Economic stimulus package

• House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin spoke for nearly 90 minutes Thursday, after which both said they had made progress on resolving differences in one of Pelosi’s big asks: a national strategic testing plan for COVID-19. Mnuchin said that the White House would accept the proposal with “minor” modifications, according to Pelosi’s spokesman, although Senate Majority Leader Mitch McConnell (R-Ky.) said that President Donald Trump is “willing to go higher” on a relief package price tag than Senate Republicans are.

U.S. budget deficit

• Data released Friday from the White House and the Treasury Department showed that the U.S. budget deficit hit a record $3.1 trillion for the fiscal year ending Sept. 30, up from the roughly $1 trillion deficit recorded in the 2019 fiscal year. The government in fiscal year 2020 spent $6.552 trillion, an increase of $2.105 trillion compared to 2019 figures, and collected $3.420 trillion in tax revenue, slightly down from the previous year.

COVID-19 recession

• World Bank Chief Economist Carmen Reinhart warned that the coronavirus pandemic could turn into a “major economic crisis, with very serious financial consequences.” When asked about central banks purchasing bonds to keep yields low and whether that strategy has its limits, she noted that there are “dire needs” that governments must address during these times, further warning that “the scenario we are in is not a sustainable one.”

• In February, as Trump and his advisers insisted publicly that the coronavirus pandemic was “very much under control,” board members of the conservative Hoover Institution received briefings from senior members of the White House economic team, including Tomas Philipson and Larry Kudlow, on the dire outlook for the economy due to COVID-19, spurring one hedge fund consultant who attended the gathering to write a document describing the sessions. The document, which spread among the investing world, provided elite traders access to information from the administration that gave them an advantage over others in the ensuing turmoil that hit the markets, according to interviews with eight people who received a copy of the memo or who were briefed on aspects of it.

• The International Monetary Fund said in its Global Financial Stability Report that the coronavirus pandemic “could be a major resilience test for the global financial system” as companies that borrowed substantially to survive the crisis at low interest rates could have difficulties paying those debts, particularly among smaller firms. That could elevate the risk of bankruptcies, which could start tightening bank lending standards and further stymying economic recovery, according to the IMF.

Financial regulation 

• The Commodity Futures Trading Commission voted to establish position limits for the first time on 16 agricultural, metal and energy commodities, as well as updating nine existing agricultural caps. The rule, a provision of the 2010 Dodd-Frank Act, is designed to prevent price swings caused by speculators that aren’t representative of supply-and-demand movements. 

Banks

• Wells Fargo & Co. fired more than 100 employees for allegedly defrauding the Small Business Administration “by making false representations in applying for coronavirus relief funds for themselves,” according to an internal memo. Similarly, JPMorgan Chase & Co. earlier found that 500 employees had used the Economic Injury Disaster Loan program, with dozens doing so improperly.

• Morgan Stanley quarterly profit rose 25 percent to $2.7 billion. Revenue rose 16 percent from the year-ago period to $11.7 billion.

• Bank of America Corp. reported profit of $4.9 billion in the third quarter, up nearly 50 percent from last quarter but down from $5.8 billion during the year-ago period. The bank set aside another $1.4 billion to offset loan losses, totaling more than $8 billion this year. 

• Goldman Sachs Group Inc. posted $3.62 billion in profit and revenue of $10.78 billion for the third quarter.

• JPMorgan Chase reported profit of $9.44 billion in the third quarter and  revenue of $29.94 billion. The bank set aside $611 million for loan defaults this quarter, compared to $10.5 billion in the previous quarter, showing that the bank is pulling back significantly in feeling it needs to offset loan losses due to the coronavirus pandemic.

• The Senate and the House are scheduled to be in state and district work periods.

• The American Bankers Association is holding its “Unconventional Convention” featuring Federal Reserve Vice Chairman Richard Clarida on Monday and Federal Deposit Insurance Corp. Chair Jelena McWilliams on Tuesday.

• The Securities Industry and Financial Markets Association will have its annual conference, with Chief Executive of Morgan Stanley James Gorman, Federal Reserve Bank of Atlanta President Raphael Bostic and Securities and Exchange Commission Chairman Jay Clayton on Monday, along with Fed Vice Chairman for Supervision Randal Quarles and CFTC Chairman Heath Tarbert on Tuesday.

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