• The American Apparel and Footwear Association, which represents more than 1,000 brand-name companies, will send a letter to Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell early this week warning that without Treasury or Fed guarantee of routine financing, the retail industry could see “a commercial credit crisis that threatens to seize up our economy and stall the safe restart in its infancy.” Retailers, which make up a $3.8 trillion sector, will say in the letter that their suppliers will need “credit insurance backstops” to offset the coronavirus pandemic, which is reducing their cash flow just as credit insurers are pulling back. (The Washington Post) 

• Top executives of some of the largest banks in the country wrote to workers condemning racism amid the protests across the country after George Floyd’s death, with JPMorgan Chase & Co. CEO Jamie Dimon and the bank’s diversity chief, Brian Lamb, writing they are committed to “fighting against racism and discrimination wherever and however it exists.” In a blog post titled “I can’t breathe” on Citigroup Inc.’s website, Chief Financial Officer Mark Mason, one of the highest-ranking black Wall Street executives, said that black Americans are “too often denied basic privileges that others take for granted.” (Bloomberg) 

• Funds that specialize in non-investment grade debt made up about one-sixth of the Fed’s first $1.3 billion purchases of exchange-traded funds that invest in corporate bonds, according to disclosures of 158 purchases made between May 12-18. On Friday, Powell said the central bank’s move to purchase the debt of non-investment grade companies has allowed those companies to finance themselves, keep cash on their balance sheets and avoid layoffs. (The Wall Street Journal) 

Policy Makers Aim to Ensure Underserved Communities Have Access to PPP Loans
Amara Omeokwe, The Wall Street Journal

Policy makers are trying to ensure that communities underserved by traditional banks are getting access to a small-business coronavirus loan-relief program, but it has turned out to be more of an art than a science. When the Small Business Administration released the application form for the forgivable loan program, there was no instruction for lenders to collect optional demographic information. 

Grateful for Aid, but Worried About What Comes Next
Stacy Cowley, The New York Times

The Paycheck Protection Program, the federal government’s ambitious effort to keep workers at small businesses off the unemployment rolls through the worst of the pandemic, has provided a financial safety net to more than four million companies. For many, the money was a lifeline.

Trump Plans Expanded Fall G-7 Meeting With Russia, Others
Justin Sink, Bloomberg

President Donald Trump said he’s planning an expanded Group of Seven leaders meeting in the autumn, potentially even after the November election, postponing efforts to hold the event in June at Camp David. Trump, speaking to reporters aboard Air Force One, said he’d like to extend an invitation to leaders from Russia, Australia, India and South Korea as well the current participants, calling the setup “outdated” at the moment.

Retailers and Restaurants Hit in Protests, Adding to Coronavirus Damage
Sarah Nassauer and Heather Haddon, The Wall Street Journal

Many retailers and restaurants, already crippled by the coronavirus pandemic, are grappling with damage to their properties and new closures following protests sparked by the death of George Floyd that have sometimes turned violent. From Minneapolis, where Mr. Floyd died while handcuffed and in police custody, to California and Georgia, big and small retailers and restaurants have shut locations in anticipation of violence or are working to rebuild after destruction over the past week.

Aid Swelled Incomes, but Spending Still Saw a ‘Wild’ Drop
Nelson D. Schwartz, The New York Times

Even as emergency government aid gave incomes a boost in April, coronavirus lockdowns caused Americans to shut their wallets, prompting the biggest monthly drop in consumer spending on record. Personal income rose 10.5 percent, lifted by nearly $3 trillion in government transfer payments, mostly in the form of $1,200 checks that millions of households received from the federal government.

Watchdog Warns of ‘Significant’ Fraud with Unemployment Money
Laura Davison, Bloomberg 

A watchdog warned the Department of Labor Friday that lax requirements for claiming expanded unemployment benefits make those programs “highly vulnerable” to fraud. Those making claims have to self-certify that they have lost income because of a coronavirus-related reason, which could include contracting the disease or having their workplace shutdown to slow the spread. 

Wall Street and Fed fly blind as coronavirus upends annual stress tests
Pete Schroeder, Reuters

U.S. financial regulators, banks and their investors will get their first glimpse into the health of the nation’s banking system as it confronts soaring corporate and consumer defaults in the economic crisis sparked by the novel coronavirus.

China Halts Some U.S. Farm Imports, Threatening Trade Deal
Bloomberg News

Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the U.S. over Hong Kong, according to people familiar with the situation.U.S. Futures Fluctuate on China Pausing Imports: Markets Wrap
Todd White, Bloomberg

U.S. stock-index futures pared losses and European shares climbed as investors weighed signs of economic recovery with the possibility of renewed trade frictions with China.

Wells Fargo CEO Says Crisis Makes Staying Under Asset Cap Harder
Hannah Levitt, Bloomberg

It “hasn’t been easy” for Wells Fargo & Co. to operate under an asset cap as the bank faces a flurry of deposits and credit-line draws tied to the coronavirus pandemic, Chief Executive Officer Charlie Scharf said.

Penalty Guidance Gives Companies More Transparency, CFTC Official Says
Dylan Tokar, The Wall Street Journal

New guidance on how the nation’s derivatives regulator calculates fines is intended to give companies and officials a framework for settlement discussions, an official said. The guidance on civil monetary penalties from the Commodity Futures and Trading Commission lays out factors regulators are meant to consider when calculating fines.

BlackRock’s Fink Follows Banks in Statement on Race Inequality
Annie Massa, Bloomberg

BlackRock Inc. Chief Executive Officer Larry Fink joined other executives in the financial-services industry in condemning a series of episodes underscoring racial inequality in the U.S. Fink, CEO of the world’s largest-asset management firm, said that he was appalled by three separate issues that drew nationwide attention.

Tips to SEC Surge as Working From Home Emboldens Whistleblowers
Mengqi Sun, The Wall Street Journal

A new side effect of remote working, layoffs and furloughs stemming from the coronavirus pandemic: more whistleblowers. The U.S. Securities and Exchange Commission received about 4,000 tips, complaints and referrals of possible corporate wrongdoings from mid-March to mid-May, said Steven Peikin, co-director of the SEC’s enforcement division. 

Threat of negative rates hangs over $4.8tn US money fund industry
Chris Flood, Financial Times

Thin margins and fee waivers to jeopardise profitability as part of coronavirus disruption.

Citi warns markets are out of step with grim reality
Laura Noonan, Financial Times

Tougher times ahead as a result of pandemic, says co-head of investment banking.

Why housing prices aren’t dropping in the pandemic
Emily Stewart, Vox

For house hunters wondering whether the coronavirus crisis might lead to a better deal on an upcoming purchase, there’s some bad news: probably not, at least not right now. The housing market, somewhat like the stock market, has been okay lately — even during a pandemic, an economic recession, and a landscape where looking two days into the future seems murky, let alone two weeks or two months.

Democrats Stick With Tax-Rise Policies as They Make Plans for 2021 Majority
Richard Rubin, The Wall Street Journal

The coronavirus pandemic shook the U.S. economy. It hasn’t shaken Democrats’ fervor for trillions of dollars in tax increases, and significant income redistribution is still likely as soon as 2021 if Joe Biden wins the White House and Democrats control Congress.

Millions of paper tax returns go unopened at short-staffed IRS
Toby Eckert, Politico 

The IRS estimates that nearly 5 million unopened paper tax returns had piled up at the agency by mid-May amid the closure of its offices nationwide due to the coronavirus pandemic, according to a report that POLITICO has obtained. Overall, the IRS estimated it had a backlog of 10 million pieces of mail to open and process as thousands of workers begin returning to the offices on Monday.

Expanding tax credit for businesses retaining workers gains bipartisan support
Naomi Jagoda, The Hill

Lawmakers on both sides of the aisle are expressing interest in expanding a tax credit designed to help keep workers connected to their jobs, a sign that the idea could find its way into the next coronavirus relief package. For much of the pandemic, certain businesses have been eligible to take advantage of a refundable payroll tax credit of up to $5,000 per employee for wages and health care benefits paid through the end of the year.

OCC Issues Rate Fix for Bank Loans Sold to Fintechs, Investors
Lydia Beyoud, Bloomberg Law

The Office of the Comptroller of the Currency has issued a final rule upholding the validity of interest rates on bank loans sold to fintech lenders or other third parties. The rule is one of acting Comptroller Brian Brooks’ first moves as the head of the national bank regulator.

Forget COVID! Trump Says Regulations Are the Problem.
Frances Colón et al., Morning Consult

What’s the biggest challenge facing our country today? COVID-19? The millions of jobs that disappeared nearly overnight?

Government May Take the Lion’s Share of America
Stephen Moore, The Wall Street Journal

In response to the coronavirus pandemic, Congress has enacted four spending bills—so far. The Congressional Budget Office estimates their cost at roughly $2.1 trillion, of which nearly $1.6 trillion is new spending. 

Fed Should Resist Market Pressure to Do More
Mohamed A. El-Erian, Bloomberg

In listening to market chatter urging the Federal Reserve to do more, I’m reminded of two simple insights I was exposed to years ago that have stayed with me. They don’t help predict what the Fed will end up doing, but they help shed light on the possible consequences.

How to Fix the Paycheck Protection Program
Ron Johnson, The Wall Street Journal

Without dispute, the Paycheck Protection Program has helped some struggling businesses stay afloat. To date it has provided $511 billion in forgivable loans (essentially federal grants) to millions of distressed businesses and organizations.

The Impacts of COVID-19 on Minority Unemployment: First Evidence from April 2020 CPS Microdata
Robert W. Fairlie et al, The National Bureau of Economic Research

COVID-19 abruptly impacted the labor market with the unemployment rate jumping to 14.7 percent less than two months after state governments began adopting social distancing measures. Unemployment of this magnitude has not been seen since the Great Depression.