General
A record 3.3 million Americans filed for unemployment benefits as the coronavirus slams economy
Heather Long and Alyssa Fowers, The Washington Post
A record 3.3 million Americans applied for unemployment benefits last week, the Labor Department said Thursday, as restaurants, hotels, barber shops, gyms and more shut down in a nationwide effort to slow the spread of the deadly coronavirus. Last week saw the biggest jump in new jobless claims in history, surpassing the record of 695,000 set in 1982.
How the Fed’s Magic Money Machine Will Turn $454 Billion Into $4 Trillion
Jeanna Smialek, The New York Times
Treasury Secretary Steven Mnuchin has a favorite talking point: With the Federal Reserve’s help, the government will turn a $500 billion spending package working its way through Congress into a $4 trillion booster shot for the United States economy. How, you might ask, does that figure?
Federal Reserve’s Balance Sheet Tops $5 Trillion for First Time
Matthew Boesler, Bloomberg
The Federal Reserve’s balance sheet topped $5 trillion for the first time amid the U.S. central bank’s aggressive efforts to cushion debt markets against the coronavirus outbreak through large-scale bond-buying programs. Total assets held by the Fed rose by $586 billion to $5.25 trillion in the week through March 25, according to data published Thursday on its website.
G20 leaders to inject $5 trillion into global economy in fight against coronavirus
Stephen Kalin and David Lawder, Reuters
Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic.” Showing more unity than at any time since the G20 was created during the 2008-2009 financial crisis, the leaders said they committed during a videoconference summit to implement and fund all necessary health measures needed to stop the virus’ spread.
It was the worst week for the economy in decades. The pain is just beginning.
Heather Long, The Washington Post
The record 3.3 million jobless claims reported Thursday mark the beginning of an economic crisis facing American workers and businesses — a slump, experts say, that will only end when the coronavirus pandemic is contained. The economy has entered a deep recession that has echoes of the Great Depression in the way it has devastated so many businesses and consumers, triggering mass layoffs and threatening to set off a chain reaction of bankruptcies and financial losses for companies large and small.
The National Debt Is About to Soar. Without a Rescue, It Would Probably Soar Even More.
Neil Irwin, The New York Times
The United States government is poised to take on a huge amount of debt to contain the effects of the coronavirus pandemic, with budget deficits on a scale not seen since World War II looking likely. But the only thing worse for the public debt outlook would be if it didn’t. That’s why a broad range of economic analysts — including even many fiscal conservatives who generally view high public debt as a long-term threat — support aggressive action.
Small Businesses Will Get Help Paying Workers, if They Can Wait
Emily Flitter, The New York Times
Every day counts for Glynis Donnelly, who owns a jewelry store in Tampa, Fla. Ever since the coronavirus outbreak decimated foot traffic to her store, she has been using her savings to pay her eight part-time employees. “It may not be the most business-smart thing to do,” Ms. Donnelly said, “but I know my employees very well, and I know that they need me as much as I need them.”
Wall Street flees coronavirus and glimpses its mortality
James Fontanella-Khan et al., Financial Times
Bankers hunker down in vacation homes and advisers counsel chief executives with children and dogs beside.
Coronavirus Pandemic’s Global Economic Toll Mounts
Cho Koh Ping, The Wall Street Journal
Singapore said it is bracing for what could be its deepest-ever recession, while European data showed tumbling business and consumer confidence, as evidence mounts that the financial impact of the coronavirus pandemic is getting worse. Singapore, a Southeast Asian country of 5.7 million, is among the first to report official growth statistics.
U.S. Futures Drop With Europe Stocks; Bonds Rise: Markets Wrap
Yakob Peterseil, Bloomberg
U.S. equity futures and European stocks slipped on Friday as investors caught their breath following the first three-day rally in global shares since mid-February. Treasuries climbed and the dollar swung between gains and losses.
Banking
Banks Poised for Big Win on Loan Losses in Senate’s Virus Bill
Robert Schmidt and Jesse Hamilton, Bloomberg
The banking industry is close to gaining relief from a much-hated accounting rule imposed after the 2008 financial crisis, thanks to a provision tucked deep in the Senate’s massive coronavirus aid bill. The legislation, which still must be voted on by the House, would likely delay until the end of the year a requirement that lenders partially write down losses when they make a loan –- a directive that banks say paints an unfair picture of their books and could stymie lending, especially during a time of economic tumult.
Citigroup chief says navigating virus fallout is ‘fine line’
Laura Noonan, Financial Times
Mike Corbat says US banks need to guard against an increase in consumer indebtedness.
Wells Fargo Joins U.S., European Lenders in Suspending Job Cuts
Hannah Levitt, Bloomberg
Wells Fargo & Co. is suspending new job cuts, joining banks on both sides of the Atlantic giving workers a reprieve as they grapple with the impact of the coronavirus. “We have paused initiating new displacements,” spokeswoman Beth Richek said Thursday in a statement.
Goldman Forces Women Into Arbitration in Gender-Bias Case
Chris Dolmetsch and Jef Feeley, Bloomberg
Goldman Sachs Group Inc. can force more than 1,000 women suing the bank over gender-bias claims into arbitration, a judge ruled, dealing a setback to one of the era’s biggest such lawsuits targeting a financial institution. The 14-year battle over allegations that Goldman Sachs let managers make biased pay decisions that denied women opportunities they deserved looms large on Wall Street, where the biggest U.S. banks are all led by men.
Financial Products and Investments
How the Fed helped bond ETFs meet their biggest challenge
Joe Rennison, Financial Times
Central bank’s decision to buy the debt funds released pressure at a critical time.
Fragile markets prompt providers to leave benchmarks unchanged
Phillip Stafford, Financial Times
S&P Dow Jones Indices, FTSE Russell and ICE Data Services all delay index rebalancing.
Housing and GSEs
Congress Addresses Housing Crunch Amid Coronavirus Pandemic
Lola Fadulu, The New York Times
Congress’s $2.2 trillion stabilization package headed for likely final passage on Friday will allocate more than $12 billion in funding for federal housing and rental assistance, a belated recognition that Americans cannot shelter in place from the coronavirus if they have no shelter. The pandemic is hitting hardest in some of the most expensive housing markets in the country — New York, Seattle, San Francisco and Los Angeles — where governments were struggling with homelessness and affordable shelter long before the virus reached American shores.
Mortgage rates head back down as Federal Reserve becomes major buyer of mortgage-backed securities
Kathy Orton, The Washington Post
Mortgage rates have bounced around a lot lately, making it difficult to know where they are headed. Last week, they spiked to their highest levels since January.
Taxes
JCT: Coronavirus aid bill to cut taxes by $591B over 10 years
Doug Sword, Roll Call
The coronavirus financial rescue package the House will take up Friday would save U.S. households and businesses nearly $1 trillion in taxes this year, though companies would have to pay a chunk of that back starting in 2021. The Joint Committee on Taxation estimates that overall during the next decade, the tax provisions of the massive relief bill will cost $591 billion.
Bonanza for Rich Real Estate Investors, Tucked Into Stimulus Package
Jesse Drucker, The New York Times
The federal government’s planned $2 trillion economic rescue package includes financial aid for individuals and industries that are struggling to survive the coronavirus pandemic. It also includes a potential bonanza for America’s richest real estate investors.
Financial Technology
Fintech lenders find an opening in $2T coronavirus relief package
Anna Hrushka, Banking Dive
Fintech lenders such as Kabbage and Funding Circle have been lobbying for Congress to pass legislation that would allow nonbanks to participate in the SBA’s emergency loan program in an effort to help get cash to small businesses quicker. “The language does include opportunity for fintechs to support, but it’s now up to the Treasury to finalize the definition.
Opinions, Editorials and Perspectives
Market Turmoil Should Push SEC to Close Loophole Risking Retirement Investments
Richard Fiesta, Morning Consult
The current volatility in the financial markets has many Americans doing a double-take at the sight of their retirement investment accounts. While the up-and-downs of IRAs, 401Ks, and pension funds are to be expected at this time, everyday Americans might not be aware of a lesser-known threat to their nest eggs.
A Q&A With Minneapolis Fed President Neel Kashkari: ‘It’s Much Better to Intervene Quickly’
Greg Ip, The Wall Street Journal
Neel Kashkari has a unique, close-up perspective of both the last economic crisis and this one. As assistant secretary of the Treasury Department from 2008 to 2009, he administered the $700 billion Troubled Asset Relief Program, which was used to recapitalize banks, support credit markets and assist home-mortgage modifications.
Robert Reich Says ‘There Is No Reason to Bail Out Big Companies’
Robert B. Reich, Bloomberg Businessweek
We’re trying to stimulate the economy in the traditional way, but this is not your typical recession, not like after 2008. This economic crisis is entirely because we have an unprecedented public-health crisis.
Why Is America Choosing Mass Unemployment?
The Editorial Board, The New York Times
Thursday’s news that more than three million Americans filed for unemployment benefits last week, a total far higher than in any previous week in the modern history of the United States, has been greeted with surprising equanimity by the nation’s political leaders. They appear to regard mass unemployment as an unfortunate but unavoidable symptom of the coronavirus.
Research Reports
Fetal Shock or Selection? The 1918 Influenza Pandemic and Human Capital Development
Brian Beach et al., The National Bureau of Economic Research
Almond (2006) argues that in utero exposure to the 1918 influenza pandemic lowered socioeconomic status in adulthood, whereas Brown & Thomas (2018) find that the effect disappears after controlling for parental characteristics of the 1919 birth cohort. We link microdata from the 1920 and 1930 censuses to WWII enlistment records and city-level in uenza data.
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