General
Key 2008 Financial Crisis Players Are Back for Coronavirus
Yalman Onaran and Sonali Basak, Bloomberg
The origins of the 2008 financial crisis were nothing like what’s driving the current meltdown. Then, a housing bubble puffed up by overextended banks and homeowners was the culprit.
How Jerome Powell’s Unconventional Career Path Prepared Him for This Crisis
Neil Irwin, The New York Times
When Jerome H. Powell was nominated to lead the Federal Reserve in late 2017, there was some tut-tutting about his seemingly unusual background for the job. Some articles noted that he would be the first Fed chair without formal economic training since a notoriously inept Carter-era Fed chair, G. William Miller.
The past two weeks wiped out all the economy’s job gains since the 2016 election
Heather Long and Abha Bhattarai, The Washington Post
The coronavirus recession is shaping up to be the biggest blow to the U.S. economy since the Great Recession, and fears are rising that it could take years to reverse the damage, especially for millions of Americans who are losing their jobs and businesses. The past two weeks have wiped out all the economy’s job gains since President Trump’s November 2016 election, a sign of how rapid, deep and painful the economic shutdown has been on American families struggling to pay rent, prescriptions, food and health insurance in the middle of a pandemic.
Fed’s dilemma: Picking winners for $4 trillion in credit
Howard Schneider, Reuters
When the Federal Reserve polled Wall Street about financial stability risks last fall, “global pandemic” didn’t make the list. But the coronavirus outbreak has triggered virtually every other shock that was mentioned – from a stock market rout to a looming global recession – and is forcing the U.S. central bank and the U.S. Treasury to triage a system springing leaks by the day.
U.S. Jobs Report Likely to Show Start of Record Labor-Market Collapse
Eric Morath, The Wall Street Journal
The March jobs report is expected to show the start of a labor-market collapse that this spring could shed all the U.S. jobs added by employers in the past decade and push the unemployment rate to record highs. The near shutdown of swaths of the U.S. economy due to the new coronavirus pandemic—from corner restaurants to manufacturing plants to international tourism—is inflicting damage on the labor market that economists say dwarfs the most significant economic downturns of the post-World War II era.
The Unemployment Rate Is Probably Around 13 Percent
Justin Wolfers, The New York Times
The jobless rate today is almost certainly higher than at any point since the Great Depression. We think it’s around 13 percent and rising at a speed unmatched in American history.
Trump Administration Scales Back Paid Leave in Coronavirus Relief Law
Emily Cochrane et al., The New York Times
The Trump administration has substantially scaled back paid leave requirements for employers that were created by a new coronavirus relief law, effectively exempting many small businesses in a move that infuriated lawmakers who had fought to expand the benefit. In guidance issued on Wednesday, the Labor Department said that employers at companies with fewer than 50 workers had broad latitude to decline to offer the 12 weeks of paid leave that the law required for workers whose children were home from school or for child care because of the coronavirus pandemic.
Fed’s Kaplan Says More Fiscal Stimulus Appears Necessary
Michael S. Derby, The Wall Street Journal
While acknowledging that ultimately it wasn’t the central bank’s call, Dallas Fed leader Robert Kaplan said Thursday elected leaders probably would need to provide more stimulus to the economy to help it navigate the coronavirus crisis. Consumers are under heavy pressure and will struggle to come out of the crisis when the health threat subsidies, Mr. Kaplan told CNBC in an interview.
Blue-Collar America Braces for Another Devastating Recession
Shawn Donnan et al., Bloomberg Businessweek
Located a little over two hours due east of Dallas toward the border with Louisiana and a world away from the bustle of New York—or Wuhan—Lone Star is a pocket of rural Texas that’s so far managed mostly to avoid the Covid-19 outbreak. According to state data, just one case had been reported in all of Morris County as of April 1.
U.S. Trade Gap Narrowed in February as Coronavirus Spread
Harriet Torry, The Wall Street Journal
The U.S. trade deficit narrowed sharply in February as the spread of the novel coronavirus disrupted global commerce. The deficit shrank 12.2% from January to a seasonally adjusted $39.93 billion, the smallest since September 2016, the Commerce Department said Thursday.
Pence Says U.S. Spike in Unemployment From Virus is Temporary
Justin Sink, Bloomberg
Vice President Mike Pence said the U.S. economy will strongly rebound from mounting unemployment amid the coronavirus pandemic, after the number of jobless claims grew to 10 million over the past two weeks. “We’ll get through this,” Pence said Thursday in an interview with Bloomberg Television.
U.S. Futures Slip With Stocks; Dollar Extends Gain: Markets Wrap
Yakob Peterseil, Bloomberg
U.S. equity futures dropped along with stocks on Friday as investors weighed the latest corporate and economic turmoil caused by the pandemic that has infected more than a million people worldwide. The dollar strengthened.
Banking
Trump’s Company Seeks to Ease Financial Crunch as Coronavirus Takes Toll
David Enrich et al, The New York Times
All over the country, businesses large and small are seeking breathing room from their lenders, landlords and business partners as they face the financial fallout from the coronavirus crisis. President Trump’s family company is among those looking for help.
The Rush for $350 Billion in Small-Business Loans Starts Friday. Banks Have Questions.
Ruth Simon et al., The Wall Street Journal
Hours before small businesses can apply for forgivable loans from the $2 trillion financial relief package, some of the biggest U.S. banks aren’t ready to handle an expected flood of applications from potential borrowers. JPMorgan Chase & Co. told its small-business customers Thursday that it doesn’t expect to start accepting loan applications on Friday.
Financial Products and Investments
Insurers knew the damage a viral pandemic could wreak on businesses. So they excluded coverage.
Todd C. Frankel, The Washington Post
The forced closure of businesses nationwide because of the novel coronavirus would seem to be the perfect scenario for filing a “business interruption” insurance claim. But most companies will probably find it difficult to get an insurance payout because of policy changes made after the 2002-2003 SARS outbreak, according to insurance experts and regulators.
Rating agencies brace for backlash after rash of downgrades
Patrick Temple-West, Financial Times
Critics claim S&P, Moody’s and Fitch might be poised for rerun of 2008 financial crisis.
Housing and GSEs
Government housing agency unveils new mortgage relief policies for struggling borrowers
Katy O’Donnell, Politico
The Department of Housing and Urban Development on Thursday directed companies that service government-insured mortgage loans to give beleaguered borrowers the option to defer payments for up to a year, effective immediately. The move — coming just 15 days after HUD announced a two-month moratorium on evictions and foreclosures — underscores the urgency of the deepening economic crisis caused by the coronavirus outbreak.
Mortgage Servicers Teeter Near Crisis That Regulators Saw Coming
Joe Light, Bloomberg
Nonbank financial firms spent years lobbying against tougher regulation and stricter capital requirements, arguing that their emerging dominance in mortgage lending didn’t pose a risk to the financial system. Now, many of those companies say they are in desperate need of a bailout to stave off bankruptcy and a potential collapse of the U.S. housing market.
Mortgage Relief From Coronavirus Crisis Is Off to Rocky Start
Orla McCaffrey and Andrew Ackerman, The Wall Street Journal
Struggling homeowners are flooding their mortgage companies with requests for help as the coronavirus pandemic wrecks the economy. Many are having a hard time getting it.
Banks Tighten Lending to Nervous Homeowners Hoping to Tap Equity
Lananh Nuyen et al., Bloomberg
Market condition: severe. That’s Bank of America Corp.’s new assessment of a corner of the U.S. mortgage industry facing a deluge of applications from homeowners looking to shore up their finances. The coronavirus pandemic, which is prompting nervous Americans to tap into record amounts of home equity as a buffer against an economy tipping into recession, has also led Bank of America to aggressively tighten its standards for home equity lines of credit, or Helocs.
US mortgage lenders face liquidity crunch
Billy Nauman et al., Financial Times
Non-bank lenders put on downgrade watch as sector braces for wave of borrowers not paying.
Taxes
IRS official: Virus outbreak making it hard to implement key business tax provision
Brian Faler, Politico
The coronavirus outbreak is making it difficult for the IRS to implement a key stimulus tax provision designed to help struggling businesses, a top agency official said today. The relief package signed into law last week allows cash-strapped businesses to qualify for quick refunds by redoing their previous years’ taxes to account for their current losses.
Financial Technology
Chime pilots way to get $1,200 stimulus checks to users instantly after talks with Mark Cuban
Hugh Son, CNBC
Chime, the biggest U.S. digital bank start-up, is piloting a way for its users to receive their federal $1,200 stimulus checks instantly, weeks before the government is expected to send the payments. The San Francisco-based company said it randomly picked 1,000 of its customers to get the payments Thursday using a feature called SpotMe that typically allows members to go negative in their accounts without incurring fees.
Opinions, Editorials and Perspectives
With Communities in Need, Financial Service Centers Are Essential Services
Ed D’Alessio, Morning Consult
Even before the coronavirus pandemic that has challenged our nation’s financial system, the Federal Deposit Insurance Corporation (FDIC) called attention to the fact that over 60 million adults in the U.S. are either unbanked or underbanked. This figure, which equates to nearly one-third of all U.S. adults, demonstrates that despite the public policy emphasis on banks as the panacea for every financial need, there remains a mismatch between bank products and the needs of everyday Americans, many of whom choose to use non-depository financial providers.
The Covid-19 Slump Has Arrived
Paul Krugman, The New York Times
Over a normal two-week period we’d expect around half a million U.S. workers to file claims for unemployment insurance. Over the past two weeks we’ve seen almost 10 million filings. We’re facing an incredible economic catastrophe.
Research Reports
The Value of Opacity in a Banking Crisis
Haelim Anderson and Adam Copeland, Liberty Street Economics
During moments of heightened economic uncertainty, authorities often need to decide on how much information to disclose. For example, during crisis periods, we often observe regulators limiting access to bank‑level information with the goal of restoring the public’s confidence in banks.
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