Morning Consult Finance: Fed Officials Aren’t Likely to Force Banks to Halt Dividends, Sources Say


Top Stories

  • The Federal Reserve isn’t likely to block U.S. banks from paying dividends to shareholders, people familiar with the matter said, despite comments from former regulators, including former Fed Chairwoman Janet Yellen, that the payouts should be suspended so that the banks can preserve capital. While the European Central Bank and the Bank of England are pressing banks to stop using capital to pay dividends, Fed officials, who see differences in how European and American banks distribute capital, will wait to conduct an analysis of the U.S. banking system’s health after U.S. banks submit their “stress tests” today., the people said. (The Wall Street Journal)
  • Wells Fargo & Co. said it has the ability to lend $10 billion to small businesses in the federal small-business lending loan program, but it can’t meet its clients’ demand for even more loans because of the asset cap imposed by the Fed. As a result, the lender, which has privately lobbied for the Fed to temporarily ease its restriction, said that it will prioritize lending to nonprofits and businesses with fewer than 50 employees. (Bloomberg
  • Senate Democratic leader Chuck Schumer (D-N.Y.) and House Speaker Nancy Pelosi (D-Calif.) in a letter pressed Treasury Secretary Steven Mnuchin to speed up aid to airlines and urged him to avoid imposing strict terms in exchange for government help. The administration should focus on protecting workers, the Democratic leaders said in the letter, so aid to airlines shouldn’t come at such a high price that an employer would “choose bankruptcy instead of providing payroll grants to its workers.” (The New York Times

Chart Review

Events Calendar (All Times Local)

04/06/2020
American Bankruptcy Institute webinar: “Tools to Navigate the Financial Crisis Related to COVID-19” 12:00 pm
Hudston Institute: “A Conversation with Under Secretary of State Keith Krach on America’s Economic Security” 12:00 pm
04/07/2020
Brookings webinar: “Former Fed Chair Ben Bernanke weighs in on the economic response to COVID-19” 1:00 pm
04/08/2020
American Bankruptcy Institute webinar: “Preference Update: SBRA’s Due Diligence Requirement” 1:00 pm
SEC Open Meeting 3:00 pm
View full calendar

Morning Consult Debuts Daily Consumer Confidence Tracking Data

As the coronavirus outbreak continues to upend global markets and roil businesses, Morning Consult is committed to delivering daily economic data on how consumer confidence is shifting in these economically uncertain times.

Recently, we debuted our newest product, Morning Consult Economic Intelligence: Global Consumer Confidence, the most robust data set on consumer confidence available today.

Click here to learn more or speak to one of our specialists.

General

Trump Nominates White House Lawyer to Oversee Coronavirus Business Loans
Alex Leary, The Wall Street Journal

President Trump has nominated a White House lawyer to serve as an oversight chief for business loans within the Treasury Department as part of the $2.2 trillion coronavirus economic rescue package passed by Congress last week. Mr. Trump on Friday night nominated Brian D. Miller as special inspector general for pandemic recovery.

Mnuchin’s Unfilled Jobs Leave Treasury Stretched in Virus Crisis
Saleha Mohsin and Robert Schmidt, Bloomberg

Stock prices were tanking, the Federal Reserve was pouring unprecedented relief into the markets and Wall Street firms were in panic mode. Steven Mnuchin was due to gather the central bank chairman and other top financial regulators to assess the damage from the coronavirus outbreak. But the Treasury secretary was stuck on Capitol Hill.

Americans hit by economic shocks as confusion, stumbles undermine Trump’s stimulus effort
Jeff Stein, The Washington Post

The Trump administration has stumbled in its initial push to implement the $2 trillion coronavirus aid package, with confusion and fear mounting among small businesses, workers and the newly unemployed since the bill was signed into law late last month. Small-business owners have reported delays in getting approved for loans without which they will close their doors, while others say they have been denied altogether by their lenders and do not understand why.

Coronavirus Pandemic Deepens Labor Divide Between Online, Offline Workers
Harriet Torry, The Wall Street Journal

The severe job losses reported this week provide a split-screen snapshot of a labor force increasingly divided between the can and can-nots—based in part on the ability to work online. The employment report released Friday showed employers slashed 701,000 U.S. jobs last month. About two-thirds of the drop occurred in leisure and hospitality, mainly in food services and drinking places—which includes restaurants and bars.

How Economists, Too, Are Taking On the Coronavirus Crisis
Eduardo Porter, The New York Times

Ernesto Stein, an economist at the Inter-American Development Bank, normally spends his time thinking about industrial policy in Latin America. But recently, a map in The New York Times caught his eye. 

Millennials, Burdened With Debt, Are Now Facing Their First Economic Crisis
Nathaniel Popper, The New York Times

The last time a serious economic downturn hit in 2008, Evan Schade was in high school and the crisis seemed like a news event that happened to other people. This time, as the coronavirus has brought the economy to its knees, it has become a personal affair.

State Shutdowns Have Taken at Least a Quarter of U.S. Economy Offline
Josh Mitchell, The Wall Street Journal

At least one-quarter of the U.S. economy has suddenly gone idle amid the coronavirus pandemic, an analysis conducted for The Wall Street Journal shows, an unprecedented shutdown of commerce that economists say has never occurred on such a wide scale. The study, by the economic-analysis firm Moody’s Analytics, offers one of the most comprehensive looks yet at how much of the world’s largest economy has shut down in the past three weeks.

Administration Turns to Private Firms to Help Process Small Business Aid
Kenneth P. Vogel and David McCabe, The New York Times

The Small Business Administration doled out tens of millions of dollars in contracts in recent days — including $50 million for a contract linked to the firm of a friend and donor to President Trump — to help it deal with the deluge of loan applications from businesses ravaged by the coronavirus-triggered economic collapse. The flurry of contracts came as the S.B.A. was straining to quickly disseminate hundreds of billions of dollars through banks to millions of small businesses. 

Dems find a rallying cry: Trump tanked the economy
David Siders and Elena Schneider, Politico 

For most of the presidential campaign, the economy looked like the one thing that could overcome Donald Trump’s stubbornly low approval ratings and carry him to a second term. Even many Democrats acknowledged they had no cohesive economic message of their own.

Stocks Jump With U.S. Futures on Easing Virus Toll: Markets Wrap
Sam Potter, Bloomberg

Stocks jumped in Europe and Asia alongside U.S. equity futures after the reported death tolls in some of the world’s coronavirus hot spots showed signs of easing over the weekend. The dollar edged higher and Treasuries fell.

Banking

Jamie Dimon details JPMorgan’s strength in annual letter, says US can emerge from crisis stronger
Hugh Son, CNBC

Jamie Dimon, CEO of JPMorgan Chase, released his widely-read annual letter on Monday. “We have the resources to emerge from this crisis as a stronger country,” Dimon said in the letter. “America is still the most prosperous nation the world has ever seen.”

Ivanka Trump Was Conduit for Small Banks Over SBA Program
Justin Sink and Jennifer Jacobs, Bloomberg

Bank executives concerned about the Trump administration’s rollout of a $349 billion emergency small business lending program personally appealed to Ivanka Trump this week as they sought additional guidance and higher interest rates. The direct calls to the president’s daughter and adviser — from officials at institutions that included smaller, regional banks as well as Bank of America Corp. — underscored the efforts within the financial sector and among President Donald Trump’s aides to properly implement the Paycheck Protection Program, a centerpiece of the $2.2 trillion stimulus program signed into law last week.

Basel regulators loosen bank capital rules to keep credit flowing
Matthew Vincent, Financial Times

Customers seeking temporary relief need not be treated as higher risk.

Anatomy of an Outbreak: How Coronavirus Swept Through JPMorgan’s Trading Floor
Rob Copeland and David Benoit, The Wall Street Journal

March 9 was supposed to be the start of a new routine for JPMorgan JPM -2.96% Chase & Co. employees. With coronavirus spreading, the bank had told the staff in its stock-trading operation to head to three separate sites around New York City.

JPMorgan Among Banks Delaying Internships or Moving Them Online
Olivia Rockeman and Michelle F Davis, Bloomberg

Firms including JPMorgan Chase & Co., HSBC Holdings Plc and Nasdaq Inc. are making changes to their summer internship programs, including delaying their start, making them shorter or moving them online, as the coronavirus pandemic shifts work arrangements across the finance industry. JPMorgan pushed back the start date of its internship program to July 6, and is exploring a virtual format if necessary for safety reasons. 

Wells Fargo Curtails Jumbo Loans Amid Market Turmoil
Ben Eisen, The Wall Street Journal

Wells Fargo WFC -3.64% & Co. substantially curtailed its program for making large loans this week, one of the most pronounced signs yet of how the recent market turmoil is cutting off access to some types of mortgages. America’s largest mortgage lender will only refinance jumbo mortgages for customers who hold at least $250,000 in liquid assets with the bank, according to a bank spokesman. 

Financial Products and Investments

Private Equity Firm Pushes for Broader Access to Fed Lending Program
Kate Kelly et al., The New York Times

As government officials fight to prevent an economic depression by setting up emergency lending programs to keep credit flowing to taxpayers and small businesses, a prominent private equity firm is pushing to ensure that a broader spectrum of investments are included. Apollo Global Management, the large private-equity and financing firm, has been pressing government officials in recent weeks to expand the types of assets eligible to be offered as collateral in a Federal Reserve lending program, according to six people who have been briefed on the firm’s initiative and a draft of an Apollo presentation that was reviewed by The New York Times.

Investors prepare legal action over disputed margin calls
Stefan Wagstyl, Financial Times

Lawyers predict eventual claims to recover losses could match or exceed those generated by 2008 financial crisis.

Fed taps Pimco and State Street for funding programme
Eric Platt, Financial Times

Appointment of managers for commercial paper facility comes after BlackRock was hired to run bond purchases.

If Companies Aren’t Buying Their Own Stock, Who Is?
Paul Vigna, The Wall Street Journal

Hilton Worldwide Holdings Inc. added $2 billion to its stock buyback program on March 3, a vote of confidence among executives as the stock market began to slide. Just over three weeks later, the hotel company would strip the business down to its core, furloughing employees, cutting expenses, mothballing capital expenditures and suspending its dividend and buyback plan.

Housing and GSEs

Mortgage Crisis Prompts U.S. to Weigh Harder Line With Borrowers
Elizabeth Dexheimer, Bloomberg

With a wave of U.S. mortgage borrowers expected to seek reprieves from monthly payments, regulators are taking steps to make it easier for firms that service the loans and bracing for the reality that they may have to take a harder line in specifying who qualifies for relief. The likely surge in coronavirus-fueled forbearance requests has been exacerbated by the $2.2 trillion stimulus measure that Congress passed last week. 

Taxes

TurboTax offers free tool to help Americans who don’t file taxes get stimulus payments
Lorie Konish, CNBC

Online tax preparation service TurboTax has launched a free stimulus registration website so that Americans who do not typically file tax returns can get their relief checks faster. Millions of Americans are slated to get one-time government checks of up to $1,200 or $2,400, based on whether they are single or married, and are under certain income thresholds, $75,000 or $150,000.

Financial Technology

High-frequency traders are winning big thanks to coronavirus disruption
John Detrixhe, Quartz

The coronavirus pandemic is disrupting the global economy and taking a major toll on financial companies, from insurers to banks and asset managers. High-frequency trading companies are among the very few to benefit from the pandemonium in financial markets.

Opinions, Editorials and Perspectives

‘Buy American’ Executive Order Will Worsen Shortages and Raise Costs for Americans
Dee Stewart, Morning Consult

As our country continues to grapple with COVID-19, patient access to affordable health care remains a significant concern. While the Trump administration’s rapid response to this pandemic is appreciated, there is still much to be done to secure needed medications and medical products for Americans. 

A Tax Break for Coronavirus-Hit States
Tom Suozzi, The Wall Street Journal

The Tax Cuts and Jobs Act of 2017 placed a $10,000 cap on the amount of state and local taxes that taxpayers could deduct from their federal taxable income. The SALT cap effectively raised the taxes of millions of Americans in states like New York, New Jersey, California and Illinois. The most recent census data for 2019 show population declines in these states.

Research Reports

The Aggregate Consequences of Default Risk: Evidence from Firm-level Data
Timothy J. Besley et al., The National Bureau of Economic Research

This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of credit contracts with moral hazard, we show that a firm’s probability of default is a sufficient statistic for capital allocation.

Do NOT follow this link or you will be banned from the site!