Top Stories

  • Rep. Chip Roy (R-Texas), who cosponsored a bill with Rep. Dean Phillips (D-Minn.) to revise the terms of Paycheck Protection Program loans, said negotiators have agreed to allow recipients to use 60 percent of the aid on payroll, rather than 75 percent, for the loan to be forgiven. The bill, which is set for a House floor vote today, would also give borrowers up to 24 weeks to use the loans, compared to the current eight-week timeline. (Roll Call
  • Less than 4 percent of the $2.6 trillion available in the Federal Reserve’s emergency lending facilities has been tapped so far, according to the latest data available from the central bank. The Fed has made five of the 11 emergency lending facilities fully or partially available, with usage at $95 billion. (Financial Times
  • Economists expect the number of unemployment insurance applications to slow for the eighth straight week but stay about 10 times higher than before the coronavirus pushed the U.S. economy into a lockdown in March. (The Wall Street Journal

Chart Review

Events Calendar (All Times Local)

05/28/2020
Revised 1st Quarter GDP
CFTC Open Commission Meeting 10:00 am
05/29/2020
The Washington Post event: “The Path Forward: The Global Economy” 9:00 am
05/30/2020
The Hill event: “Advancing America’s Economy” 7:10 pm
06/01/2020
SEC: Fixed Income Market Structure Advisory Committee 9:30 am
06/02/2020
Bloomberg Invest New York
The Heritage Foundation webinar: “The Good Fight: Capitalism vs. Socialism” 2:00 pm
Senate Homeland Security Committee hearing: “Nominations of The Honorable Russell Vought to be Director, Office of Management and Budget, and Craig E. Leen to be Inspector General, Office of Personnel Management” 2:30 pm
View full calendar

Morning Consult Expands Daily Brand and Economic Tracking to Italy, Spain and South Korea

Morning Consult is expanding its real-time data tracking on consumer confidence and brand reputation to Italy, Spain and South Korea, allowing access to millions of survey interviews from 15 countries.

Get in touch today to learn more about our real-time global data that Fortune 500 companies rely on.

General

Trump vs. China Risks Are Mounting for Markets and the Economy
Bloomberg 

It’s only a matter of time before the Trump administration hits China over a range of grievances. The question for CEOs, investors and economic policy makers is how bad things will get.

As Coronavirus Lockdown Rules Ease, Some Want to Keep Working From Home
Harriet Torry, The Wall Street Journal

As states begin to lift the stay-at-home restrictions put in place to combat the coronavirus pandemic, some workers now say they are just fine working from home and would like to do so permanently. In response, employers are formulating plans to allow many of their staffers to keep working remotely when the crisis is over. 

NYC Revenue Picture Worsens With Shortfall Rising to $9 Billion
Martin Z Braun and Henry Goldman, Bloomberg

New York City’s fiscal crisis has worsened, with Mayor Bill de Blasio projecting a $9 billion loss in tax revenue through mid 2021 because of the coronavirus lockdown. The shortfall is $1.6 billion more than projected last month and may force de Blasio to order layoffs, furloughs or further cuts to city services if the city doesn’t receive additional federal aid, the mayor said.

Help Wanted: Risk-Takers Willing to Work Hard Jobs for Low Pay
Alexandre Tanzi, Bloomberg

As coronavirus-induced lockdowns forced millions of workers out of jobs, some U.S. industries — from shipping to online learning — are hiring tens of thousands to meet demand related to Covid-19. Workers who can perform tasks such as stocking grocery store shelves or delivering takeout food are highly sought after. 

U.S. Futures Fluctuate as Stocks Rise With Dollar: Markets Wrap
Yakob Peterseil, Bloomberg

U.S. futures fluctuated while stocks climbed on Thursday as investors weighed increased friction between America and China against fresh fiscal stimulus from the European Union. Treasuries edged higher with the dollar.

Banking

Wall Street Has Billions to Lose in China From Mounting Tension
Bloomberg

Wall Street giants such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. have tens of billions of dollars at stake in China as political tension risks derailing the nation’s opening of its $45 trillion financial market. Five big U.S. banks had a combined $70.8 billion of exposure to China in 2019, with JPMorgan alone plowing $19.2 billion into lending, trading and investing. 

Goldman Sachs president says bank on track to meet growth goals
Elizabeth Dilts Marshall, CNBC

Goldman Sachs Group Inc (GS.N) President and Chief Operating Officer John Waldron said Wednesday that the bank remains on track to achieve its medium and long term growth targets despite the economic shocks caused by the novel coronavirus. However, the economic shutdown has caused some negative impacts, and the bank will be slowing down hiring plans for its private wealth management division and delaying the launch of a digital wealth management product to next year, Waldron said.

These big banks may be at risk of dividend cuts after the Federal Reserve’s stress tests
Phillip van Doorn, MarketWatch

Sell-side analysts have expressed confidence during the coronavirus crisis that most banks will be able to maintain their dividends through the expected economic recession. But now we’re about to see the results of the Federal Reserve’s annual stress-test process.

JPMorgan’s investment banking head: quarterly revenues tracking 50% up from 2019
Elizabeth Dilts Marshall, Reuters

JPMorgan Chase & Co’s (JPM.N) head of its corporate and investment banking division said second-quarter revenues for its markets unit are on track to be up more than 50% higher than the same period last year, thanks to extremely strong fixed income and equities trading revenues. Speaking at a virtual conference hosted by global asset manager Alliance Bernstein, Daniel Pinto said he also expects investment banking fees in the second quarter to be up by a percentage in the mid- to high teens, while mergers and acquisitions will be “probably 15-20% down.”

Bank of America CEO Sees Trading Revenue Rising Close to 10% This Quarter
Lananh Nguyen, Bloomberg

Bank of America Corp. Chief Executive Officer Brian Moynihan said he expects the company’s traders to do very well in the current quarter, while not up to the pace set in the first three months of the year.

Financial Products and Investments

Designing insurance for the next pandemic
Oliver Raph et al., Financial Times

The industry is already planning for the next crisis — and the threat of a second wave means it might be only months away.

SEC chair warns of risks tied to ESG ratings
Chris Flood, Financial Times

Jay Clayton says merging separate metrics can lead to imprecise analysis.

Housing and GSEs

Low mortgage rates increasingly inaccessible for poor credit score borrowers
Mitch Strohm, Bankrate

Mortgage rates may be near multi-decade lows, but those favorable rates are becoming less accessible to borrowers with damaged credit. In fact, for many of those individuals loans are starting to become unavailable altogether. In light of the pandemic that has weakened the economy and caused unemployment to skyrocket, lenders are tightening lending requirements and only taking on borrowers with good to excellent credit. 

Taxes

Trump administration gives renewables more time to take advantage of tax credits
Rachel Frazin, The Hill

The Trump administration is making it easier for renewable energy projects to take advantage of certain tax credits amid the coronavirus pandemic. The Treasury Department and Internal Revenue Service issued a notice Wednesday that said it would give some companies that started construction in 2016 or 2017 an extra year before they have to put their projects in service.

IRS Rule Change Could Aid Foreign Election Meddling, Critics Say
Kenneth P. Doyle, Bloomberg Tax

Transparency advocates are looking for a legislative fix after the IRS approved a rule they say opens the door to allow politically active nonprofits to take foreign money to influence U.S. elections, without being detected. “At a time when over $10 billion total is expected to be spent during this election season, the requirement that organizations (like the National Rifle Association) report their donors to the IRS was key to ensuring that the foreign-money ban on elections was enforced,” Campaign Legal Center President Trevor Potter said in a statement.

Financial Technology

Bitcoiners Go Wild After Goldman Revives Tulip Mania Comparison
Vildana Hajric, Bloomberg

Goldman Sachs Group Inc. just forged a lot of new enemies — in the crypto world. Buzz that Goldman would release a report discussing the state of the economy as well as gold and cryptocurrencies set enthusiasts ablaze, with many hoping the bank would finally put its weight behind digital tokens. 

Banks determined to lock in coronavirus technology changes
Laura Noonan, Financial Times

Pandemic is forcing progress in a security-conscious field — but can it be maintained?

Coronavirus crisis mobile banking surge is a shift that’s likely to stick
Ellen Sheng, CNBC

Digital banking isn’t new, but with the coronavirus pandemic, young and old Americans suddenly flocked to online and mobile banking en masse. The sudden uptick in online and mobile traffic even created outages. Among those affected: online platforms for U.S. Bank, PNC, Fifth Third Bank, Bank of America, T.D. Bank and BB&T.

Opinions, Editorials and Perspectives

Small Business Loans Alone Won’t Help U.S. Workers. Congress Must Use the Payroll Tax
Josh Reeves et al., Morning Consult

Over the last month, the federal government has made nearly $700 billion available to small businesses through the Paycheck Protection Program. This program was intended to keep small businesses afloat and their employees on payroll through June.

Trump’s Economic Advisers Are Wrong
Steven Rattner, The New York Times

Like dutiful soldiers, President Trump’s top economic advisers have been ardently echoing their boss’s optimism about the likelihood of a quick economic snapback, while downplaying the need for another rescue package. Regrettably, that’s dead wrong on both counts, as even Mr. Trump’s pick to head the Federal Reserve, Jerome Powell, has countered repeatedly.

To rebuild economy, strengthen community banking
Sen. David Perdue (R-Ga.), The Hill

Banks, especially local community banks, have been true heroes in the COVID-19 crisis. As small businesses faced insolvency, community banks processed millions of Paycheck Protection Program loans that are saving millions of American jobs.

Research Reports

Job Training Mismatch and the COVID-19 Recovery: A Cautionary Note from the Great Recession
Benjamin G. Gyman and Karne X. Ni, Liberty Street Economics

Displaced workers have been shown to endure persistent losses years beyond their initial job separation events. These losses are especially amplified during recessions. 

Heterogeneous Globalization: Offshoring and Reorganization
Andrew B. Bernard et al., The National Bureau of Economic Research

This paper exploits a unique offshoring survey to show that firms continue domestic production of the same goods they offshore to low-wage countries. This shift towards “produced-good imports” coincides with a reallocation of labor from physical production to innovation and technology occupations, and an increase in domestically-produced varieties’ unit values.

Morning Consult