coronavirus pandemic. Warren, who was chairwoman of a similar panel after the 2008 financial crisis, said that some companies were able to tap bailout money they were ineligible for and didn’t face any consequences. “You must ensure that – unlike in the wake of the 2008 financial crisis – companies that rip off taxpayers and the executives that run them are not let off the hook with minimal fines, no criminal liability, and no requirements that they even admit guilt,” Warren said in the letter.
New York man charged with $20 million PPP and SBA loan fraud – A Manhattan man was charged by federal prosecutors with fraudulently trying to obtain more than $20 million in government loans intended to aid small businesses affected by the coronavirus pandemic. Muge Ma, also known as Hummer Mars, 36, is accused of applying for both Small Business Administration emergency loans and Paycheck Protection Program assistance for two companies he claimed had hundreds of workers on payrolls totaling millions of dollars. He was actually the only employee for both companies, prosecutors said in announcing the charges Thursday. In one of his loan applications, Ma allegedly said his company would “help the country reduce the high unemployment rate caused by the pandemic by helping unemployed American workers and unemployed American fresh graduates find jobs as quickly as possible.” His two companies were approved for more than $1.45 million in loans before the fraud was discovered, according to prosecutors. “Ma’s alleged attempts to secure funds earmarked for legitimate small businesses in dire financial straits are as audacious as they are callous, and now he now faces federal prosecution,” Manhattan U.S. Attorney Geoffrey Berman said in a statement. “Small businesses are facing uncertainty and unprecedented challenges, the least of which should be opportunists attempting to loot the federal funds meant to assist them.” Ma, a U.S. permanent resident from China, was arrested Thursday and was scheduled to appear before a magistrate judge later Thursday. He is charged with defrauding both the U.S. government and the banks from which he sought PPP loans and faces more than 30 years in prison if convicted. Apart from lying about his companies, Ma also falsely claimed that his companies were involved in procuring personal protective equipment and COVID-19 test kits for the state of New York, prosecutors said.
Have the Record Number of Investors in the Stock Market Lost Their Minds? – The stock market fell for three days in a row to start this week, and Jerome Powell, the chairman of the Federal Reserve, said on Wednesday that there is a growing sense that “the recovery may come more slowly than we would like.” In a Zoom presentation to the Economic Club of New York, on Tuesday, Stanley Druckenmiller, a former hedge-fund manager who now invests his own money, said, “The risk-reward for equity” – that is, stocks – “is maybe as bad as I’ve seen it in my career.” And yet many small investors, like my golfing companion, do not seem fazed by warnings like these. Since the Dow plunged more than ten thousand points in February and March, individual traders have been buying and selling stocks at record rates. On Thursday, E-Trade, the discount brokerage, reported that its daily trading volume in April was more than three times as large as it was in April, 2019. Other discount brokers have reported similar figures. TD Ameritrade said that it did more than three million trades a day in April, compared with eight hundred and seventeen thousand a year earlier. This trading frenzy is taking place in the context of a price war that has prompted firms such as E-Trade, TD Ameritrade, and Charles Schwab to eliminate commissions for stock purchases and sales, exchange-traded funds, and index options. Since the shutdowns began, many investors have taken advantage of this era of free trades, which began last fall, well before the coronavirus pandemic hit, to exploit what they seem to view as a good money-making opportunity. In March alone, TD Ameritrade added more than four hundred thousand accounts, CNBC’s Maggie Fitzgerald reported earlier this week. Charles Schwab added nearly three hundred thousand accounts. In rational terms, getting rid of commissions shouldn’t have had a substantial impact. If you invest five thousand dollars in Apple or Tesla, the five or ten dollars you saved in fees won’t have much effect on the ultimate outcome. “How much trading would you have to do for it to make a difference?” Richard Thaler, an economist at the University of Chicago – who was awarded the 2017 Nobel Memorial Prize in Economic Sciences, for his contribution to behavioral economics – said to me on Thursday, when I called and asked him about the surge in online trading. On the other hand, Thaler added, “Free is always appealing. Everybody likes a free lunch, even though my colleagues don’t think they exist.” “It could be that it’s just a lot of people have a lot of time on their hands,” he said. “One friend suggested to me it is replacing gambling. The casinos are closed and there are no sports to bet on.”
5 ways the CFPB has eased industry’s coronavirus burden – The Consumer Financial Protection Bureau’s response to the coronavirus pandemic has included relaxing or eliminating rules so financial institutions can focus on aiding consumers.Continuing a regulatory relief focus for the agency that preceded the crisis, CFPB Director Kathy Kraninger said in March that the agency planned to deliver “temporary and targeted regulatory flexibility” to financial firms.“We recognize that many institutions are facing operational challenges due to COVID-19, and the priority must be responding to consumers facing nearer-term issues,” Kraninger said March 22 at a Financial Stability Oversight Council meeting. “We will continue to provide further relief as needed to ensure that resources can be focused on consumers.”Banks had lobbied for relief – which the CFPB delivered – in two recent rulemakings already in linefor rollbacks before the crisis hit.One of Kraninger’s first actions was to postpone quarterly HMDA reporting indefinitely. Yet some of the agency’s actions since the onset of the pandemic were permanent rulemakings that had been begun beforehand, such as a rule easing disclosure requirements for remittances. Kraninger also has made clear in policy statements that financial institutions will not face enforcement actions or be cited in supervisory exams if they make good-faith efforts to help consumers on a number of different fronts.At the same time, Kraninger has repeatedly said that the CFPB will vigorously enforce consumer finance laws, including protecting consumers from unfair, deceptive or abusive acts or practices. She also has encouraged consumers and whistleblowers to file complaints. Here are five ways the bureau is attempting to help institutions deal with the crisis by relaxing regulatory expectations.
Trump CFPB Appointees Use COVID-19 Crisis as Rationale to Weaken Consumer Protection – Jerri-Lynn Scofield – A recent article in Politico, Consumer bureau draws fire for pro-business tilt during crisis caught my eye.This area joins policies on immigration, environmental protection, judicial selection, corporate legal liability, and fossil fuels among the many areas in which the Trump administration and its willing minions follow the advice of former Chief of Staff Rahm Emmanuel, “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”And boy, the COVID-19 pandemic provides such a crisis.As Politico tells the story:The Consumer Financial Protection Bureau [CFPB] is relaxing rules designed to shield Americans from abuse during the coronavirus crisis, saying the moves are necessary to give businesses flexibility during the pandemic. “The CFPB under President Trump has used this pandemic as an excuse to weaken protections for consumers – enabling predatory lending, watering down credit reporting protections and fair lending laws, and making it easier for credit card and debit card companies to rip off their consumers,” Senate Banking Committee ranking member Sherrod Brown (D-Ohio) told POLITICO.Now, readers will not be surprised to hear that the COVID-19 pandemic has created unprecedented opportunities for the unscrupulous to practice financial crime. Yet that tendency has not been matched by a willingness by the CFPB’s leaders to pursue and prosecute the fraudsters: Yet the coronavirus crisis has underscored the dangers that Americans face from financial crime: A record number of consumer complaints have already been filed with the bureau – more than 42,000 in April alone, greater than in any other month since it opened in July 2011. The Justice Department recently brought its first fraud charges related to a small business lending program. More will follow.The bureau, for its part, has not brought a single enforcement case during the crisis, and its enforcement actions fell by 80 percent from 2015 to 2018, according to an analysis by the Consumer Federation of America. Its staff has been reduced by more than 14 percent under President Donald Trump, and the agency is filled with political appointees to keep an eye on the career employees. U.S. PIRG drills down on the repercussions of COVID-19 for consumer complaints: As the House considers the next coronavirus funding bill, the Heroes Act, an analysis by U.S. PIRG of recent complaints to the U.S. Consumer Financial Protection Bureau (CFPB) shows an alarming need for Congressional action to protect consumers from the pandemic’s repercussions …. Key findings in U.S. PIRG’s analysis include:
- Credit reporting complaints have always historically topped the list, but these types of complaints increased by more than 20,000 in April, double the monthly amount from 2018.
- Of the complaints that include written explanations (optional narratives) and mention the pandemic, mortgages and credit cards were the most complained about.
Yet the agency’s response to these COVID-19 inspired trends is to soften its consumer protection policies ,rather than strengthen them, according to Politico:
Community groups plan to sue OCC over CRA rule – Three community reinvestment advocacy groups said Thursday they plan to sue the Office of the Comptroller of the Currency over its final rule to reform the Community Reinvestment Act, arguing that the agency flouted procedure and public feedback. The joint statement by the National Community Reinvestment Coalition, California Reinvestment Coalition and Democracy Forward accuses the OCC of “unlawfully gutting” the historic anti-redlining law under the veneer of modernization.“The OCC went against the majority of public comments and introduced new, gaping loopholes into the rules that will allow banks to reduce their focus on lower-income borrowers and communities, the very communities the law was intended to protect when it was passed in 1977,” said Jesse Van Tol, the chief executive of the NCRC. “It’s an administrative fiasco. We’ll see you in court.” The OCC issued the rule Wednesday just as Comptroller of the Currency Joseph Otting, who championed the reforms, was preparing to announce his resignation from the agency. Although CRA modernization has long been treated as an interagency effort, the OCC ultimately had to move unilaterally after the Federal Reserve and Federal Deposit Insurance Corp. both declined to back the rule. Otting finalized the plan, which applies only to OCC-regulated banks, despite calls to suspend the ambitious rulemaking amid the pandemic. Community groups have long had reservations about the direction of CRA reform under Otting’s leadership.Thursday’s announcement appears to focus on process and procedure. Government agencies are bound by the Administrative Procedure Act, which governs the timing and requirements for federal rulemaking. “We have fought this shady rulemaking process from the start, and the fight will continue,” said Anne Harkavy, executive director at Democracy Forward.Community groups allies had previously accused the OCC of rushing CRA reform with little public support.
FHFA close to unveiling capital plan for privatized GSEs – Federal Housing Finance Agency Director Mark Calabria signaled the agency is close to issuing a revised proposal on Fannie Mae and Freddie Mac’s post-conservatorship capital levels.Calabria said the proposal, which the agency is redrafting after the director shelved a previous capital plan proposed by his predecessor, should be out “very soon.”Speaking at a virtual event held by the Mortgage Bankers Association Tuesday, Calabria said the FHFA has been working simultaneously on responding to the COVID-19 pandemic and capital rule proposal. The agency announced in November that it would re-propose the capital framework rather than use the plan developed by former FHFA Director Mel Watt. “Everything that we have experienced the past few months with the pandemic and national emergency reinforces the need for Fannie and Freddie to be well-capitalized and operate in a safe and sound manner,” Calabria said. Calabria also reiterated his belief that nonbank mortgage servicers are still on solid financial ground, despite growing concern among some in the market that servicers are struggling under the weight of loan forbearance plans resulting from the coronavirus crisis.Watt had originally put forward a post-conservatorship capital proposal in June 2018. But after Calabria took office last year and later entered into an agreement with the Treasury Department that allowed for the government-sponsored enterprises to hold higher levels of capital, the agency decided it would revisit the plan. In Watt’s proposal, the agency had asked for comment on two different minimum leverage ratio requirements that would incorporate credit risk for different mortgage categories and include components for market risk and operational risk. Under one option, the GSEs would have to hold capital equal to 2.5% of assets and off-balance-sheet guarantees. The second method would have required Fannie and Freddie’s capital to be equal to 1.5% of trust assets and 4% of nontrust assets.But in comment letters to the FHFA submitted in 2018, a number of lenders and other stakeholders called for the GSEs to hold a higher amount of capital post-conservatorship than Watt’s proposal suggested, and expressed concern that the framework was too procyclical.
Borrowers in forbearance can refinance under certain conditions: FHFA – The Federal Housing Finance Agency issued guidance Tuesday clarifying that borrowers with Fannie Mae- or Freddie Mac-backed mortgages who have entered into forbearance plans can be eligible to refinance or purchase a new home once they are considered “current” on their mortgage. Borrowers can either refinance or buy a new home once they have made three consecutive mortgage payments, either after their forbearance ends or under a repayment plan or loan modification, the agency said. Borrowers who also continued to make mortgage payments while their loan was in forbearance will be eligible to refinance, the FHFA said. CNBC had reported last week that some homeowners were mistakenly placed in forbearance plans without their knowledge, and they were unable to refinance their loans. “Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized,” FHFA Director Mark Calabria said in a press release. “Today’s action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible.”The FHFA also said Tuesday that it would extend the government-sponsored enterprises’ ability to buy mortgages that are subject to forbearance plans beyond a previous May 31 deadline.Fannie and Freddie will now be able to buy loans in forbearance that have closed on or before June 30, as long as they are sold to the GSEs before Aug. 31 and the borrower has missed only one mortgage payment.
‘Tidal Wave’ Of Delinquent Mortgages Set To Surpass Great Recession -With nearly 4 million homeowners in some type of mortgage forbearance plan – representing 7.54% of all mortgages, delinquencies are set to eclipse the great recession which peaked at 10%. According to a new report from UK-based forecasting firm Oxford Economics, 15% of homeowners will fall behind on their monthly mortgage payments in a ‘tidal wave’ of delinquencies.Stimulus legislation signed by President Donald Trump allows any borrower with a federally-backed mortgage to request forbearance for up to 12 months, meaning the homeowner can skip or make reduced payments during that time.Given the risk mortgage companies are facing right now, many lenders have imposed more stringent requirements for loan applicants. “The uncertainty in the mortgage market has contributed to a significant tightening of lending standards that may persist even once a recovery is underway,” Oxford Economics wrote. – MarketWatch An while the pace of requests for forbearance has slowed in recent weeks – however that could change. “Although the pace of forbearance requests slowed this week, call volume picked up – which could be a sign that more borrowers are calling in to check their options now that May due dates have arrived,” said Mortgage Bankers Association chief economist, Mike Fratantoni.Keep in mind that Oxford Economics’ forecast is half of the potential mortgage bloodbath predicted by Moody’s chief economist, Mark Zandi, who said that as many as 30% of Americans with home loans – or around 15 million households, may stop paying if the US economy remains closed through the summer or beyond.
MBA Survey: “Share of Mortgage Loans in Forbearance Increases to 8.16%” of Portfolio Volume — To put these numbers in perspective, the MBA notes “For the week of March 2, only 0.25% of all loans were in forbearance.” From the MBA: Share of Mortgage Loans in Forbearance Increases to 8.16% The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased from 7.91% of servicers’ portfolio volume in the prior week to 8.16% as of May 10, 2020. According to MBA’s estimate, 4.1 million homeowners are now in forbearance plans. . “There has been a pronounced flattening in loans put into forbearance – despite April’s uniformly negative economic data, remarkably high unemployment, and it now being past May payment due dates. However, FHA and VA borrowers are more likely to be employed in the sectors hardest hit in this crisis, which is why more than 11 percent of Ginnie Mae loans are currently in forbearance.”According to Fratantoni, record-low mortgages rates are sustaining the refinance wave, helping homeowners lower their mortgage payments and save money during these challenging times. Furthermore, the consecutive increase in purchase applications in the last four weeks is a sign that housing demand is strengthening as more states ease restrictions on activity and people get back to work.This graph shows the weekly forbearance requests as a percent of servicer’s portfolio volume.The requests peaked in the week of March 30th to April 5th.The MBA notes: “Forbearance requests as a percent of servicing portfolio volume (#) dropped across all investor types for the fifth consecutive week relative to the prior week: from 0.51% to 0.32%.”
Black Knight: Black Knight: 4.75 Million Homeowners Now in COVID-19-Related Forbearance Plans; Nearly Half Made April Mortgage Payments -Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance. From Black Knight: Black Knight: 4.75 Million Homeowners Now in COVID-19-Related Forbearance Plans; Nearly Half Made April Mortgage Payments“Of the 4.25 million homeowners who were in active forbearance as of the end of April, nearly half – 46% – still made their April mortgage payment,” said Jabbour. “The fact that only 54% of borrowers in forbearance actually missed their payments helps explain the disparity between April’s delinquency and forbearance rates. However, just 21% of borrowers in forbearance have made their May payments, which could lead to another sharp increase in the national delinquency rate for May if those payments are not received before the end of the month.” The McDash Flash Forbearance tracker shows that the 4.75 million loans in forbearance represent 9% of all active mortgages and account for a little over $1 trillion in unpaid principal. An estimated 7.1% of all GSE-backed loans and 12.6% of FHA/VA mortgages are now in forbearance. Over the past week, active forbearance volumes have increased by just 93,000, a more than 70% decline from the 325,000 in the first week of May. CR Note: The delinquency rate in April increased sharply to 6.45%, but it would have been much higher if so many borrowers in forbearance hadn’t made their mortgage payments (loans in forbearance are counted as delinquent in the survey).
Black Knight: National Mortgage Delinquency Rate Increased Sharply in April, “Largest Single-Month Increase Ever Recorded” – Note: Loans in forbearance are counted as delinquent in this survey, so the delinquency rate jumped in April. From Black Knight: Black Knight’s First Look: Past-Due Mortgages Increase by 1.6 Million in April, Largest Single-Month Increase Ever Recorded; Delinquency Rate Nearly Doubles
• 3.6 million homeowners were past due on their mortgages as of the end of April, the largest number since January 2015
• The number includes both homeowners past due on mortgage payments who are not in forbearance, as well as those in forbearance plans who did not make an April mortgage payment
• At 6.45%, the national delinquency rate nearly doubled (+3.06%) from March, the largest single-month increase ever recorded, and nearly three times the previous single-month record set back in late 2008
• There were declines in cure activity among later-stage delinquencies as well, with the number of seriously delinquent mortgages (90+ days) increasing by 56,000 (+14%) from March
• Both foreclosure starts and foreclosure sales hit record lows in April as moratoriums halted foreclosure activity across the country
According to Black Knight’s First Look report for March, the percent of loans delinquent increased 90.2% in April compared to March, and increased 85.8% year-over-year. The percent of loans in the foreclosure process decreased 3.8% in April and were down 19.3% over the last year.Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 6.45% in April, up from 3.39% in March.The percent of loans in the foreclosure process decreased in April to 0.40% from 0.42% in March. The number of delinquent properties, but not in foreclosure, is up 1,558,000 properties year-over-year, and the number of properties in the foreclosure process is down 48,000 properties year-over-year.
California bill to pause foreclosures, repos draws fire from lenders – California has emerged as an early battleground in a burgeoning dispute over how far the government should go to protect borrowers from the economic fallout of the coronavirus crisis.This week in Sacramento, a state legislative panel voted 7-3 to advance legislation that would temporarily halt foreclosures and auto repossessions, expand consumers’ eligibility for loan forbearance and limit lenders’ options once payment deferral periods end.The measure, which borrows from proposals that have been championed by Democrats in Washington, is drawing opposition from banks, credit unions and other lenders. It figures to spark a bigger fight than the federal emergency relief law that Congress quickly passed in late March with bipartisan support, despite substantial disagreement over its borrower protection provisions. At the heart of the debate is to what extent the government should constrict financial institutions’ decision-making during the pandemic. Many banks and credit unions are voluntarily offering forbearance to borrowers who have suffered financially, and it is often in the lenders’ own interest to do so. Payment deferrals can enable borrowers to get back on their feet, staving off losses for the lenders. But supporters of the California legislation say that many borrowers are being left out. More than 30% of residential mortgages in the nation’s largest state are not federally backed, which means they do not qualify for up to 360 days of forbearance under the federal relief law, according to a legislative staff analysis of the California bill.The legislation by Democratic Assemblymember Monique Limón would extend protections to homeowners with privately backed mortgages. “What I want to ensure is that there is some standardization for Californians,” Limón said Tuesday during a hearing on the bill. “Right now, it is by luck.”The bill would also guarantee relief to struggling auto loan borrowers. Borrowers who state that they are experiencing hardship during the pandemic would get 90 days of forbearance, which could be extended. After the forbearance period, servicers of both auto loans and mortgages would be required to work with borrowers to establish payment plans that avoid lump-sum repayments.At Tuesday’s hearing, all three votes against the bill were by Republicans. But Democrats who voted to advance the measure also raised objections to various aspects of the bill. Limón vowed to make changes in response to the feedback she has been receiving.
U.S. Existing-Home Sales Dropped 17.8% in April – WSJ Sales of previously owned homes plunged in April, as the coronavirus pandemic shut down much of the country’s economic activity and sellers and buyers stayed on the sidelines. Existing-home sales dropped 17.8% in April, the biggest monthly decline since July 2010, at a seasonally adjusted annual rate of 4.33 million, the National Association of Realtors said Thursday. Previously owned homes make up most of the housing market. Economists surveyed by The Wall Street Journal expected a 19.5% decline. Stay-at-home orders prevented real-estate agents from showing homes in person in some states, and widespread job losses and tightening credit requirements have made it more difficult for buyers to qualify for loans. While the number of transactions declined, prices continued to rise, as sellers opted to take their houses off the market or wait until later to sell them, limiting the supply of homes for sale. The median existing-home price rose 7.4% from a year earlier to $286,800. “Price appreciation in the 7% range is unhealthy,” said Lawrence Yun, NAR’s chief economist. “The only way for [price growth to slow] is to get more listings and also more home construction.” Homes typically go under contract a month or two before the contract closes, so the April data largely reflects purchase decisions made in February or March. The spring is typically the most active season for home sales, as families look to move over the summer before a new school year starts. About 40% of the year’s sales typically take place from March through June. Some real-estate brokers and economists say home-shopping demand has started to rise in recent weeks, as parts of the country have loosened restrictions. “The housing market here is already back,” said Kris Lindahl, chief executive of Kris Lindahl Real Estate in Minneapolis. “We have so much pent-up demand from the spring market that most everything is still in multiple offers.” Existing-home sales fell the most in the West, at 25%, and in the South, at 17.9%, according to the NAR data.
Housing Starts decreased to 891 Thousand Annual Rate in April – From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in April were at a seasonally adjusted annual rate of 891,000. This is 30.2 percent below the revised March estimate of 1,276,000 and is 29.7 percent below the April 2019 rate of 1,267,000. Single-family housing starts in April were at a rate of 650,000; this is 25.4 percent below the revised March figure of 871,000. The April rate for units in buildings with five units or more was 234,000. Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,074,000. This is 20.8 percent below the revised March rate of 1,356,000 and is 19.2 percent below the April 2019 rate of 1,330,000. Single-family authorizations in April were at a rate of 669,000; this is 24.3 percent below the revised March figure of 884,000. Authorizations of units in buildings with five units or more were at a rate of 373,000 in April. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) were down in April compared to March. Multi-family starts were down 40.2% year-over-year in April. Multi-family is volatile month-to-month, and had been mostly moving sideways the last several years. Single-family starts (blue) decreased in April, and were down 24.8% year-over-year. Total Housing Starts and Single Family Housing StartsThe second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then eventual recovery (but still historically low). Total housing starts in April were below expectations, however starts in March were revised up. Residential construction is considered an essential business, and held up better than some other sectors of the economy, but was still negatively impacted by COVID-19.
Comments on April Housing Starts -Although housing starts declined significantly, residential construction is considered essential, and starts did not decline as sharply as some other sectors. Earlier: Housing Starts decreased to 891 Thousand Annual Rate in April Total housing starts in April were below expectations, however revisions to prior months were positive.The housing starts report showed starts were down 30.2% in April compared to March, and starts were down 29.7% year-over-year compared to April 2019.Single family starts were down 24.8% year-over-year, and multi-family starts were down 40.2% YoY. This first graph shows the month to month comparison for total starts between 2019 (blue) and 2020 (red). Starts were down 29.7% in April compared to April 2019. Last year, in 2019, starts picked up in the 2nd half of the year, so the comparisons are easy early in the year. Starts, year-to-date, are still up 3.7% compared to the same period in 2019. Starts will be down YoY for at least the next few months due to the impact from COVID-19. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily for several years following the great recession – then mostly moved sideways. Completions (red line) had lagged behind – then completions caught up with starts- although starts picked up a little again lately. The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion – so the lines are much closer. The blue line is for single family starts and the red line is for single family completions. Note the relatively low level of single family starts and completions. The “wide bottom” was what I was forecasting following the recession, and now I expect some further increases in single family starts and completions once the crisis abates.
NAHB: Builder Confidence Increased to 37 in May – The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 37, up from 30 in April. Any number below 50 indicates that more builders view sales conditions as poor than good.From NAHB: Builder Confidence Posts Solid Gain Following Last Month’s Historic Drop In a signal that the housing market is showing signs of stabilizing and gradually moving forward in the wake of the COVID-19 pandemic, builder confidence in the market for newly-built single-family homes increased seven points to 37 in May, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. The rise in builder sentiment follows the largest single monthly decline in the history of the index in April. The fact that most states classified housing as an essential business during this crisishelped to keep many residential construction workers on the job, and this is reflected in our latest builder survey,” said NAHB Chairman Dean Mon. “At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings.”“Low interest rates are helping to sustain demand,” said NAHB Chief Economist Robert Dietz. “As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen. Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks. However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors.”
Homebuilder sentiment bounces back in May, after record plunge in April – After the sharpest one-month drop in the history of the index in April, homebuilder sentiment bounced back slightly in May as builders saw a quick rebound in interest from buyers. Confidence in the market for single-family, newly built homes rose 7 points in May to 37, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Anything above 50 is considered positive, so sentiment remains in negative territory. The index stood at 66 in May 2019 and hit a recent high of 76 in December. Sentiment plunged an unprecedented 42 points in April, as the coronavirus pandemic shut down much of the economy and job losses soared. Homebuilding continued, deemed an essential business, but buyers pulled back decisively. Now, buyers appear to be shopping again – in person and virtually. Record low mortgage rates are also helping with affordability. “The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey,” said NAHB Chairman Dean Mon. “At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings.” All components of the index rose in May but remain in negative territory. Current sales conditions increased 6 points to 42, sales expectations in the next six months jumped 10 points to 46 and buyer traffic rose 8 points to 21. “As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen,” said NAHB chief economist Robert Dietz. “However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors.” While there is no specific data yet, real estate agents and builders say they are seeing higher demand from apartment-dwellers in major cities looking to move out to larger homes in the suburbs. Stay-at-home orders have clearly strengthened the desire for more space.
AIA: Architecture Billings Index Decreased in April to Record Low – Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. From the AIA: Architecture billings continue historic contraction: Demand for design services in April saw its steepest decline on record, according to a new report today from The American Institute of Architects (AIA). AIA’s Architecture Billings Index (ABI) score of 29.5 for April reflects a decrease in design services provided by U.S. architecture firms (any number below 50 indicates a decrease in billings). During April, both the new project inquiries and design contracts scores also declined significantly, posting scores of 28.4 and 27.6 respectively. “With the dramatic deceleration that we have seen in the economy since mid-March, it’s not surprising that businesses and households are waiting for signs of stability before proceeding with new facilities,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Once business activity resumes, demand for design services should pick up fairly quickly. Unfortunately, the precipitous drop in demand for design services will have lasting consequences for some firms.”
• Regional averages: West (38.1); Midwest (31.2); South (31.1); Northeast (23.0)
• Sector index breakdown: institutional (36.1); multi-family residential (30.3); mixed practice (29.0); commercial/industrial (27.8)
This graph shows the Architecture Billings Index since 1996. The index was at 29.5 in April, down from 33.3 in March. Anything below 50 indicates contraction in demand for architects’ services.Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.This is the lowest level for this index on record, even below the lowest level during the Great Recession.
US retailer JCPenney to close nearly one-third of department stores, announces bankruptcy – American department retailer JCPenney announced Monday that it will permanently close nearly one-third, or 242, of its 846 existing retail stores across the US. The closures are part of the struggling Plano, Texas-based department store chain’s decision to file for Chapter 11 bankruptcy on Friday. The stores are set to close between the current and next fiscal year, according to documents filed with the US Securities and Exchange Commission (SEC). This year 192 stores are slated for closure with the remaining 50 to close in 2021. The SEC filing quoted the company as stating that the remaining 604 stores will “represent the highest sales-generating, most profitable, and most productive stores in the network.” A full list of the closing stores has yet to be released, but it can be expected that they will be located in some of the most economically depressed areas of the US which have been hardest hit by both the economic depression brought on by the COVID-19 pandemic and the 2008 recession before it. JCPenney joins other major chains, including Neiman Marcus and J.Crew, in filing for bankruptcy amid the pandemic. Like its competitor and fellow struggling department store giant Sears, JCPenney filed for bankruptcy to avoid liquidation after years of parasitic financialization had cut the corporation’s assets to the bone. S&P Global Ratings currently ranks the retailer as “distressed” with a negative outlook and has assigned it a CCC, or junk bond, status. The most recent announcement of JCPenney’s store closures comes on top of 27 permanent closings in 2019. That year saw an unprecedented wave of 9,700 retail store closures across the US and the liquidation of well-known chains such as Toys“R”Us, Payless ShoeSource, Charlotte Russe and Gymboree. At its height in 1973, the retailer operated 2,053 stores worldwide until it began to decline one year later as the 1974 recession took hold. The company began to close stores and departments or sell them off through mergers and acquisitions beginning in the late 1970s and continuing through the present day with closures especially accelerating after 2014. In 2014, JCPenney closed 33 stores and laid off 2,000 employees and the following year closed 39 stores and laid off a further 2,250 employees. In 2017 it shuttered 140 stores and two distribution centers, offering buyouts to 6,000 employees who lost their jobs.
Pier 1 Imports to close all 540 stores after 58 years – Pier 1 Imports is calling it quits. The bankrupt home-goods retailer has asked a court for permission to liquidate its remaining 540 stores once they reopen after coronavirus-driven lockdowns, ending a 58-year legacy of selling glassware, wicker furniture and other home decor. Pier 1 said it is in talks with several prospective buyers to sell its remaining assets, including its intellectual property and e-commerce business, during a court-supervised auction on July 15. The company has tapped Gordon Brothers to begin liquidating its locations this weekend across the US, according to court documents. “It is now clear that Pier 1’s future does not involve any brick-and-mortar retail locations,” Pier 1 said in court filings. The Fort Worth, Texas-based chain – founded in 1962 in San Mateo, Calif., under the moniker Cost Plus Imports – filed for bankruptcy protection in February, pushed to the brink by increasing competition from online home furnishings giant Wayfair, Target and Walmart. In March, Pier 1 canceled a court-administered auction to sell the company, citing a lack of interest. Lenders explored buying the company but ultimately backed away, forcing Pier 1 to shut down for good, according to court papers. “This is not the outcome we expected or hoped to achieve,” Robert Riesbeck, Pier 1’s chief executive and chief financial officer, said in a statement. At the beginning of this year, Pier 1 had 936 stores and had hoped that closing half of them in bankruptcy would be a linchpin to its reorganization. But the coronavirus quashed the company’s ability to restructure, according to court documents.
Rental-Car Company Hertz Files for Bankruptcy – WSJ – Coronavirus contributed to woes; company enters chapter 11 with no deal in place from creditors. Hertz Global Holdings Inc., one of the nation’s largest car-rental companies, filed for bankruptcy protection Friday, saddled with about $19 billion in debt and nearly 700,000 vehicles that have been largely idled because of the coronavirus.The Estero, Fla.-based company entered chapter 11 proceedings in the U.S. Bankruptcy Court in Wilmington, Del., hoping to survive a drop-off in ground traffic from the pandemic and avoid a forced liquidation of its vehicle fleet.
As summer driving season kicks off, it’s unclear just how many people will take to the road – This weekend’s Memorial Day holiday could be a test for the gasoline market, depending on whether drivers in reopening states hit the road and then keep on driving. Gasoline demand is about 30% below where it was before states shut down in March. As the economy reopens, analysts are looking at traditional measures of supply and demand, but also some newer metrics like Apple mobility data and GPS-generated traffic congestion data. “After many of these states opened up in early May, we saw a pretty big surge or improvement in the congestion data. By mid that next week, we actually saw a regression in many cities U.S.-wide,” said Michael Tran, global energy analyst at RBC. “When we look at the numbers, we saw a big surge then we saw a regression.” Tran said though he believes gas prices are eventually headed higher, and the market should show improvement in fits and starts as economic activity picks up across the U.S. Retail gasoline data is showing that demand has been varying greatly by region, depending on state shutdown rules, or more normal factors like weather. The GasBuddy tracking firm, for instance, found that demand nationally last Friday was up 11.8% from the previous Friday, and in some states it was way higher. Gasoline demand is important for a couple of reasons. For one, it is an economic indicator linked closely to employment. Second, U.S. gasoline demand is a factor in the calculation of global oil prices, since U.S. gas consumption equals about 10% of daily oil demand.
Americans use their $1,200 stimulus checks to splurge at Walmart, Target, BJ’s and Best Buy – here’s what they’re buying – While many Americans have used their stimulus checks to cover basic needs such as groceries, mortgage or rent, there’s evidence people are also spending the money on non-essentials including electronics, clothes and toys, according to major retailers. “Call it relief spending, as it was heavily influenced by stimulus dollars, leading to sales increases in categories such as apparel, televisions, video games, sporting goods and toys,” Walmart Chief Executive Doug McMillon said during the company’s earnings call Tuesday. Target, BJ’s Wholesale Club Holdings Inc and Best Buy also saw increased consumer demand for discretionary goods in mid-April as the stimulus payments from the $2.2-trillion CARES Act flowed into Americans’ bank accounts, the companies’ CEOs said this week. Apple saw an uptick in demand for its products “across the board,” CEO Tim Cook said April 30. Related: Best Buy’s stock rises after profit, revenue and same-store sales fall less than expected At Walmart, Target, shoppers bought more TVs, electronics, gaming equipment and apparel. Walmart also saw increased demand for adult-sized bikes. BJ’s CEO Lee Delaney told investors on Thursday that the company saw “relatively significant growth” in discretionary categories, including electronics and TVs. “We would imagine that there is certainly an impact from stimulus checks that are impacting the business,” Delaney said. “But I think it’s right to assume there is some benefit flowing through from stimulus checks in the business.”
The Covid Surcharge: Companies Confront the Unforgiving Economics of Coronavirus – WSJ – Companies from major retailers and package carriers to local restaurants and hair salons are awakening to a new economic reality in the age of the new coronavirus: Being open for business is almost as hard as being closed. Facing higher costs to keep workers and customers safe and an indefinite period of suppressed demand, businesses are navigating an ever-narrower path to profitability. To make the math work, some businesses are cutting services and jobs. Others are raising prices, including imposing coronavirus-related fees aimed at getting customers to share some of the expenses. For large companies, the price – and perils – of operating in a pandemic are already coming into focus. Walmart Inc., Target Corp. and Home Depot Inc. this week said they absorbed more than $2 billion combined in added expenses for wages, bonuses and other benefits for workers during the early months of the pandemic. McDonald’s Corp. laid out conditions for franchisees to reopen their dining rooms that include cleaning bathrooms every half-hour and digital kiosks after every order. Ford Motor Co. this week opened its American assembly plants for the first time in two months, and promptly had to idle factories in Michigan and Illinois after employees tested positive for Covid-19. The stakes can be higher for small businesses, which tend to operate on thinner profit margins and smaller cash reserves. As they begin to reopen after weeks of being shut down, they are confronting a cost-revenue ratio that is increasingly out of whack. Prices of food and other items have risen. Employees need protective equipment at work. Rising unemployment, safety concerns and limits on the number of customers a business is allowed to serve are setting a cap on sales. Some have tried to raise prices to bridge the divide, but greeting consumers who have been staying at home with higher costs is a delicate proposition. Billy Yuzar saw adding a surcharge to diners’ tabs as a simple way to compensate for higher food prices at his West Plains, Mo., restaurant, Kiko Japanese Steakhouse & Sushi Lounge. It was more convenient than raising menu prices, Mr. Yuzar said, because he could update the fee in the business’s point-of-sale computer in one step. Regular customers were supportive, he said, but when a photo of a Kiko receipt showing a Covid-19 surcharge surfaced on social media, people who had never been to his restaurant began calling to complain. “The people from this community and my actual customers don’t mind at all paying,” Mr. Yuzar said. “The backlash that I got is just because of these tweets.” Mr. Yuzar has removed the surcharge and raised menu prices.
Ford Temporarily Shuts Down Two Plants Just Days After Reopening After Workers Test Positive For COVID-19 – Ford was forced to temporarily shut down production at two of its plants – one in Dearborn and the other in Chicago – because of workers testing positive for COVID-19, according to the Detroit News. The Dearborn Truck Plant, where Ford assembles the F-150 and Raptor pickups, halted production Wednesday after an employee there tested positive for the virus, Kelli Felker, Ford’s global manufacturing and labor communications manager, said in a statement. Production is expected to resume Wednesday night.”When a Dearborn Truck Plant employee who returned to work this week tested positive for COVID-19, we immediately began to notify people known to have been in close contact with the infected individual and asked them to self-quarantine for 14 days,” Felker said. “We are deep cleaning and disinfecting the work area, equipment, team area and the path that the team member took.”In Chicago, two employees who returned to work this week tested positive for the virus. The same protocols were applied in those cases, and Chicago Assembly now is running again. Due to the known incubation time of the virus, Ford said “we know (these employees) did not contract COVID-19 while at work.”The cases illustrate the potential perils of restarting production amid the COVID-19 pandemic that has claimed more than 5,000 lives in Michigan. Autoworkers employed by Detroit’s automakers returned to work Monday following an eight-week shutdown due to the coronavirus pandemic.At facilities operated by all three companies, employees must follow stringent health and safety protocols that are designed to help prevent the spread of COVID-19 in plants. Those protocols include wearing personal protective equipment, having their temperatures checked before entering, and daily health self-certifications.
Philly Fed Manufacturing Index: Continued Weakening But Improvements in May – The Philly Fed’s Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to the direction of the broader Chicago Fed’s National Activity Index.The latest Manufacturing Index came in at -43.1, up 13.5 from last month’s -56.6. The 3-month moving average came in at -37.5, down from -10.9 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 49.7, up from the previous month’s 43.0.The -43.1 headline number came in below the -41.5 forecast at Investing.com. Here is the introduction from the survey: Manufacturing firms reported continued weakness in regional manufacturing activity this month, according to results from the Manufacturing Business Outlook Survey. Despite remaining well below zero, the survey’s current indicators for general activity, new orders, shipments, and employment rose this month after reaching long-term low readings in April. The firms expect the current slump in manufacturing activity to last less than six months, as the broadest indicator of future activity strengthened further from last month’s reading; furthermore, the firms continue to expect overall growth in new orders, shipments, and employment over the next six months. (Full Report) The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011, 2012 and 2015, and a shallower contraction in 2013. The latest figures have not been seen since the 1980s.
Major League Baseball Set To Lose $640,000 Per Game This Season – Even with Major League Baseball restarting and playing a shortened 82 game season, the organization would still be expected to post a monster loss for the year due to the coronavirus lockdowns, according to the Associated Press. In fact, MLB will lose an estimated $640,000 per game played in empty ballpark, over an 82 game season. On May 12, the MLB released a document called “Economics of Playing Without Fans in Attendance” to try and open negotiations to begin a delayed season around July 4. Teams would still suffer a $4 billion loss and players would get about 89% of MLB’s total revenue. As of now, teams are arguing that they lose more money with each additional game played, while players are arguing that clubs lose less money with more games played. Teams and owners would also benefit from regional sports networks having more games to broadcast, as many owners and teams have a stake in such networks. Owners voted on Monday for player salaries to be based on a 50-50 split of revenue, which is framework that players are expected to reject. Teams have also submitted virus-testing plans to the players association. The Yankees would be expected to lose about $312 million this year. The Dodgers will suffer local losses of $232 million, while the Mets, Cubs and Red Sox would lose $214 million, $199 million and $188 million, respectively. Detroit and Baltimore would lose the least, with an expectation of posting negative EBITDA of $84 million and $90 million, respectively. Either way, the LA Times reports teams are going further into debt: Teams remain worried that a second wave of the virus during the fall could wind up decimating their finances, especially if the post-season winds up being cancelled. The post-season brings in about $787 million in media money and is a key part of the financial picture for the league going forward. The MLB says “2019 revenue was 39% local gate and other in-park sources, followed by 25% central revenue, 22% local media, 11% sponsorship and 4% other.”
Workers File 2.4 Million Unemployment Claims – WSJ – Workers filed another 2.4 million unemployment claims last week, a slight drop-off in the wave of historically high weekly filings since the economic fallout from the coronavirus pandemic began. Weekly claims continued to log in at high levels, though they are down since an initial surge in layoffs drove claims to a peak of nearly 7 million at the end of March, according to Thursday’s Labor Department report. Meanwhile, the ranks of workers receiving benefits swelled in early May. In the week ended May 9, the number of so-called continuing claims – a proxy for overall levels of unemployment – increased to 25.1 million from 22.5 million a week earlier. Continuing claims figures lag by a week from initial claims filings. The claims totals exclude hundreds of thousands of self-employed and gig-economy workers receiving unemployment benefits for the first time through a temporary coronavirus-related program. The omission of self-employed workers means the actual number of workers seeking claims has been higher since the federal program called pandemic unemployment assistance, included in a stimulus package approved in late March, got under way. “The pandemic unemployment assistance program is giving us a view into a segment of the workforce that’s harmed during a recession that we don’t typically get,” said Dante DeAntonio, an economist at Moody’s Analytics. “It gives us a better handle on the scope of what’s happening.” While layoffs appear to have subsided in recent weeks, the number of people without work continues to remain at record-high levels. As of the beginning of this month, a large share of workers eligible for unemployment benefits were drawing on them in states across the nation, with particularly big parts of the workforces in Nevada, Michigan and Washington claiming benefits. Still, the bulk of states saw fewer new applications for unemployment benefits last week, with particularly steep declines occurring in Georgia, New Jersey and Kentucky. Many states reported fewer layoffs in early May at restaurants and health-care companies, the report said. States have been paying out unemployment benefits to newly eligible workers such as independent contractors and self-employed individuals in recent weeks. As of Tuesday, 43 states were making such payments, a U.S. Labor Department spokeswoman said.
Initial jobless claims: employment damage continues to spread – Now that there is more than one month of data from initial and continuing jobless claims since the coronavirus lockdowns started, we can begin to trace whether the economic impacts of the virus are being contained, or are continuing to spread out into further damage.Nine weeks in, it appears that, insofar as employment is concerned, the damage is continuing to spread.First, let’s look at initial jobless claims both seasonally adjusted (blue) and non- seasonally adjusted (red). The non-seasonally adjusted number is of added importance since seasonal adjustments should not have more than a trivial effect on the huge real numbers: There were 2.174 million new claims, which after the seasonal adjustment became 2.438 million. This is a slight decline from last week’s number which was revised down to 2.687 million. By now, virtually all of the people laid off due to the initial lockdowns in March and early April should have already applied for benefits. Further, last week was the second week after some States “reopened.” Thus these new claims are almost certainly primarily represent the spreading second-order impacts of the coronavirus shutdowns. In other words, this is evidence that new economic damage have continued to spread, and in a very large way.Next, looking at continuing claims, which lag one week behind, both the non-seasonally adjusted number (red), and the less important seasonally adjusted number (blue) rose: This tells us that, as of two weeks ago, there were not enough callbacks to work to offset the spreading new damage. If “reopening” leads to a significant new upturn in cases – something that may have begun in the past week – this will only get worse.Bottom line: confining my comments strictly to the economy, while there have been significant or small rebounds in many of the series, the news on employment is not just bad, but it is still getting worse, albeit getting worse at a slower rate.
Nearly one in four workers has applied for unemployment benefits: Congress must do much, much more — Last week, 3.3 million workers applied for unemployment benefits. That is an improvement over the 6 million per week we saw in late March/early April, but is an increase from the prior week – and is still well over three times the worst week of the Great Recession. Of the 3.3 million who applied for unemployment benefits last week, 2.2 million applied for regular state unemployment insurance (UI), and 1.2 million applied for Pandemic Unemployment Assistance (PUA). PUA is the new federal program for workers who are not eligible for regular UI (e.g., gig workers) but are still out of work as a result of the virus. At this point, 15 states and the District of Columbia are not yet reporting PUA data, so PUA claims are being undercounted. Note, the number of PUA claims for Massachusetts was misreported as 1,184,792. It should have been 115,952. I have corrected for that error throughout this blog post. It is also worth noting that the Department of Labor (DOL) reports that 2.4 million workers applied for regular state unemployment insurance last week on a “seasonally adjusted” basis, compared with 2.2 million on an unadjusted basis. Seasonal adjustments are usually helpful – they are used to even out seasonal changes in claims that have nothing to do with the underlying strength or weakness of the labor market, typically providing a clearer picture of underlying trends. However, the way DOL does seasonal adjustments is distortionary at a time like this, so I focus on unadjusted numbers when looking at regular state UI. PUA claims are available only on an unadjusted basis. What is the total number of workers on UI or PUA in this recession so far? We can add up various data points to get at that. As of May 9, 22.9 million workers had made it through at least the first round of regular state UI processing (these are known as “continued” claims), and 4.5 million had filed initial UI claims since then. And, as of May 2, 6.1 million workers had made it through at least the first round of PUA processing, and 3.0 million had filed initial PUA claims since then. So altogether, that’s 36.6 million workers – close to one in four people in the U.S. workforce. And the situation is still deteriorating. The most recent Goldman Sachs forecasts imply that the unemployment rate will average more than 30% for May and June. Further, millions are also losing their health insurance, since our health care system ties health insurance to work. It is also worth always keeping in mind that any overall numbers mask the fact that recessions hit different race and gender groups differently, because of things like occupational segregation, discrimination, and other labor market disparities.
More than a quarter of the workforce in 10 states has filed for unemployment –The Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data this morning, showing that another 2.2 million people filed for regular UI benefits last week (not seasonally adjusted) and 1.2 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers.While most states saw a decline in UI claims filed relative to the prior week, 12 states saw increases in UI claims. Washington saw the largest percent increase in claims (31.0%) compared with the prior week, followed by California (15.7%), New York (13.6%), and North Dakota (10.1%).A note about the data: Unless otherwise noted, the numbers in this blog post are the ones reported by the U.S. Department of Labor, which they receive from the state agencies that administer UI. While DOL is asking states to report regular UI claims and PUA claims separately, many states are also including some or all PUA claimants in their reported regular UI claims. As state agencies work to get these new programs up and running, there will likely continue to be some misreporting. Since the number of UI claims is one of the most up-to-date measures of labor market weakness and access to benefits, we will still be analyzing it each week as reported by DOL, but ask that you keep these caveats in mind when interpreting the data. Figure A and Table 1 below compare regular UI claims filed last week with the prior week and the pre-virus period, in both level and percent terms. It also shows the cumulative number of unemployment claims since March 7 and that number as a share of each state’s labor force. In 10 states, more than a quarter of the workforce filed an initial claim during the past 10 weeks: Georgia (39.2%), Kentucky (38.0%), Hawaii (35.0%), Washington (30.9%), Louisiana (29.9%), Rhode Island (29.7%), Nevada (29.6%), Michigan (29.2%), Pennsylvania (28.4%), and Alaska (27.9%).
US unemployment claims approach 40 million since March – The United States Department of Labor reported on Thursday that more than 2.4 million Americans applied for unemployment insurance last week, bringing the total number of new claims to 38.6 million since mid-March, when social distancing measures and statewide stay-at-home orders were first implemented in an effort to slow the spread of the coronavirus. Even with the push by the Trump administration since then to reopen the economy and the easing of lockdown orders in all 50 states – despite a continued rise in COVID-19 infections and deaths – the US marked its ninth straight week in which more than 2 million workers filed for unemployment. While this is down from the peak at the end of March when 6.8 million applied for unemployment insurance, it still dwarfs the worst weeks of the Great Recession in 2008. It is expected that the official unemployment rate for May, which is to be reported by the federal government in the first week of June, will approach 20 percent, up from 14.7 percent last month. This is a significant undercount, with millions of unemployed immigrants unable to apply for benefits, and many other workers who are not currently looking for work and therefore are not counted as unemployed. Fortune magazine estimates that real unemployment has already hit 22.5 percent, which is nearing the peak of unemployment reached during the Great Depression in 1933, when the rate rose above 25 percent. Millions more are expected to apply in the coming weeks, pushing the numbers beyond those seen during the country’s worst economic crisis. But even these figures do not capture the extent of the crisis now unfolding across the country. Millions have been blocked for weeks from applying for unemployment compensation because of antiquated computer systems, and a significant share of those who have applied have been denied any payments. On top of this there are significant delays in processing applications in multiple states, including Indiana, Missouri, Wyoming and Hawaii. Meanwhile, Florida, which has some of the most stringent restrictions, has refused to extend its paltry three-month limit on payments for the few who manage to qualify. Sparked by the pandemic, the greatest economic crisis since the 1930s is already having a devastating impact on the millions who have seen their jobs suddenly disappear, while millions more will see wages, benefits and hours dramatically curtailed whenever they are able to return to work. Optimistic projections that the US economy would quickly bounce back once stay-at-home orders were lifted are now becoming much gloomier. A University of Chicago analysis from earlier this month projects that 42 percent of lost jobs will be permanently eliminated. At the current record number, this will mean a destruction of 16.2 million jobs, nearly double the number of jobs which were lost during the Great Recession just over a decade ago.
Week 9 of the Collapse of the U.S. Labor Market: Still Getting Worse at a Gut-Wrenching Pace – Wolf Richter – The moment the unemployment crisis stops getting worse and bottoms out would signal the beginning of a recovery of the job market. But instead, it’s still getting worse at a gut-wrenching pace. In the week ended May 16, state unemployment offices processed 2.438 million “initial claims” for unemployment insurance under state programs, bringing the total number of initial claims over the past nine reporting weeks since mid-March to a mind-bending 38.6 million (seasonally adjusted). The claims reported by the US Department of Labor this morning were over three times the magnitude of the prior weekly records during the unemployment crises in 1982 and 2009. These “initial claims” exclude the gig workers, self-employed, and contract workers who are now eligible to receive unemployment insurance under the special and temporary federal program in the stimulus package, called Pandemic Unemployment Assistance (PUA).In the week ended May 16, an additional 2.23 million people (not seasonally adjusted) filed initial claims under the PUA program, up from the 850,000 that had filed the week ended May 9, and the 1 million that had filed in the week ended May 2. So in total, when regular initial claims (not seasonally adjusted) and PUA initial claims are combined for the week ended May 16, the total of initial claims (not seasonally adjusted) more than doubles to 4.4 million. Laid-off workers who filed an “initial claim” for Unemployment Insurance (UI) and state programs and who are still looking for a job a week later are added to the “insured unemployment.” The number of these “continued claims” spiked by 2.525 million to 25.07 million, having weeks ago blown past the pre-Covid-19 record of 6.63 million in May of 2009: Last week’s “insured unemployed” were heavily revised down today to 22.55 million (seasonally adjusted), just 171,000 above the prior week. And given the enormous magnitude, the revised totals for last week and the prior week look nearly flat in the chart below. However, today’s spike delayed any hopes that the bottom of the unemployment crisis was inThese “insured unemployed” are those in the regular state UI programs and do not include the PUA claims. Including all types of claims, not seasonally adjusted, the total uninsured unemployed combined surged to 27.3 million. California is back in first place, after having dropped to third place last week behind Georgia and Florida. During the early phases of this crisis, California’s weekly initial claims exceeded 1 million. These are the regular initial claims and do not include PUA claims: (table) The national “insured unemployment rate” for the week ended May 9, also released today, jumped to 17.2%, from 15.5% in the prior week. For comparison, the record in the pre-Covid-19 era was 7.0% in May 1975. The “insured unemployment rate” for each state, also released today, lags one week behind the national average. The table below shows the “insured unemployment rate” for each of the 50 states and Washington DC in the week ended May 2. There are 38 states plus Washington DC now with a double-digit “insured unemployment rate”; three states sport a rate above 20%:
Jobless Rate Rose in All 50 States in April, Labor Department Says – WSJ – Nevada registered the highest unemployment rate in the U.S. last month at 28.2%, the Labor Department said Friday in a report detailing the impact of the new coronavirus and related lockdowns on the job market in all 50 states. The jobless rate rose in all 50 states and the District of Columbia last month, and 43 states recorded the highest level on record back to 1976. The rate in three states exceeded 20% in April, well above the national rate of 14.7%, which was the highest on record back to 1948. Friday’s report offers the first state-by-state look at how the coronavirus pandemic had a differing, but widely devastating impact, across the country last month. In total, U.S. employers cut more than 20 million jobs in April, but the employment loss wasn’t evenly distributed. U.S. payrolls shrank 13.5% in April, led by an almost 50% drop in leisure and hospitality jobs. Especially hard hit were states such as Hawaii and Nevada, which rely heavily on tourism. Manufacturing states were also hit hard as plants closed in states like Michigan and Washington. After Nevada, the two states with the highest rates of joblessness were Michigan, at 22.7% and Hawaii, at 22.3%. Rates rose by at least 10 percentage points in 20 states. Connecticut had the lowest unemployment rate last month at 7.9%. The next lowest rates were in Minnesota, 8.1%, and Nebraska, 8.3%. The unemployment rate is the share of people without jobs but actively seeking employment, compared with a state’s overall labor force. Separate Labor Department data shows that many who recently lost jobs dropped out of the labor force because they are either not seeking work or are unable to report to a job in mid-April, the period the survey determining the jobless rate asked about.
BLS: April jobless rates up in all 50 states; 43 States at New Record Highs – From the BLS: Regional and State Employment and Unemployment Summary — Unemployment rates were higher in April in all 50 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Similarly, all 50 states and the District had jobless rate increases from a year earlier. The national unemployment rate rose by 10.3 percentage points over the month to 14.7 percent and was 11.1 points higher than in April 2019.Nevada had the highest unemployment rate in April, 28.2 percent, followed by Michigan, 22.7 percent, and Hawaii, 22.3 percent. The rates in 43 states set new series highs. (All state series begin in 1976.) The rates in Hawaii and Nevada exceeded their previous series highs by more than 10.0 percentage points each, while the rates in Michigan, New Hampshire, Rhode Island, and Vermont exceeded their previous highs by more than 5.0 points each. Connecticut had the lowest unemployment rate, 7.9 percent. The next lowest rates were in Minnesota and Nebraska, 8.1 percent and 8.3 percent, respectively.This graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 1976.Currently 43 states are above 10% unemployment rate.Seventeen states are above 15%.Three states are above 20% (Hawaii, Michigan, and Nevada).One state (Nevada) is above 25% unemployment.
At height of pandemic, 1.4 million US health workers lose jobs – Dayna James has been an emergency nurse for 17 years — and thought the COVID-19 pandemic would mean she’d have more work than ever. Instead, she’s filing for unemployment benefits, an ironic twist of fate shared by 1.4 million of America’s 18 million health care personnel who have lost their jobs since March — including 135,000 hospital workers. “Here in south Florida, we don’t have the patients, the hospital can’t afford all of the staff to be on duty and just sit around,” said James. The 40-year-old mother of four lost a two day a week teaching job at a university hospital in March, and is barely getting any work at the children’s hospital in Miami where she was previously a regularly contracted nurse. The United States is the country hardest hit by the coronavirus pandemic, with more than 80,000 deaths and almost 1.4 million confirmed cases. Epicenters include New York, New Jersey and other cities across the country, but not all regions have been affected equally, with certain localities seeing a far lower COVID-19 caseload. At the same time, elective procedures have all been put on hold since March, people with chronic illnesses or even emergencies are avoiding coming to hospitals out of fear they may become infected with the virus, and lockdowns have reduced the numbers of accidents. James does remain on call — and was able to work on Sunday because of a shortage of staff on Mother’s Day — but her family is now mainly relying on her husband’s salary. “I see other places keeping nurses on staff just in case. It just feels somewhat unfair,” she said. In the capital Washington, a 34-year-old nurse who works in pre- and post-operative care at a major hospital said that she too was struggling. “COVID has basically made my job almost obsolete,” she said. “We haven’t done elective surgeries in two months, which is the main source of revenue for our department.” The nurse, who asked to remain anonymous, is employed on a “per diem” basis, like many in the US health care system. Her weekly hours had gone down from 36 to around nine, and she is relying on unemployment benefits and her savings.
Census: Household Pulse Survey shows 47.5% of Households lost Income – From the Census Bureau: Measuring Household Experiences during the Coronavirus (COVID-19) PandemicThe U.S. Census Bureau, in collaboration with five federal agencies, is in a unique position to produce data on the social and economic effects of COVID-19 on American households. The Household Pulse Survey is designed to deploy quickly and efficiently, collecting data to measure household experiences during the Coronavirus (COVID-19) pandemic. Data will be disseminated in near real-time to inform federal and state response and recovery planning.…Data collection for the Household Pulse Survey began on April 23, 2020. The Census Bureau will collect data for 90 days, and release data on a weekly basis. (For the first release, the Census Bureau anticipates it will take two weeks after the first week of data collection to prepare and weight the data; subsequent releases will then be made on a weekly basis.)This will be updated weekly, and the Census Bureau released the first survey results today. This survey asks about Loss in Employment Income, Expected Loss in Employment Income, Food Scarcity, Delayed Medical Care, Housing Insecurity and K-12 Educational Changes. This survey will be useful in tracking the “opening” of the economy.This is the first release. The data was collected between April 23 and May 12, 2020. The data will be updated weekly for the next 90 days.
Millions of Americans, including front-line workers’ families, face loss of employer-sponsored health insurance in pandemic – Loss of health insurance is becoming a more and more frequent occurrence in the US as the total number of jobless claims has skyrocketed in recent weeks. Even as coronavirus infection rates accelerate rapidly in many areas of the US and federal and state officials drop efforts to contain the spread of the disease, millions of households are being left vulnerable to sickness due to the elimination of health coverage from employment. In a particularly cruel development, the families of health care workers, first responders and other workers deemed essential who have died from COVID-19 now face the prospect of losing their health coverage due to the cut-off of their loved ones’ employer-sponsored insurance (ESI). In New York City, at least 260 municipal employees have been killed by the coronavirus. Mayor Bill de Blasio announced on May 10 the city would cover the health care premiums for families of city’s civil servants who have died from COVID-19 for only a pitiful 45 days. Despite the horrific death toll due to COVID-19 in public sector occupations, local and state governments are rationing health care treatment and coverage to surviving spouses and children due to the fiscal crises erupting in the states that have felt the greatest economic pressures due to business closures. Families of deceased front-line workers are being compelled to prove that their contraction of COVID-19 was work-related. However, this process is severely undermined by the chronic lack of testing and contact-tracing throughout the country. In a recent Kaiser Family Foundation (KFF) analysis, researchers found that tens of millions are projected to have lost their health insurance coverage through their ESI plans from March 1 – which generally marked the beginning of the pandemic’s rampage – to May 2. The report also paints a disturbing picture of the millions of households that have seen significant portions of their income disappear as a result of layoffs and furloughs. Between March 1 and May 2, it is estimated that nearly 78 million Americans lived in a family where at least one person lost employment.
“They Were Way Too Late” – Amazon Skimped On Safety At PA Warehouse Where 1,000 Workers Fell Ill: NYT – Just days after the 7th Amazon warehouse employee succumbed to the coronavirus, triggering another explosion of outrage as the patient died just after the e-commerce giant unveiled plans to cut hazard pay for warehouse workers (who are indisputably, as Sen. Sherrod Brown would say, ‘risking their lives for the sake of GDP’.While that’s true – in a sense – it doesn’t change the fact that without these workers, millions of people might be cut off from critical supplies, including important staples like food, clothing etc. Even toilet paper and masks.In response to the death, an NYT investigative reporter covering the Jeff Bezos-founded e-commerce and cloud computing behemoth published a sprawling piece detailing Amazon’s many failures to protect workers at “AVP1” – a fulfillment center nestled in PA’s Hazle Township, a small town in Luzerne County, nestled in the foothills of the scenic Poconos.More warehouse workers at AVP1 have been infected than any other of Amazon’s 500 facilities in the US, the NYT reported. The total remains unclear: Some local lawmakers Local lawmakers believe that more than 100 workers have contracted the disease. At first, Amazon informed workers about each new case. But when the total hit 60, the announcements inexplicably stopped. That was consistent with patterns seen at other warehouses: According to a the NYT, one employee/activist at Amazon crowdsourced a count of 900 cases, but it’s believed the number is higher. Amazon employs about 400k blue-collar workers. The company’s inability to protect these workers, according to the NYT, is made more indefensible by the fact that the company was supposedly “early” in confronting the virus: It told its Seattle-based white-collar employees to work from home starting on March 5. It also consulted an infectious disease specialist about what to do. Still, since there are no other companies really like Amazon in the US, there’s nothing to really compare its performance to. The 900-case figure is more or less consistent with the overall infection rate for the US – that is, about 2.25 cases per 100,000.
Illinois business owners could face fine, jail time for reopening in defiance of coronavirus restrictions – Business owners in Illinois could now face a Class A misdemeanor charge for opening their establishments in defiance of the state’s stay-at-home order. Gov. J.B. Pritzker (D) on Friday filed an emergency rule that would penalize owners of restaurants, bars, gyms, barbershops and other businesses for reopening before coronavirus restrictions are lifted, according to The New York Times. In Illinois, a Class A misdemeanor charge can carry a fine of up to $2,500 and a maximum jail sentence of one year. The emergency rule is an “additional enforcement tool for businesses that refuse to comply with the most critical aspects of the stay-at-home order,” Jordan Abudayyeh, a spokeswoman for the governor, told the Times. Abudayyeh noted that “only businesses that pose a serious risk to public health and refuse to comply with health regulations would be issued a citation.” Pritzker administration general counsel Ann Spillane added to The Associated Press that the rule change was “very mild, like a traffic ticket.” “Nobody’s getting arrested or handcuffed,” Spillane said. “But they are getting a citation where they would have to go to court.” State legislators on a bipartisan oversight committee will reportedly have the opportunity to review the new rule on Wednesday. The change prompted pushback from Republican legislators, including state Sen. Dan McConchie. McConchie, a member of the Senate Public Health Committee, said on Twitter that it was “an affront to the separation of powers.” “Legislatures make laws,” he said. “Governors enforce them. Period.” Pritzker has extended the state’s stay-at-home order through the end of May, though he has allowed retail stores to offer curbside service. The Illinois Department of Public Health had reported more than 94,000 confirmed cases of COVID-19, the disease caused by the novel coronavirus, and about 4,100 deaths from it as of Sunday.
Democratic governors hit with flurry of legal challenges to coronavirus lockdowns – The raging public debate over statewide coronavirus lockdowns is running parallel to a series of legal battles in state capitals – and the lockdown skeptics got a big boost this week. The decision by Wisconsin’s Supreme Court on Wednesday to toss Gov. Tony Evers’ statewide shelter-in-place order set off a scramble in cities across the state to impose their own local restrictions. Elsewhere, bars and restaurants shut down by the order declared themselves open for business. And legal challenges are continuing to pile-up across the country – even as governors who extend their state’s shelter-in-place orders begin peeling back some restrictions. The plaintiffs are business owners, aggrieved private citizens, pastors and in some cases, state legislators and legislatures. The targets? Almost always Democratic governors or their top health appointees. Already, more than a dozen states across the country have faced lawsuits over their lockdown mandates – although it’s not clear whether any will be as successful as the litigation filed by Wisconsin’s Republican-led Legislature. In Michigan, Democratic Gov. Gretchen Whitmer’s administration on Friday defended her unilateral extension of the state’s emergency declaration and its stay-at-home order against a lawsuit brought, as in Wisconsin, by the GOP-controlled Legislature after it voted to deny her an extension last month. In California, Gov. Gavin Newsom is facing more than a dozen lawsuits challenging everything from beach to business closures. And earlier in May a coalition of business owners sued Maine Gov. Janet Mills, also a Democrat, seeking to end that state’s shelter-in-place order. The lone pair of Republican governors facing such lawsuits, Maryland’s Larry Hogan and Ohio’s Mike DeWine, recently announced reopening plans that could potentially render pending lawsuits moot.
Maryland and Virginia begin “phase one” reopenings despite record increase in COVID-19 cases – States in the Mid-Atlantic region of the United States began lifting restrictions on businesses and public gatherings Friday amid record increases of the COVID-19 illness in the state of Virginia. Both Maryland and Virginia have recorded more than 30,000 cases each as of Sunday. Virginia has reported 1,009 deaths and Maryland is likely to surpass 2,000 by Monday. Both states are abandoning the already-inadequate preconditions for reopening set out by the White House last month, which included a decline of daily infection rates throughout the course of two weeks. Neither state has met even this criterion, let alone provided an adequate number of tests, contact tracing and other necessities. In contrast, the government of Washington, D.C.’s Democratic Mayor Muriel Bowser announced last week plans to continue sheltering in place until June 8. The city has counted over 7,000 positive cases as of Sunday. However, Bowser has also hinted at the possible easing of restrictions for “nonessential” businesses prior to that date. On Thursday, Virginia reported a record number of COVID-19 infections in the 24 hours prior to its reopening. The state counted 1,067 cases of the disease the day before. A seven-day average of the state’s infection rate reported by the Washington Post on Friday shows that Virginia saw 790 cases daily, with 485 of those infections concentrated in the heavily-populated suburbs of Washington, D.C. The state has seen an average of 25 deaths a day. The Virginia government has failed to meet its stated daily goal of administering 10,000 tests to residents. The overall daily average has been around 6,000 throughout the past week. Further undermining the state’s testing data was the Virginia Department of Health’s announcement that nearly 10 percent of its findings came from serology tests, which are meant to determine the presence of antibodies in individuals previously infected. Virginia’s Democratic Governor Ralph Northam has increasingly shed his earlier posture of being driven by a concern for the health of the population. His initial statements, in which he advocated a “science-based” approach to dealing with the sickness and reluctantly implemented mild social distancing measures, had been seized on by the Trump administration to attack the state government as hampering efforts to reopen the economy.
US Cities Will Lose $360 Billion From The COVID-19 Lockdown – The coronavirus lockdown in the U.S. is going to cost cities an astounding $360 billion in revenue through 2022, according to estimates from the National League of Cities. Pennsylvania is going to be hit the hardest, according to Bloomberg. The state is at risk of losing 40% of its total revenue this year. Not far behind are Kentucky, Hawaii, Michigan and Nevada. The projections take into account the expected rise in unemployment and assume that every 1% of unemployment will cause tax revenues to drop about 3%. The analysis was performed by looking at how unemployment would affect specific state and city revenue streams. It combined those changes with each respective state or city’s tax structure to estimate the impact. Bloomberg’s piece says that the states need help “from the Federal Government” to avoid drastic budget cuts, but the truth of the matter is that they need help from the Fed. The Federal Government, nobody seems to notice, is broke. The analysis comes a day after the Fed said it may need to implement more stimulus than the $3 trillion it has already enacted. Democrats are currently proposing $1 trillion bailouts for state and local governments.
Florida stalls jobless pay to force workers back to work -Florida’s state government is moving rapidly toward reopening non-essential businesses and public spaces under conditions in which the COVID-19 infection rate is showing no signs of slowing down, while the economic crisis produced from the pandemic is further impoverishing hundreds of thousands. The official number of confirmed cases of COVID-19 stands at near 47,000 and the death total is nearing 2,000. Governor Ron DeSantis approved a “full phase one” statewide reopening that began on Monday without putting in place any measures to revamp public health infrastructure and implement the necessary testing, contact tracing, and quarantine strategies that health experts say are crucial to prevent the spread of the disease. Under the governor’s new guidelines, restaurants have been allowed to seat customers at 50 percent of their normal capacity. Retail stores, museums, gyms, fitness studios, and other large-venue areas are also permitted to operate at half their normal capacity. State legislators have moved swiftly to reopen businesses in large part to avoid further paying out unemployment benefits to the hundreds of thousands of workers who have been laid off or furloughed. DeSantis has adopted the same strategy that dozens of states across the country have embraced in alignment with the Trump administration. The ultimatum being presented to workers is to either go back to work and risk becoming sick, or stay home and be denied any financial assistance. Even before lockdown measures were taken, the state government made conscious efforts to restrict funding as much as possible. A local television station revealed that Florida did not start sending unemployment checks until the stay-at-home order was lifted. While thousands of families sought desperately for unemployment aid, the state only withdrew $80 million in federal funds provided under the CARES act to pay the unemployed, although a billion dollars’ worth of federal aid was available. The state has only started withdrawing significant portions of the federal aid in the last several weeks, which means many households have gone more than a month without paychecks and receiving no benefits. In fact, the sudden increase in unemployment compensation disbursements this month began after a report was released showing that the state had received millions of dollars in interest to its state unemployment fund, which is separate from the federal stimulus, showing that it was actually taking in more money than it was paying out to applicants.
Florida Governor Deploys National Guard To Force Residents Back Into Malls, Movie Theaters – Proclaiming that he simply could not allow people to remain in their homes any longer, Florida Gov. Ron DeSantis announced Thursday he had deployed the National Guard to force state residents back into shopping malls, movie theaters, restaurants, and other public spaces. “Today I have ordered both the Army and Air National Guards to do whatever is necessary to ensure every person in the Sunshine State is fully participating in this economy,” said DeSantis, who issued a new directive making it illegal for the total number of shoppers in a Bed, Bath, and Beyond to dip below 90% of fire code capacity, or for anyone to refuse to attend sold-out screenings of Trolls World Tour. “As governor, it is my duty to preserve the Florida we all know and love by requiring our 21 million residents to break quarantine so they can once again eat at Buffalo Wild Wings and shop at Aéropostale. Effective immediately, we will also be authorizing members of the reserve force to employ a variety of nonlethal and lethal methods to compel Floridians to frequent hair salons, roller rinks, and trampoline parks.” At press time, reports confirmed an F-16 from the 159th Fighter Squadron had dropped a bomb on citizens in a Jacksonville Sunglass Hut who had refused to try on the latest in Ray-Bans.
Empty trains, clogged roads: Americans get behind the wheel to avoid transit (Reuters) – As Americans plan for life after pandemic lockdowns, many want to avoid public transport and use a car instead, straining already underfunded transit systems and risking an increase in road congestion and pollution. Several opinion polls show Americans plan to avoid trains and buses as stay-at-home orders ease, with some city dwellers buying a car for the first time. A potential boon to coronavirus-battered automakers, the shift poses a challenge to city planners end environmental goals. Similar dynamics have played out in China, where transit ridership in large cities remains down about 35% two months after lockdown restrictions were lifted while car purchases increase. Ford Motor Co Chief Operating Officer Jim Farley said the company has seen an uptick in Chinese demand for higher-priced utility vehicles fueled by upscale office workers who used to take public transport. Volkswagen AG VWG_p.DE has also seen its sales in China rise above prior-year levels in the final week of April, driven by the desire to avoid public transport, according to Juergen Stackmann, in charge of VW’s passenger car sales and marketing. Sales of passenger cars jumped 12.3% between April 20 and 25, according to China’s Passenger Car Association Transit ridership has plummeted by as much as 95% in large U.S. cities during the pandemic and America’s leading transit agencies forecast massive budget drops and revenue deficits well into 2022. They call for $33 billion in federal support in addition to the $25 billion they were granted as part of a March U.S. coronavirus stimulus bill.
Whitmer extends stay-home order, closures of gyms, salons and other businesses to June 12 – Gov. Gretchen Whitmer has further extended the stay-home order, as well as restrictions that have shut down many Michigan businesses to limit the spread of the coronavirus outbreak. The governor signed two executive orders Friday, May 22 to continue various emergency mandates, including the stay-home order, to June 12, and Michigan’s state of emergency to June 19. The orders continue the temporary closure of public accommodations such as theaters, gyms, salons and casinos. Executive order 2020-99 extends the emergency declaration and order 2020-100 extends the stay-home order and amends a number of previous orders restricting certain non-essential public activities. Despite seven-day averages of confirmed cases declining in the last two weeks, Whitmer states the data isn’t yet where it needs to be. “While the data shows that we are making progress, we are not out of the woods yet,” the governor said in a news release. “If we’re going to lower the chance of a second wave and continue to protect our neighbors and loved ones from the spread of this virus, we must continue to do our part by staying safer at home. If we open too soon, thousands more could die and our hospitals will get overwhelmed. While we finally have more protective equipment like masks, we can’t run the risk of running low again.” The most recent seven-day moving averages statewide were 525 new COVID-19 cases and 55 deaths per day. Friday’s numbers were both below those averages. A week ago, the seven-day average for cases was 623 cases and 47 deaths. Whitmer also referred to Mid-Michigan and West Michigan counties in the state such as Kent for continued increases.
The Lockdown Protestors Are Not Working Class – Sarah Jones, in The Coronavirus Class War, does a neat, tidy job of kneecapping the notion that the anti-lockdown protests are manned by workers who want to get back to their jobs so they can start making money again.While there are no doubt some who feel like that, not only are they not well represented among low-wage workers, but they also don’t appear to be well represented among the protestors either.Let’s look at the upper end of the working stiff income spectrum, employees at top tech companies. Their bosses are keeping them well away from their glam campuses. From Big Tech was first to send workers home. Now it’s in no rush to bring them back, in the Washington Post:Tech’s titans set the agenda for U.S. employers in early March, sending staff to work from home as the coronavirus started to spread near their West Coast headquarters….those same giants – Google, Facebook, Microsoft, Amazon and Twitter – will likely be among the last large employers to reopen their office doors and welcome staff back.Google and Facebook told employees that many workers who can do their jobs remotely should plan to do so until 2021. More generally, polls not only show that citizens prefer to keep the lockdowns on longer, but that that desire is strengthens as wages levels drop. They can least afford to contract a potentially deadly ailment. We’ve followed Mike Elk of the Payday Report on strikes by front-line workers at Amazon warehouses and meatpacking plants, as well as by nurses over the lack of PPE. The risks are highest for work in crowded conditions, and those laborers have sorted out they aren’t being paid enough to risk their health. Now you might then say, “But what about those protestors?” First, there’s a weird tendency among the chattering classes to view all Trump fans as poor white trash, resentful of their educated blue city latte-drinking, well-traveled betters. In fact, the average income of Trump voters in 2016 was more than $10,000 higher than that of Clinton voters..While it isn’t decisive evidence, the fact that many protestors drove long distances isn’t consistent with financial distress. From the Guardian: Cellphone location data suggests that demonstrators at anti-lockdown protests – some of which have been connected with Covid-19 cases – are often traveling hundreds of miles to events, returning to all parts of their states, and even crossing into neighboring ones.
At least 275,000 teachers in the US face permanent job loss as states prepare massive budget cuts – The devastating long-term economic impacts of the COVID-19 pandemic have not yet fully materialized, but the growing budgetary crisis in every state in the US has already resulted in massive cuts for the current fiscal year, with plans for far greater austerity in the near future. This poses an existential threat to public education, with the jobs of hundreds of thousands of teachers and other school employees at risk and untold consequences for an entire generation of youth. Leaders of major school districts across the United States have recently warned that if they do not receive emergency funding to offset the impacts of declining tax revenues during the pandemic, at least 275,000 teachers in major US cities will permanently lose their jobs. The Council of Great City Schools (CGCS) warns that districts will have to cut between 15-25 percent from their budgets for the 2021 fiscal school year, which begins July 1 for most states. On May 12, Mike Casserly, the head of the CGCS, told Education Week, “If Congress and the administration do not approve substantial additional funding, state and local revenue losses will result in teacher layoffs and cuts to other supports and services that will take a generation to recover from in terms of restoring district instructional and operational capacity.” Another recent analysis by the public education advocacy group Learning Policy Institute provides several estimates of teacher job losses based on the extent of the budget shortfalls. With a 15 percent loss in funding, they project 319,000 teacher jobs would be destroyed. With a 30 percent loss in funding – which is entirely plausible for the coming year – an estimated 697,675 teaching positions would be cut. Given variations in the proportion of education funds going to teacher salaries, the impact on each state varies widely. The most severely impacted proportionally would be Minnesota and Hawaii, which would face the loss of 20.5 and 20 percent of their teacher workforces respectively. A 15 percent cut in education funding in Michigan would mean the loss of 12,561 teaching positions, while in California that number nearly quadruples to 49,197 jobs. As brutal as these cuts are, these estimates do not include hundreds of thousands of support staff workers, including school bus drivers, teacher aides, food service workers and custodians, whose jobs would also be eliminated.
Seasonal Adjustment Weirdness: Will State and Local Governments Hire 700,000 Teachers in June and July? – Every year, state and local governments let about 2 million teachers go in late Spring, and then hire them back at the end of Summer. Since this happens every year, the BLS adjusts for this seasonal pattern in the monthly employment report. However, in 2020, state and local governments let almost 700 thousand teachers go in March and April (mostly in April). What this means is that instead of letting 2 million teachers go in late Spring, state and local governments will only let go about 1.3 million teachers (since 700 thousand were already let go).This creates a weird seasonal adjustment problem. By the end of July, the normal number of teachers (around 2 million) will probably have been let go. Since the BLS has already reported almost 700 thousand teaching jobs lost seasonally adjusted, the seasonally adjusted number from the BLS will have to show something like an increase of 700 thousand teacher jobs in June and July! State and local governments will not hire 700 thousand teachers in June and July, but the BLS seasonally adjusted report will show those hires to make the numbers balance out. Just something to remember in a few months.
Harvard Sued Over Subpar Online-Learning Amid Pandemic – On Wednesday, students sued Harvard University for not refunding tuition and fees after the coronavirus pandemic forced classes online. This makes Harvard at least the fourth Ivy League school to be targeted for failing to reimburse educational costs, following Brown, Columbia, and Cornell. The school is facing a $5 million federal class-action lawsuit. Students chose to pursue legal action as a result of not having “received the benefit of in-person instruction or equivalent access to university facilities and services.”“The online learning options being offered to Harvard students are subpar in practically every aspect and a shadow of what they once were, including the lack of facilities, materials, and access to faculty,” the lawsuit reads.“Students have been deprived of the opportunity for collaborative learning and in-person dialogue, feedback, and critique.” Harvard confirmed awareness of the suit in a statement to Campus Reform, although the university had no further comment on the situation. Harvard’s use of its finances has already been called into question with regard to its handling of the coronavirus shutdown. In April, the university faced controversy over the allocation of CARES Act funds, which it eventually turned down, expressing in a press release concern “that the intense focus by politicians and others on Harvard in connection with this program may undermine participation in a relief effort that Congress created and the President signed into law for the purpose of helping students and institutions whose financial challenges in the coming months may be most severe.”The move to decline funding followed public pressure from lawmakers; initially, Harvard had announced that it would accept the money. At that time, Harvard stated that it “remains fully committed to providing the financial support that it has promised to its students.”
Graduations, Campus Classes Canceled by Coronavirus Shock College-Town Economy – WSJ -The coronavirus pandemic has turned vibrant college towns across the U.S. into vacant ones. This weekend was supposed to be one of the busiest of the year for businesses in Blacksburg, Va., as parents, grandparents and well-wishers converged on the town to celebrate the 2020 graduates of Virginia Polytechnic Institute and State University. Instead, the city of 45,000 remains in quiet repose, pining for its students to return. It has been a long two months for Blacksburg and other communities like it, as the pandemic robbed them of their main source of economic vitality. What is happening in Blacksburg is playing out in cities from Ithaca, N.Y., to Pullman, Wash., where the pandemic hasn’t only shut down many businesses but also emptied out college campuses. The losses are especially painful in places that have leaned on universities to lure well-paying jobs and industry to communities that might otherwise lack both. Large colleges and universities employ thousands, buy local goods and services and draw tens of thousands of students and visitors to their stores, restaurants and hotels. Their presence has shielded local communities from both long-term economic shifts and short-lived recessions. In places like Blacksburg, business cycles turn predictably with the seasons: It gets busy in the spring, slows in the summer and then roars to life in September. Now, Blacksburg business owners look anxiously toward the fall, the possibility of in-person classes and the fate of seven home football games that have reliably filled hotel rooms, bars, restaurants and shops. Virginia Tech is responsible for more than half of Blacksburg’s economy, generating about $1.2 billion in annual income, according to Anna Brown, a researcher at Emsi, a provider of labor-market analytics. One of every two jobs is supported by the university, its students and visitors, according to Emsi estimates. As of January, the university had 9,742 employees, including full-time and part-time faculty, staff and wage workers, a university spokesman said.
University of Texas considering furloughs, permanent layoffs to deal with ‘uncertainty’ during coronavirus pandemic – – The University of Texas at Austin is entering its next phase of financial mitigation measures to adjust to operations during the COVID-19 pandemic. On Tuesday, UT President Greg Fenves and Interim President Designate Jay Hartzell sent a letter to the community explaining that while measures have already been taken, the school is facing declines in expected future revenues – in addition to uncertainty about the coming academic year. “Taken together, these forces have significantly altered UT’s immediate financial outlook,” write Fenves and Hartzell. According to the letter, revenue generating units will be directed to develop plans that will “contain costs.” Revenue generating units, the letter explains, are units that fund their operations in a variety of ways, including through service charges, fees and memberships. The letter explains: “For these units, the mitigation plans will likely include furloughs or permanent reductions in force for staff members in specific revenue-generating units where revenues have declined.” The university says leadership in these departments will reach out to staff members should these changes be implemented. Additionally, the university says emergency leave will no longer be available as an option to employees without work. Staff members without work who had been using emergency leave will be asked to review work options with their units and/or begin using their own paid-leave accruals. Federal emergency family and medical leave will still be available for other situations, the letter states.
Coronavirus Revives Debate Over Drug Pricing – WSJ – Not long ago, drug companies had a bull’s-eye on their ticker symbols. Sky-high prices for lifesaving drugs and the opioid crisis had made them the country’s least-liked industry. Democratic presidential candidates were one-upping each other with promises to rein in prices, while President Trump mulled similar plans.Covid-19 has given drug companies a shot at redemption. They are pouring resources into therapies and vaccines, with the entire economy’s fate resting on their success.When Moderna Inc. reported positive early results on its vaccine on Monday, the Dow Jones Industrial Average leapt nearly 4%. Positive results from Gilead Sciences ’ antiviral therapy remdesivir had similar effects three weeks earlier.Drug companies know the world is watching. “We are likely to face significant public attention and scrutiny about any future business models and pricing decisions with respect to remdesivir,” Gilead noted in a securities filing. It promised to give away its first production run and allow poor countries to make generics. Johnson & Johnson said it would sell its vaccine, now in trials, on a not-for-profit basis. Moderna’s chief executive has said “we don’t want to maximize profit” on its vaccine. This may be an astute investment in good will, but not a sustainable business model: In the long run the companies have to charge prices commensurate with the cost of developing drugs, including those that fail. The big question is whether Covid-19 proves to the public and politicians the merits of the current pricing system, which lets drug companies charge whatever the market will bear. “There are a lot of people in biotech really trying to solve this problem because it’s the right thing to do,” said Craig Garthwaite, a health economist at Northwestern University‘s Kellogg School of Management who disagrees with forcing drug companies to lower prices. “But I don’t want to put all my eggs in the altruism basket. We want every company that can possibly address this problem to think that both morally and financially, the best thing to do is to tackle the coronavirus.” The lure of profits may not be the primary reason drug companies are racing to find coronavirus treatments. But it does explain why they have the capital, know-how and technology to deploy in the fight against the coronavirus.
Vaccination Rates Drop to Alarmingly Low Levels During Lockdowns – A new study released by the Centers for Disease Control found that vaccination rates in Michigan for children younger than two have fallen to alarmingly low rates. One of the more eye-popping statistics was that fewer than half of infants five months or younger have received the immunizations that usually start when they’re two months old, according to The New York Times.The rates in Michigan are likely mirrored across the country, as parents nationwide have been reluctant to schedule well visits out of fear of exposure to COVID-19. That means children nationwide have fallen behind on vaccinations for diseases like measles and pertussis, better known as whooping cough, as The New York Times reported.In addition to parental fears of coronavirus exposure, the CDC study suggests that stay-at-home orders have also reduced access to doctor offices, as Reuters reported.The drop in vaccination rates raises concerns that quarantines might lead to an outbreak of preventable diseases, like the measles. As Reuters reported, the CDC researchers analyzed the data from vaccine doses given to children at ages one, three, five, seven, 16, 19 and 24 months this year and the prior four years. In the 16-month age group, coverage with all recommended vaccines declined. The rate of measles vaccinations in particular fell to 71 percent this year from 76 percent last year.The total number of vaccines given to children under two dropped more than 15 percent compared to the previous two years.”The observed declines in vaccination coverage might leave young children and communities vulnerable to vaccine-preventable diseases such as measles,” the CDC scientists wrote in the report, according to Reuters. “If measles vaccination coverage of 90%-95% … is not achieved, measles outbreaks can occur.”Just as the coronavirus is disproportionally affecting poor and minority communities, the poor are receiving the fewest vaccines, according to the study. The report found that up-to-date vaccination coverage was lower for children enrolled in Medicaid, the federal government’s health insurance program for the poor, than for those who were not enrolled, according to CNBC.
Chinese NEV Sales Plunge 43%, Falling For The Tenth Straight Month – The auto industry has been under pressure from all angles as a result of the global coronavirus lockdowns. And it looks as though while Elon Musk has been busy melting down, faux-libertarian style, about the re-opening of his California factory, things may have taken a turn for the worse for the EV market overseas. In addition to the pandemic crippling demand, there seem to be far too many players in China’s NEV market, and that has caused sales to come under pressure, according to Automotive News.. China’s market now has about 50 established EV startups competing with larger companies like Geely and Tesla. In fact, new energy vehicle sales fell for a tenth straight month in April, plunging 43%. Brian Gu, president of Alibaba-backed Xpeng Motors said: “The difficulties that EV start-ups have encountered, such as the auto sales decline, harsh fundraising environment and subsidies reduction, all started last year. The outbreak will aggravate these issues that already had existed.” He continued: “Only the top-tier EV makers will be able to attract attention from investors in this environment.” Experts believe the hit to the EV market could get even worse with the plunging price of oil, even despite subsidies and tax breaks. One anonymous investor said: “Those who had not launched mass production of their car models by 2019 would probably die. The outbreak is going to accelerate their death.” The headwinds could make it difficult for China to reach its goal of having EVs account for 25% of all auto sales by 2025, according to the report. Currently, the number stands at about 5%.
Beijing Scraps GDP Target, a Bad Sign for World Reliant on China Growth – WSJ – China broke with more than a quarter-century of tradition by not issuing an economic growth target for 2020, a stark acknowledgment of the challenges facing the world’s second-largest economy as it grapples with uncertainties around the coronavirus pandemic. The unusual move – it’s the first time a formal target has been omitted since the practice began in 1994 – suggests Beijing’s leaders aren’t eager to unleash a large-scale stimulus after China’s sharpest contraction in four decades. It foreshadows more economic pain for a world that has become increasingly reliant on China as an engine of growth. China reported a 6.1% gain in gross domestic product last year – its slowest pace in nearly three decades, though within the targeted range of between 6.0% and 6.5%. The implicit acknowledgment of sharply slower growth for 2020 marks a climbdown for leader Xi Jinping during a year when he was set to proclaim the end of absolute poverty in the country and double the economy’s size from a decade earlier – political goals meant to burnish his standing ahead of next year’s centennial of the Chinese Communist Party’s founding. Economists had said China needed to grow its economy by at least 5.5% to fulfill the mission of doubling the economy’s overall size – a target that now appears to be out of reach in the absence of a broader reframing of the goals. The lack of a formal growth target was a surprise to many economists, though some had predicted Beijing would have no choice given the extraordinary challenges this year. In the first quarter of 2020, China’s economy suffered its first contraction in more than four decades, shrinking by 6.8% from a year earlier. Even so, Beijing did make clear that it would step up government spending and stimulate the economy, following the hit from the coronavirus. China’s Finance Ministry said Friday it would target a fiscal budget deficit this year of more than 3.6% of the country’s projected GDP, significantly higher than last year’s 2.8% target and above its traditional upper limit of 3%. China’s decision to not set a growth target was revealed in a speech by Premier Li Keqiang on Friday, at the beginning of an annual meeting of China’s rubber stamp legislature, the National People’s Congress. The meeting had been delayed for nearly three months as the country reeled from the coronavirus that first appeared in the central Chinese city of Wuhan. Mr. Li said the decision to scrap an explicit numerical forecast was made “because our country will face some factors that are difficult to predict,” pointing to the coronavirus and uncertainties around trade. But Mr. Li said the lack of a target “will enable all of us to concentrate on ensuring stability…and security.”
China stocks up food and oil supplies as coronavirus spurs fears about shortages – China has been building up its food and energy stockpile this year, taking advantage of slumping crude oil prices even before the coronavirus pandemic disrupted supplies. The world’s second largest economy, which has limited arable land, is facing pressure to shore up its food supplies as prices for food started ticking higher last year, prior to the virus outbreak. Lockdowns and movement restrictions aimed at containing the coronavirus have triggered transportation and logistics bottlenecks. Those blockages have highlighted the vulnerability of global supply chains, and fears of food shortages have come to the forefront of countries, both in developed and emerging economies. Fear is a powerful motivator. It’s driving policy in China currently. Fits well with those hardliners that want to rebuild food reserves. Consumers in China are worried about further repercussions from the pandemic as it continues to spread globally. “People there (in China) are panicked that coronavirus will eventually shut down the world’s ports, making it impossible for them to import,” said Arlan Suderman, chief commodities economist for INTL FCStone in a tweet on Monday. “As such, they are hoarding supplies now while they are cheap and available.” “Fear is a powerful motivator. It’s driving policy in China currently. Fits well with those hardliners that want to rebuild food reserves,” he added. China is the world’s largest consumer of pork, a staple protein for the country. In the first four months of the year, meat imports in China rose 82% compared to a year ago. These include pork, beef and poultry. “We expect food stockpiling to continue especially in cities exposed to logistic disruption. The confluence of expected food price increases alongside an economic contraction and rising unemployment will push up the risk of civil unrest,” said Kaho Yu, senior Asia risk analyst at Verisk Maplecroft, a consultancy. Already, food inflation in the country has been ticking higher. Last Tuesday, China announced that food prices rose 14.8% in April from a year ago. Even though it was lower than the 18% increase in March, it was still at a high level. Pork prices rose almost 97% in April in what has been a persistent trend since early 2019 due to the African swine fever epidemic in pigs that decimated China’s hog herds. In comparison, non-food prices rose just 0.4% in April, official government data showed.
China Considers More Economic Pain for Australia on Virus Spat China is considering targeting more Australian exports including wine and dairy, according to people familiar with the matter, in what would be a dramatic deterioration in ties as the key trading partners spar over the coronavirus outbreak.Chinese officials have drawn up a list of potential goods also including seafood, oatmeal and fruit that could be subject to stricter quality checks, anti-dumping probes, tariffs or customs delays, the people said, asking not to be identified as the discussions are private. State media could also encourage consumer boycotts, they said, adding a final decision on the measures had not been made.Australia, which is the world’s most-China dependent developed economy, has raised Beijing’s ire by calling for an investigation into the origins of the pandemic. President Xi Jinping’s government is sensitive to criticism of its handling of the outbreak and has a track record of using trade as a diplomatic cudgel, with South Korea, Japan and Taiwan all experiencing reprisals in recent years. China has already barred meat imports from four Australian slaughterhouses for “technical” reasons, and slapped tariffs of more than 80% on Australian barley late Monday after a long-running inquiry. Any additional measures will depend on how Australia addresses China’s objections, the people said, adding Beijing doesn’t intend to publicly acknowledge any link between its trade actions and the calls for a virus probe.
Japan’s Economy Fell Into Recession in First Quarter of 2020 – WSJ – Japan’s economy fell into a recession by one common definition in the first quarter of 2020, with worse expected in the current quarter. The world’s third-largest economy after the U.S. and China shrank an annualized 3.4% in the January-March period, pushed down by the initial effects of the coronavirus pandemic. That followed a revised 7.3% contraction in the previous quarter that was triggered by an increase in the national sales tax. Two straight quarters of contraction is one definition of a recession. “The situation has become even more severe in April and May after a state of emergency was issued,” Economy Minister Yasutoshi Nishimura said Monday. “The economy is expected to shrink substantially for the time being.” Prime Minister Shinzo Abe declared a national state of emergency in April to contain the spread of the coronavirus. Last week, he lifted it in 39 of 47 prefectures. It still applies in Tokyo and Osaka, but is expected to end nationwide in the next week or two. Many stores and restaurants have closed during the pandemic, while tourism has virtually halted because most foreign visitors are barred from entering the country and Japanese people have been encouraged to avoid travel. Economists are forecasting a contraction at an annualized pace of 20% or more in the current quarter. Exports fell at an annual rate of 21.8% in the first quarter, reflecting supply-chain disruptions and lockdowns in China, one of Japan’s biggest markets. Private consumption and capital spending by companies also fell, but not as much.
Japan Exports Worst Since Financial Crisis; Korea Early May Export Data Just As Dire – Japan reported another round of dismal trade numbers, with Imports plunging 7.2% in April, worse than the -5.0% drop in March but slightly better than expected. However, it was Japan’s exports – that key benchmark for the BOJ whose goal of keep the yen weaker is not only to support stocks but also to facilitate exports – that was the highlight, with the April number plunged by 21.9%, double the previous month’s -11.7% drop and the biggest plunge since the financial crisis. But if Japan’s number was dismal, at least it was expected. What was more concerning was the latest Korean export number for the first 20 days of May, which some had expected to see a solid rebound in light of the so-called reopening observed this month. Well, it did not happen, and while the May number wasn’t quite as bad as the near-record plunge in April when exports plunged by 26.9% in the first 20 days, the -20.3% Y/Y drop in May – off an already depressed 2019 number – showed that any hopes for a solid global recovery taking hold have been painfully premature. To be sure, there was a tiny silver lining, as semiconductor exports rose 13.4% in contrast to a 15% decline in the same period of April. According to Bloomberg “this supports optimism for an economic turnaround and equities’ rally” and is “likely to give investors fresh reasons to look at the tech sector in Korea and abroad” although we disagree. As noted in recent weeks, just like during the trade war in much of 2019, the reason for a sharp pick up in semiconductor trade has been fear that China’s tech sector will soon be locked out of US supply chains – as the recent Huawei news confirmed – and as such any jump in S.Korean semi exports is simply frontloading of demand now ahead of more crackdowns on the Chinese tech space in the future, when Huawei et al may find themselves completely locked out from US suppliers, which in turn explains why as Bloomberg reported earlier, China is planning to invest $1 trillion in its semiconductor industry to if not overtake the US in technology, at least become self-sufficient and not rely on US semi production.
WTO’s Goods Trade Barometer Hits Record Low Amid COVID Disruptions – The World Trade Organization (WTO) published its Goods Trade Barometer on Wednesday morning, showing a steep decline in 1H20 as the COVID-19 pandemic disrupted the global economy.”The index currently stands at 87.6, far below the baseline value of 100, suggesting a sharp contraction in world trade extending into the second quarter,” the new report showed. “This is the lowest value on record since the indicator was launched in July 2016.” Most importantly, the WTO warned: “the current reading captures the initial phases of the COVID-19 outbreak, and shows no sign of the trade decline bottoming out yet.” The current reading of the Goods Trade Barometer suggests world merchandise trade could plunge between 13% and 32% in 2020, which is all dependent on if there’s a second virus wave. WTO trade data show the volume of world merchandise trade contracted by 0.1% in 2019, the first decline since the 2009 GFC. The downturn in the global economy started in late 2017, mostly because marginal productivity of debt was quickly depleted across major economies and a trade war between the US and China that quickly erupted.For more color on collapsing world trade, A.P. Moller-Maersk A/S, the world’s largest container line, warned last week that global trade would continue to falter with volumes declining by at least a quarter in 2Q20. The shipper dashed all hope that a V-shaped recovery will be seen in the back half of the year, instead suggesting a U-shaped recovery is more plausible. Meanwhile, this week, BofA’s latest Fund Manager Survey, which polled 223 participants with $651BN in AUM, showed the vast majority of financial professionals remain incredibly bearish on the global economy. Respondents do not expect global manufacturing PMI to rise back above 50 until 4Q20.
India’s Coronavirus Crisis Spurs a New Look at Self-Reliance – WSJ – The coronavirus pandemic has pushed India’s jobs crisis from bad to worse, leading the government to take a new look at an old solution: self-reliance. Prime Minister Narendra Modi’s latest plan appears aimed at helping companies to get even more focused on Indian consumers, as opposed to exports, while also using the potentially vast domestic market to lure foreign firms to set up operations in the country and employ Indians. To what extent this is accomplished through protectionism or root-and-branch economic reform, or something in between, could determine its success in creating the tens of millions of new jobs India desperately needs in the coming years and decades, economists said. Mr. Modi took to national television last week to tout an economic stimulus plan he said was worth 10% of the nation’s economy. The centerpiece of his pitch was self-sufficiency. The prime minister isn’t the only world leader casting his sights back on his home market. Politicians around the world have invoked the almost impossible challenge of getting basic medical supplies to call for more domestic economic control. As the virus started spreading, France’s finance minister demanded more “economic and strategic independence” for French industry. President Trump has repeatedly said the pandemic justified his nationalist economic agenda. India has a history of rejecting globalization, and Mr. Modi’s call taps deep into the nation’s psyche. Self-sufficiency was at the heart of the campaigns Mohandas Karamchand Gandhi led to achieve India’s independence from Britain. For the Mahatma, it meant a focus on village life, farming and self-reliance, symbolized by the image of himself hand-spinning thread on a wooden wheel.
100 Babies Stranded in Ukraine After Surrogate Births – NYT. – – The babies lie in cribs, sleeping, crying or smiling at nurses, swaddled in clean linens and apparently well cared for, but separated from their parents as an unintended consequence of coronavirus travel bans. Dozens of babies born into Ukraine’s booming surrogate motherhood business have become marooned in the country as their biological parents in the United States and other countries cannot travel to retrieve them after birth. For now, the agencies that arranged the surrogate births care for the babies. Authorities say that at least 100 babies are stranded already and that as many as 1,000 may be born before Ukraine’s travel ban for foreigners is lifted. “We will do all we can to unite the children with their parents,” Albert Tochilovsky, director of BioTexCom, the largest provider of surrogacy services in Ukraine, said in a telephone interview. He said he released a video showing dozens of stranded babies in cribs to call attention to the problem. “I’m in a difficult situation,” he said. “Hundreds of parents are calling me. I’m exhausted.” Ukraine does not tally statistics on surrogacy, but it may lead the world in the number of surrogate births for foreign biological parents, Mr. Tochilovsky said. His company alone is awaiting about 500 births. Fourteen companies offer the service in Ukraine. Ukraine is an outlier among nations, though not alone, in allowing foreigners to tap a broad range of reproductive health services, including buying eggs and arranging for surrogate mothers to bear children for a fee. The business has thrived largely because of poverty. “The cheapest surrogacy in Europe is in Ukraine, the poorest country in Europe,” BioTexCom’s website explains. Surrogate mothers in Ukraine typically earn about $15,000. Some members of Parliament who have long opposed the business have renewed their calls for banning surrogacy services for foreigners now that the babies are stacking up without parents. Surrogacy is available in Ukraine only if a woman in a heterosexual partnership can demonstrate that she cannot bear children herself.
Italian Politician Demands Bill Gates Arrest For Crimes Against Humanity — As the FDA shuts down a Bill Gates-funded COVID-testing program, an Italian politician has demanded the arrest of Bill Gates in the Italian parliament.Sara Cunial, the Member of Parliament for Rome denounced Bill Gates as a “vaccine criminal” and urged the Italian President to hand him over to the International Criminal Court for crimes against humanity. She also exposed Bill Gates’ agenda in India and Africa, along with the plans to chip the human race through the digital identification program ID2020.As reported by GreatGameIndia earlier, in 2015 it were the Italians who exposed secret Chinese biological experiments with Coronavirus. The video, which was broadcast in November, 2015, showed how Chinese scientists were doing biological experiments on a SARS connected virus believed to be Coronavirus, derived from bats and mice, asking whether it was worth the risk in order to be able to modify the virus for compatibility with human organisms.In an extraordinary seven-minute speech met with wide applause, Sara Cunial, the Member of Parliament for Rome said that Italy had been subjected to a “Holy Inquisition of false science.” She roundly criticized the unnecessary lockdown imposed on her fellow Italians in the service of a globalist agenda. She urged fellow political leaders to desist in any plans to compel citizens to surrender themselves to compulsory COVID-19 vaccination at the hands of the corrupt elite – whom she identified as the Deep State.Below is the transcription of the full speech delivered to the Italian Parliament by Sara Cunial, the Member of Parliament for Rome.
ECB Is Ready to Expand Stimulus Program, Minutes Show – WSJ -European Central Bank officials are ready to step up bond purchases next month if they consider such a move necessary to combat the economic fallout from the coronavirus pandemic, according to the minutes of their April policy meeting.The ECB in March unveiled a €750 billion ($820 billion) bond-buying program to support governments and businesses in the face of plunging economic growth. But the bank surprised some analysts by leaving the program’s size unchanged at its April 29-30 meeting, while sweetening the terms of loans to eurozone banks.The minutes of the April meeting, published Friday, suggest the ECB is ready to expand the new bond-buying program at its June 4 meeting, which would help eurozone governments finance the battle against the virus, if new data suggests the current stimulus is too small.“Past experience showed that a loss of confidence in financial markets had to be avoided and pre-emptive action was preferable,” the minutes said. The ECB is trying to keep the borrowing costs of eurozone governments in check, but officials noted that some have crept up since mid-March, as government revenues have fallen and costly programs to combat the pandemic have been rolled out.The report suggests that ECB officials are willing to act aggressively, even as they weigh the legal implications of the bank’s bond purchases.Germany’s top court raised questions about the ECB’s easy-money policies this month, with a ruling that approved an earlier bond-buying program while demanding greater clarity about its economic impact.At the bank’s April meeting, one ECB official warned that the purchases of sovereign debt “had to be executed carefully in order not to encourage irresponsible behavior on the part of governments.”But other officials said that wasn’t a reason for the ECB to stop buying debt, and thereby to pursue its mandate of keeping inflation close to 2%.
UK Sells Negative-Yielding Debt For The First Time – Who would have thought that Brexit would result in a convergence of the European and UK bond markets. With the UK swept by a debate whether it should follow Europe into negative interest rates, the bond market appears to have made the decision for it, when this morning the UK sold £3.75 billion in 2023 gilts at a negative yield of -0.003% for the first time, with a fall in inflation piling even more pressure on the fiscal and monetary policymakers to take new action to prop up the economy. The UK drew orders of £8.1bn in Wednesday’s auction resulting in a 2.15 bid to cover to the amount the DMO was looking to sell. According to the FT, “the robust demand underscored the appeal of gilts, long considered to be a haven due to the UK’s strong creditworthiness. It also suggests any fears over the large increase in borrowing the UK has undertaken due to the Covid-19 pandemic has not yet weighed on investor appetite for the debt.” The auction comes during the growing debate into whether the BoE will need to reduce its main interest rate from its already historic low into negative territory, as policymakers attempt to bring inflation back towards the 2% target. Whatever you do, don’t look at Japan. The negative yield means investors who hold the debt to maturity will get fractionally less than they paid, and are paying for the privilege of lending to the UK government, reflecting growing investor expectations that the Bank of England may need to take additional steps to push inflation back to its 2 per cent target. The UK sold a one-month bill at a negative yield in 2016, but this represents the first time it has sold a conventional longer term bond at yield below zero. Moyeen Islam, rates strategist at Barclays, said the auction was a “symbolic hurdle” noting that “given recent comments from monetary policy committee members, the question of negative policy rates is far from settled.” While other central banks have already used negative rates they have faced stinging criticism, especially from bankers since it weighs heavily on the profitability of their traditional lending operations: “I can’t think of an economy where negative rates are a worse idea than the UK,” said SocGen FX strategist Kit Juckes. “The economic benefits are dubious but the power of a cocktail of negative rates and massive quantitative easing to weaken the currency seems clear and if the pound falls enough, it will make QE harder.”
Profiting from Coronavirus – Craig Murray – On 5 May, the British security services released to their pet media the claim that Russia, China and Iran were attempting to hack into British research institutes conducting coronavirus research. The BBC reported it. Britain’s shameful copy and paste media all, without exception, just copy and pasted the government press release. The Guardian gave the quote: “Any attack against efforts to combat the coronavirus crisis is utterly reprehensible. We have seen an increased proportion of cyber-attacks related to coronavirus and our experts work around the clock to help organisations targeted”. If Britain had one single mainstream media journalist willing to think, rather than just regurgitate government propaganda, they might have realised that there is a massive story here if you look at it the other way round. The quote from the Guardian deliberately attempted to give the impression that Russia, China and Iran were trying to disable, destroy or hamper coronavirus research: “Any attack against efforts to combat the coronavirus”. But if you read carefully through those articles, you find that the allegation is merely that they are attempting hack in to gain access to the research. Because the UK and the US are attempting to hide their vaccine and treatment research results from the rest of the world to make money out of them. Much has been written about the possibility for a new and better kind of world to emerge after coronavirus. Yet our governments cannot conceive of any model for fighting this threat to the whole world, other than the capitalist, money-making model. The much-touted “race to develop a vaccine” is not a race to save lives. It is a race to make billions. The United States and the United Kingdom are working in all international fora to head off efforts to pool global research and to make any vaccine or medicine a good for the world. Governments can reward those working on the vaccine, and the companies for providing the facilities, using economic models other than the patent and the potential for massive profit.
Food Security: Prince Charles Calls for Furloughed Workers to Pick Berries; My Thoughts as a Former Tomato Picker – – Jerri-Lynn Scofield – Prince Charles has turned his attention to food security:The Washington Post) picked up the message:Prince Charles this week implored workers furloughed by the pandemic to get out into the fields and “pick for Britain.”“If we are to harvest British fruit and vegetables this year, we need an army of people to help,” said his ruddy-faced royal highness, wearing a tie and tweed sporting jacket, his hand jammed into the pocket of his wrinkled mackintosh, standing in his own well-tilled garden at Birkhall, his estate in Scotland.“It will be hard graft,” the prince warned, “but is hugely important if we are to avoid the growing crops going to waste.”The Prince of Wales hit the wartime trope, and called for reconvening the Land Army of World War II, where women and girls did agricultural work, as replacement labor after many men went abroad to war, to make sure those left behind had food to eat..Most of Britain’s perishable produce is harvested by migrant workers, many from Bulgaria and Rumania, and the COVID-19 pandemic has so far blocked their annual migration to Britain to pick crops. The National Farmers Union estimates there are about 70,000 seasonal farm jobs that need filling, according to CNN.Now, Prince Charles has been a figure of fun, a butt of jokes for my entire lifetime. I was delighted to see – but if truth be told, also a bit surprised – that many Brits seem poised to heed the call to action by their heir to the throne. Maybe the country hasn’t entirely abandoned its wartime spirit. In fact, the WaPo reported that “So many people answered the royal call that the “Pick for Britain” website crashed on Wednesday….” Alas, this is no laughing matter. And what those Brits who show up to do it will find, farm work is not only hard toil, but also requires a fair amount of skill – as I learned back in the summer of 1976, while holding down my first real summer job, as a tomato picker at Mr. Guidi’s farm in Green Township, New Jersey.
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