You might assume that a federal government that already runs a trillion dollar deficit in the midst of economic expansion would find it easier to donate money in an emergency.
But Trump administration faces serious challenges on several fronts as it seeks to distribute money to people and small businesses, a cornerstone of its plan to stabilize a economy plummeting due to the pandemic of coronavirus.
Speed is essential. Bills are piling up for millions of suddenly unemployed Americans and businesses forced to close. Again task puts strain on understaffed bureaucracy struggling to design and deploy systems on the fly to deliver some $ 600 billion in cash and loans as part of the larger $ 2.2 trillion bailout program.
A flip-flop by the Treasury Department on Wednesday illustrated the nature of the panties of the federal effort. Faced with a bipartisan backlash, the Internal Revenue Service overturned a decision that social security recipients who generally do not file income tax returns should submit one in order to receive $ 1,200 in relief.
“Critics flocked after the IRS posted a notice on its website Monday asking social security recipients who do not normally send a return to file a” simple “tax return, which would be available soon,” Heather Long reports from The Post. “More than 15 million Americans on social security do not file an annual income tax return because their incomes are so low, according to the Center on Budget and Policy Priorities.
” Forty-one Democratic Senators have sent the White House a letter Wednesday, asking why the Trump administration places this “significant burden” on seniors and the disabled. GOP Senator Josh Hawley of Missouri called it “ridiculous.” “
The tax agency faces an even thornier problem in trying to distribute $ 250 billion to about 150 million Americans as quickly as possible. “In a matter of days, federal officials must create a website so that some people can enter their banking information, strengthen their security so that malicious actors cannot steal sensitive financial data and prepare to be bombarded by American questions who are not ‘I don’t know exactly what they are owed and how to get the money,’ writes Tony Romm of the Post.
Treasury Secretary Steven Mnuchin has promised that most will receive payments within three weeks. And indeed, the IRS will deposit directly in cash for taxpayers with bank account information in the agency’s file. But that will leave about 70 million Americans – the so-called unbanked and underbanked – potentially waiting much longer for their own share, according to an estimate by Aaron Klein, a former Treasury official now at the Brookings Institution.
“Solutions to these problems abound, if only policy makers prioritized them,” writes Klein. “The response to COVID exposes many problems that have been overlooked for too long. Add our basic banking and payment systems to this growing list. “
Digital payment companies like Square and PayPal present their products to the Treasury as solutions, Writes Romm. These partnerships are unlikely to materialize, according to Romm, but the IRS is looking to develop a web portal to allow those who are not already online for direct deposits to register with the agency and speed up the delivery of their payments. (See my colleague Jackie Alemany’s account of one of these efforts).
Former White House economist says mobile payments may be the best option. Lisa Cook, now a professor at Michigan State University, noted this week in an article for the Washington Center for Equitable Growth on the left that 98% of 18- to 29-year-olds have smartphones, as do nearly 75% of those who earn less $ 30,000. .
“Mobile payments preserve the value of the amount per person distributed by the government by limiting the high fees associated with the use of banking alternatives,” she writes, adding that the platforms “can withdraw money quickly, especially to more vulnerable ”.
The administration is tackling another challenge by distributing $ 349 billion in loans to small businesses to keep them afloat. The Small Business Administration is leading the effort but cannot deal with it on its own. Trump’s team is on the move to delegate work to the country’s banks.
But some large institutions register ” serious reservations about participation in the program in its current form “Pete Schroeder and David Henry of Reuters report.
Banks’ concern: “The Treasury Department has said it expects lenders to check the eligibility of borrowers and take steps to prevent fraud, money laundering and protect customer information under of the bank secrecy law, sources said. Banks worried about facing regulatory sanctions or legal fees if things go wrong in a hurry to withdraw money, or if they’re accused of not moving funds fast enough if they do due diligence as they would do in ordinary times, the sources said. ”
Application Crash Already Threatened to “Overwhelm the Trump Administration’s Efforts to Accelerate Money to Cash-strapped Small Businesses”complicating the hope of keeping tens of millions of Americans employed “during the shutdown, writes David Lynch of the Post.
Businesses can start submitting applications on Friday for fully government supported loans. And the federal government will forgive loans to those who preserve their wage bill before the pandemic. “But for the rapid-fire effort to succeed, the government must deliver more than 15 times more money in a few weeks than the SBA has issued through its main lending program in the past year,” writes Lynch.
“Administration officials said they had streamlined the loan application process by abandoning the SBA’s usual requirement for borrowers to post collateral or offer personal collateral. Companies with fewer than 500 workers are eligible to participate and can apply by filling out a two-page form, available at sba.gov. ”
As Brian Gardner, chief executive of investment banking firm Keefe Bruyette & Woods, told Lynch: “I cannot imagine, given the size of the program, that the banks will be able to get this out as quickly as the Treasury wants. But it’s the best option they have. ”
– Unemployed claims set to rise again. “More Americans should have filed for unemployment benefits in the past two weeks than in the previous six months, marking a drastic decline in the US labor market caused by the coronavirus pandemic,” write Sarah Chaney and Eric Morath. “Economists polled by The Wall Street Journal predict that about 3.1 million Americans filed for unemployment benefits last week after a record 3.3 million people applied for unemployment benefits last year two weeks while the United States closed parts of the economy to contain the virus. “
Other estimates are darker. According to Quoctrung Bui of the New York Times: “This Thursday’s number, which reflects claims filed last week, could reach 5.6 million, according to an analysis of Google search data by economists Paul Goldsmith-Pinkham of Yale and Aaron Sojourn from the University of Minnesota. Morgan Stanley estimates claims will total 4.5 million [the] report; Goldman Sachs’ estimate is 5.5 million. “
If you thought last week’s report was a doozy, jobless claims could reach 5.6 million tomorrow, according to a forecast of @paulgp and @aaronsojourner https://t.co/Te1GK3U8EY pic.twitter.com/JALgVMKNr2
– Quoctrung Bui (@qdbui) April 1, 2020
– Stock tank: “The stocks plunged deeper into their month-long funk as the nation entered one of its most terrible times in memory,” report colleagues Thomas Heath and Jacob Bogage. “The Dow Jones industry average fell 973 points, or about 4.4%, to 20,943 as investors made bad news on the coronavirus front – including the grim White House forecasts that 240,000 Americans could die from the virus. The Standard & Poor’s 500 lost 113 points, or 4.4%, to 2,470. The tech-rich Nasdaq returned 340 points, or 4.4%, to finish at 7,360. “
The dollar is advancing as the global recession looms: “The dollar has risen … with markets preparing to become one of the worst economic contractions in decades as the world faces the coronavirus pandemic,” reports Gertrude Chavez-Dreyfuss of Reuters.
“The greenback, the world’s largest reserve currency, has risen against the euro, the British pound and most other major currencies, as the sale of global stocks has highlighted the growing risks of the pandemic which has shown few signs of easing. “
Oil rebounds. Sharon Cho and Alex Longley of Bloomberg New: “Brent oil surged as China planned to start buying cheap crude oil for its strategic reserves, while [Trump] said he thought that Saudi Arabia and Russia would resolve their differences in the oil price war which added to the market malaise. Futures contracts rose 13% in London as Beijing asked government agencies to start filling state stocks after oil fell 66% in the first three months of the year. “
Manufacturing contracts in the United States: “MManufacturing activity contracted less than expected in March, but disruption caused by the coronavirus pandemic pushed new orders received by factories to an 11-year low, reinforcing economists’ view that l ‘The economy was in recession,’ said Reuters. Lucia Mutikani reports.
– Rosengren of the Fed says the virus is likely to affect real estate: “The coronavirus crisis is likely to drive home and office prices down, may lead to a permanent change in demand for office space, and could push highly indebted households and businesses into default,” said Boston Federal Reserve Bank Chairman Eric Rosengren, “Jonnelle of Reuters Marte Reports.
“His remarks at an online event with the Boston Chamber of Commerce offered a darker view of the financial challenges posed by the crisis than some of his colleagues who believe that if the health challenge is dealt with quickly, a rebound Rapid economic growth will allow the economy to recover “roughly where it left off. ”
In the USA:
- Pence compares the American situation to Italy: “Coronavirus deaths in the United States exceeded 4,600 on Wednesday as Vice President Pence issued a disturbing warning that America’s situation is more comparable to Italy’s fight against the virus, which has pushed this nation’s hospitals to full capacity and killed more than 13,000 in a few weeks “long lockdown,” my colleagues Matt Zapotosky, Nick Miroff and Ian Duncan report.
- DeSantis sells while Florida obtains a home stay order: Florida Governor Ron DeSantis (R) ordered a 30-day home stay order for the state on Wednesday, demanding that its nearly 21 million residents stay indoors unless they are not pursuing essential services or activities ”, my colleagues Fred Barbash and Alex Rapport Horton.
- Social distancing seems to work in certain places: “The sooner the better, preliminary data from two weeks of home stay orders in California and Washington,” my colleagues Geoffrey A. Fowler, Heather Kelly and Reed Albergotti report.
- There is a fight over who should take the quick tests first: “Some White House officials want to ship many of the tests, which were approved on Friday and can deliver results in five to 13 minutes, in areas where there are fewer cases, such as rural states and parts of South ”, my colleagues Steven Mufson, Juliet Eilperin and Josh Dawsey report the new method from Abbott Laboratories. The White House’s final consensus seems to be that these areas will be tested.
- Fauci obtains reinforced security: My colleagues Isaac Stanley-Becker, Yasmeen Abutaleb and Devlin Barrett report enhanced protection for the country’s best infectious disease expert, Anthony S. Fauci, as he faces increasing threats to his personal safety.
Benefits of the business:
- Treasury chooses three Wall Street banks to help airlines. “The department should operate PJT Partners Inc., Moelis & Co. and Perella Weinberg Partners,” report Cara Lombardo and Lizz Hoffman of the WSJ. “Each bank is likely to give advice on aid to one of three subsectors: commercial airlines, freight carriers, and companies critical to national security, such as Boeing Co.”
- The return of the Boeing 737 Max is even more difficult: “As airlines steal a fraction of their antiretroviral programs and production at many Planner facilities has been suspended, a small Boeing team has continued to test the latest software changes on the Max,” Peter Robison of Bloomberg, Julie Johnsson, Alan Levin, and Siddharth Vikram Philip Report. A delay would add more problems to the struggling business.
- Plants appear as battlefields: “Tensions erupt between employers and workers in the United States as some companies strive to continue production during the coronavirus pandemic and some employees postpone health and other problems,” report Alexandra Berzon, Jacob Bunge and Alejandro Lazo of the WSJ.
- Companies are looking to reduce contributions by 401 (k): “Amtrak, La-Z-Boy Inc., retailer Mattress Firm Inc. and travel technology company Saber Corp. are among the first in an expected wave of companies suspending or reducing matching contributions to 401 (k) s of employees … “, Reports by Anne Tergesen and Dieter Holger of the WSJ.
- US intelligence concludes that China has concealed the extent of the epidemic: “China has hidden the extent of the coronavirus epidemic in its country, underreporting both the total number of cases and the deaths it has suffered from the disease,” the US intelligence community concluded in a report classified in the White House, according to three US officials, “said Bloomberg. Nick Wadhams and Jennifer Jacobs report.
- The Chinese Province Returns to Lockout: “Henan Province in central China has taken the drastic step of putting a medium-sized county in total lockdown as authorities try to repel a second wave of coronavirus in the midst of a push to relaunch ‘economy,’ said Guo Rui of the South China Morning Post. and Echo Xie report.
- The Israeli Minister of Health is positive: Yaakov Litzman is the head of the ultra-Orthodox Torah united Judaism party and is a follower of the Gur Hasidic sect. “Figures released on Wednesday by the health ministry have shown that the virus has spread particularly rapidly and widely in the country’s ultra-Orthodox community,” said my colleague Ruth Eglash of Jerusalem.
- Iceland allows anyone to get tested: “They do not need to have recently traveled abroad or been in contact with someone diagnosed with the virus. They don’t even need to show symptoms, ”reports my colleague Siobhán O’Grady.
MONEY ON THE HILL
– McConnell rejects Pelosi’s plans for “phase 4”: “A week after the Senate unanimously passed a $ 2 trillion emergency relief bill to limit the financial trauma of the coronavirus pandemic, Senate majority leader Mitch McConnell ( R-Ky.), Said it would move slowly in reviewing any follow-up legislation and ignore the latest efforts by House Speaker Nancy Pelosi (D-California) to restart talks, “reports my colleague Robert Costa.
“McConnell’s massive rejection of Pelosi’s urgent call to action underscored uncertainty and ferocious political war in Congress as the coronavirus epidemic shuts down much of the nation and stifles the economy, with little consensus on what should follow the biggest and persistent bailout in US history. the tensions resulting from these negotiations between McConnell and Pelosi. “
- Key quote: “She has to give up on the idea that we’re going to take advantage of the crisis to do things unrelated to the crisis,” McConnell said in a Washington Post interview, calling the speaker’s recent comments on a fourth cycle of “premature” virus legislation.
– The Fed temporarily eases rules on bank capital. Andrew Ackerman and Ben Eisen of WSJ: “The Federal Reserve eased rules on how banks account for their ultra-secure assets on Wednesday, a move to boost the flow of credit to consumers and businesses running out of money. money during the coronavirus slowdown.
The Fed has said it will exclude T-bills and one-year deposits held by the central bank from calculating the banks’ additional leverage ratio. The ratio measures capital – the funds that banks mobilize from investors, derive profits and use to absorb losses – as a percentage of loans and other assets…
“The banks are sitting on giant stocks of cash, US government debt and other safe assets. By tweaking the way the ratio is calculated, the Fed is effectively trying to design a swap. Remove T-bills and central bank deposits from the calculation, it is believed, and banks should be able to replace them in the asset pool with loans to consumers and businesses. “
The move drew criticism from proponents of tougher industry regulation. From former FDIC President Shelia Bair:
The more leverage a bank has, the less it can absorb losses and stay in business without bailing (another) taxpayer. This will significantly increase the risk of default for a large bank.
– Sheila Bair (@ SheilaBair2013) April 1, 2020
– Kushner plays leading role in response to coronaviruses. Adam Cancryn and Dan Diamond of Politico: “ What started two and a half weeks ago as an effort to use the private sector to correct early test failures has become a complete portfolio for Kushner, who, alongside a kitchen cabinet of outside experts, including his former roommate and a suite of McKinsey consultants, took over the the most important challenges facing the federal government: expanding access to tests, increasing industrial production of necessary medical supplies and figuring out how to get them to key locations …
“The behind-the-scenes task force has also duplicated existing federal teams and operations, and its focus on quick and short-term decisions has raised concerns among some health agency officials, according to interviews with 11 people involved in Kushner’s efforts, including senior government officials, external advisers and project volunteers, as well as other officials from the health department and the White House. “
– The T-Mobile-Sprint merger is complete: “T-Mobile US Inc announced Wednesday that it has formally completed the $ 23 billion merger with Sprint Corp, strengthening its position as the number 3 wireless service provider in the United States,” report Reuters’ Arriana McLymore and Diane Bartz .
– FTC fights Altria’s investment in Juul: “The Federal Trade Commission is continuing to reverse Altria’s nearly $ 13 billion investment in famous electronic cigarette maker Juul, alleging that the deal violates antitrust laws,” said Stephanie M. Lee of BuzzFeed News.
“Altria, one of the largest tobacco manufacturers in the world, paid $ 12.8 billion in December 2018 for a 35% stake in Juul, becoming its main player and valuing the startup in San Francisco at 38 billion of dollars. The FTC complaint, filed Wednesday, alleges that the investment illegally eliminated competition between the two companies. “
Find out how the coronavirus anchored the airline industry: “According to Aireon, an aviation satellite tracking company, 37,826 planes were tracked on November 5, before the coronavirus wreaked havoc in international air travel. On Tuesday, however, only 26,217 planes were detected, down 30.7%, ”my colleagues Andrew Freedman, John Muyskens, Chris Alcantara and Monica Ulmanu report.
Take a look at only part of the air travel to the United States:
The drop in human activity since the coronavirus shock had a seismic effect:
Researchers studying Earth’s movement report a decrease in seismic noise – the buzzing of vibrations in the Earth’s crust – which could be the result of the closure of transportation systems and other human activities. # COVID19 https://t.co/9VFqntmNIK pic.twitter.com/sBua0DT1wU
– Glen Peters (@Peters_Glen) April 1, 2020
- The Labor Department publishes its weekly report on the first unemployment claims
- Walgreens Boots Alliance, Dave & Busters, Carmax and Chewy are among the notable companies that report their profits
- The Ministry of Labor publishes the monthly employment report
From Ann Telnaes of the Post: