General
First Black Fed President Warns of Systemic Racism’s Economic Toll
Nick Timiraos, The Wall Street Journal
Raphael Bostic, the Federal Reserve Bank of Atlanta’s president, is shining a light on how economic and social upheaval have changed how the central bank talks and thinks about racial and economic inequality. Mr. Bostic, an economist whose work has focused on racial disparities in access to capital, has helped lead those public discussions as the first Black president to lead one of the 12 regional reserve banks in the system’s 106-year history.
Treasury, SBA appear to miss deadline to disclose small business loan data
Jonathon O’Connell, The Washington Post
The Treasury Department and Small Businesses Administration appear unlikely to release information on hundreds of thousands of Paycheck Protection Program loans this week as planned, a setback in the Trump administration’s promises to be transparent about one of the largest economic stimulus packages ever created by the federal government. After offering contradictory statements on how much information they would release about more than 4.8 million forgivable loans issued from the $660 billion program, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced last week that they would release the names of borrowers who received at least $150,000 in funds before the holiday weekend.
Coronavirus will undermine trust in government, ‘scarring body and mind’ for decades, research finds
Christopher Ingraham, The Washington Post
Two new working papers present complementary data showing that the coronavirus pandemic will leave a deep psychological scar on the nation for years to come. The first, led by Julian Kozlowski of the Federal Reserve Bank of St. Louis, finds that the experience of the coronavirus and ensuing recession could make people and businesses less likely to resume their previous spending and investment patterns, which would have an extended stunting effect on economic growth.
Recession Led by Services Sector Is Particularly Painful for Latino Workers
Harriet Torry, The Wall Street Journal
A dramatic drop in hotel stays, elective surgeries and dining out since the coronavirus outbreak in February is driving a recession that is unlike every other since the Great Depression. Prior downturns were largely led by lower spending on such things as cars, houses, and factories while this one is hitting the service industries.
Fed’s Next Policy Move Looks Tied to Long-Run View on Inflation
Christopher Condon, Bloomberg
Jerome Powell isn’t “even thinking about thinking about” raising interest rates, but investors still wonder what it would take for the Federal Reserve chair to start taking his foot off the gas. U.S. central bankers dropped some strong hints on the answer to that question this past week.
The big factor holding back the U.S. economic recovery: Child care
Heather Long, The Washington Post
The child-care crunch triggered by the pandemic has rapidly become a crisis for many workers and companies that is hindering the economic recovery, disproportionately harming women and threatening to leave deep scars for years to come. A consensus is emerging among top economists and business leaders that getting kids back into day cares and schools is critical to getting the economy back to normal.
Don’t Know How Much Stimulus Is Needed? Put it on Autopilot, Some Say
Kate Davidson, The Wall Street Journal
One of the trickiest questions facing Congress when it takes up the debate on new stimulus later this month is just how much help the economy needs to recover from the Covid-19 pandemic. If it is already recovering rapidly, the government may spend and borrow more than needed, pushing the national debt higher.
New York Municipalities Feel Budget Crunch as Coronavirus Pandemic Squeezes Funding
Jimmy Vielkind, The Wall Street Journal
Officials in Buffalo, the second-largest city in New York, were already preparing to borrow $18 million to keep them in the black after the novel coronavirus caused municipal revenues—from parking meters to sales tax—to shrivel. But when word came from Democratic Gov. Andrew Cuomo’s administration that a $98.4 million state grant due on June 25 would be about $20 million short, the city raised its borrowing plans by 50%.
China Propels Global Stock Rally to One-Month High: Markets Wrap
Adam Haigh and Lyn Thomasson, Bloomberg
Global stock markets are starting the week with a bang after China’s influential state media stoked bullish enthusiasm. The dollar index fell for a fifth day and Treasuries dipped.
Banking
Wall Street Knows It’s Too White. Fixing It Will Be Hard.
Liz Hoffman and Susan Pulliam, The Wall Street Journal
When Charles Scharf took over at Wells Fargo WFC 1.00% & Co. last year, tasked with moving the bank past a fake-accounts scandal, he brought in a cleanup crew of former colleagues from his long career on Wall Street. A new chief operating officer and heads of public affairs, credit cards and strategic planning had all worked with Mr. Scharf at JPMorgan Chase JPM 0.32% & Co. or Bank of New York Mellon Corp.
Wells Fargo Hits Brakes on Student Loans Amid School Disruption
Hannah Levitt, Bloomberg
Wells Fargo & Co. is pulling back from student lending as the U.S. surge in coronavirus cases threatens to further disrupt higher education and the broader U.S. economy. The firm, which has been reviewing businesses under new Chief Executive Officer Charlie Scharf, said student loans for the upcoming academic year will be granted only to people who submitted applications before July 1 or to customers who already have an outstanding balance on a prior student loan from the bank.
Banks Are Still Expected to Monitor Hemp Growers’ Transactions, FinCEN Says
Mengqi Sun, The Wall Street Journal
Financial institutions still need to conduct due diligence and monitor transactions for hemp-related businesses, the U.S. Treasury Department’s financial crime unit said, expanding on previous guidance about the industry. Banks and other institutions need to tailor anti-money-laundering programs to reflect the specific risks associated with customers that produce hemp, a variety of the cannabis plant that is often used for its fiber, as they would with any other customer, the Financial Crimes Enforcement Network, or FinCEN, said in guidance published this week.
Fed stress tests predict European banks’ high rate of loan losses
Laura Noonan et al., Financial Times
Forecast adds more pressure on region’s financial institutions to reduce US presence.
Banks Are Ditching London Offices and Not Just Because of Covid-19
Jack Sidders and Donal Griffin, Bloomberg
The giants of Wall Street and European banking are giving up their stronghold on London. In the coming months alone, Barclays Plc may ditch its investment bank’s headquarters in the capital; Credit Suisse Group AG is offloading nine floors of office space; and Morgan Stanley is reviewing its entire London footprint.
How Wall Street internships are going virtual
Laura Noonan, Financial Times
US banks are redesigning one of their oldest rites of passage for the Zoom era.
Financial Products and Investments
A Trump-Backed Senate Candidate’s Hedge Fund Disaster
Danny Hakim, The New York Times
President Trump’s favored Senate candidate in Alabama, Tommy Tuberville, is known for his career as a college football coach. But he also had a brief stint as co-owner of a hedge fund.
Court ruling ties SEC’s hands over investor fraud
Chris Flood, Financial Times
New restrictions on regulator’s power to force fraudsters to repay illegal gains will affect victims of insider trading.
Housing and GSEs
Trump Attacks a Suburban Housing Program. Critics See a Play for White Votes.
Glenn Thrush, The New York Times
President Trump has taken aim at an Obama-era program intended to eliminate racial housing disparities in the suburbs, a move proponents of the policy see as an attempt to shore up his sagging support among white suburban voters by stoking racial division. In a Twitter post late Tuesday, Mr. Trump announced that he was considering the elimination of a 2015 initiative known as Affirmatively Furthering Fair Housing, which requires localities to identify and address patterns of racial segregation outlawed under the Fair Housing Act of 1968 by creating detailed corrective plans.
‘Eviction crisis’: Housing advocates fear waves of homelessness as moratoriums expire
Dartunorro Clark, NBC News
The crippling economic effects of the coronavirus pandemic could force a wave of evictions across the United States as a federal ban and a patchwork of state moratoriums quickly expire, fair housing advocates and legal experts warned. The Coronavirus Aid, Relief and Economic Security, or CARES, Act that Congress passed in March provided a temporary moratorium on evictions, but it was for a fraction of the nation’s tenants and some homeowners — applying to those in federally subsidized housing or in housing with federally-backed mortgages.
Taxes
IRS, taxpayers face obstacles ahead of July 15 filing deadline
Naomi Jagoda, The Hill
The IRS and taxpayers face a number of obstacles before crossing the finish line in this year’s longer-than-usual tax filing season. The coronavirus prompted the IRS in March to extend the deadline for individuals to file their 2019 returns, and pay their 2019 taxes, from April 15 to July 15.
Financial Technology
Our Cash-Free Future Is Getting Closer
Liz Alderman, The New York Times
On a typical Sunday, patrons at Julien Cornu’s cheese shop used to load up on Camembert and chèvre for the week, with about half the customers digging into their pockets for euro notes and coins. But in the era of the coronavirus, cash is no longer à la mode at La Fromagerie, as social distancing requirements and concerns over hygiene prompt nearly everyone who walks through his door to pay with plastic.
Deutsche Bank May Offer Wirecard a Lifeline
Christopher F. Schuetze, The New York Times
Two weeks after the spectacular crash of the German fintech giant Wirecard, Deutsche Bank said Thursday that it was open to provide emergency financing to help keep the company functioning, even as its former chief executive is out on bail and his top aide is hiding from the authorities. “We are, in principle, prepared to provide this support,” said Sebastian Krämer-Bach, a Deutsche Bank spokesman, “if such assistance should become necessary.”
Opinions, Editorials and Perspectives
How to Give Workers a Raise Without Employers Paying for It
Bharat Rammamurti and Lindsay Owens, The New York Times
For decades, American workers have seen their power erode and their wages stagnate. The current crises have only made things worse. But Congress has a chance to begin the reversal of these trends and to accelerate the economic recovery by enacting a fair wage guarantee, which makes sense economically and could be a win for both major parties.
A True Economic Stimulus Plan
Casey B. Bulligan and Stephen Moore, The Wall Street Journal
The White House will soon begin negotiating with congressional Democrats on a “Phase 4” economic revival plan. President Trump has repeatedly expressed his support for suspending the payroll tax through the end of the year as a way to stimulate jobs and help low- and middle-income families gain after-tax income.
Job Numbers Are a Good Sign But Not a Victory Flag
Mohamed A. El-Erian, Bloomberg
Although the better-than-expected U.S. employment numbers that came out on Thursday give reason for optimism, it is far too early to declare victory over the threat of further economic damage. Yes, the jobs report and other data released last week illustrated the kind of impressive across-the-board recovery that the economy is capable of.
How to Make Small Business Relief Programs More Effective
Nick Leiber, Bloomberg Businessweek
Back in March, when the pandemic started to transform life in the U.S., bookings plummeted for Beechnut Kennels, a nearly 50-year-old business spread across nine acres outside of Annapolis, Maryland. Work from home also meant that suddenly, people didn’t really need pet daycare or boarding services, says Beechnut owner Melissa Medick. The business—which Medick was in the process of buying before Covid-19 started to spread—has never had to spend much on marketing. It’s small enough, she said, that the dogs recognize every staff member.
In the Covid-19 Economy, You Can Have a Kid or a Job. You Can’t Have Both.
Deb Perelman, The New York Times
Last week, I received an email from my children’s principal, sharing some of the first details about plans to reopen New York City schools this fall. The message explained that the city’s Department of Education, following federal guidelines, will require each student to have 65 square feet of classroom space.
Research Reports
The Determinants of Fiscal and Monetary Policies During the Covid-19 Crisis
Efraim Benmelech and Nitzan Tzur-Ilan, The National Bureau of Economic Research
As countries around the world grapple with Covid-19, their economies are grinding to a halt. For the first time since the Great Depression both advanced economies and developing economies are in recession. Governments and central banks have responded to the pandemic and the economic crisis using both fiscal and monetary tools on a scale that the world has not witnessed before.
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