washingtonpost--2020-04-02--Analysis | What to Know About Recessions as the World Heads Into One

The dictionary definition is a period when economic output contracts for two straight quarters .
The National Bureau of Economic Research ’ s Business Cycle Dating Committee , which makes the official U.S. determination , uses a different approach , considering factors such as inflation-adjusted GDP , employment , industrial production and income .
The International Monetary Fund , in designating recessions on a global scale , looks at several indicators including a decline in inflation-adjusted per-capita GDP that ’ s backed up by weakness in industrial production , trade , capital flows , oil consumption and unemployment .
Almost @ @ @ @ @ @ @ output likely shrank in the quarter ending March 31 , and there ’ s widespread agreement that the contraction in the second quarter , April through June , could be the most dramatic in records going back to 1947 .
Morgan Stanley ’ s expectation that gross domestic product will fall a jaw-dropping 30.1 % in the second quarter was topped by Goldman Sachs Group Inc. , which estimates the U.S. economy will shrink by 34 % .
( It ’ s worth noting that U.S. Treasury Secretary Steven Mnuchin said on March @ @ @ @ @ @ @ would slow growth but not tip the U.S. economy into recession . )
NBER typically takes about a year to make the official call on when a U.S. expansion ends and a recession begins , though this time it may not wait that long .
Bloomberg Economics is forecasting a global recession in the first half of 2020 , noting that “ for some important parts of the world the contraction has already begun.
” It foresees the global economy shrinking by 1.8 % year-on-year in the first half of 2020 , compared @ @ @ @ @ @ @ 2019 .
Kristalina Georgieva , managing director of the International Monetary Fund , says the world economy is already in a recession that could be worse than the 2009 downturn .
Before 2020 , the IMF had counted only four global recessions tracing back to 1960 , compared to the 11 designated in the U.S. since World War II by NBER .
That ’ s becoming the question of the moment .
There was some hope that the downturn wouldn ’ t last beyond the first two quarters of this year , a @ @ @ @ @ @ @ work in getting the coronavirus under control .
More recently , economists have been losing hope in such a “ V-shaped recovery , ” in which lost output is quickly restored .
The ultimate fear is a protracted malaise that has some flavor of a depression .
It ’ s generally interpreted as a severe downturn that is measured in years , not quarters .
There ’ s been just one in the last 100 years , the Great Depression of 1929-1933 .
The 2007-2009 recession lasted 18 months , making it the @ @ @ @ @ @ @ the name the Great Recession .
Besides duration , other measures of a recession ’ s severity are how much the economy contracts and how bad unemployment gets .
The worst recessions tend to be those paired with some sort of collapse in the financial system , as happened in the U.S. in 1929 and 2008 .
Another driver of a recession ’ s severity is how broadly the economy suffers a contraction .
The relatively short and mild 2001 recession , for instance , was largely confined to the tech sector , @ @ @ @ @ @ @ the economy .
That ’ s a question of particular interest in the U.S. , where the economic expansion has lasted almost 11 years .
But Federal Reserve Bank of Cleveland researchers found little evidence that duration of an expansion influences how bad the subsequent recession .
They did , however , find reason to think severe recessions ( like the one that ended in 2009 ) spawn strong expansions .
In terms of the depth of the downturn , it might well be worse than the recession of 2007-2009 .
But the @ @ @ @ @ @ @ , since this recession will reflect a shock ( the virus ) rather than the buildup of underlying economic imbalances .
Also on the positive side , American households are in a good spot .
They ’ re carrying less debt , and an increase in mortgage refinancing has put more cash in consumers ’ pockets .
Central banks around the world are cutting interest rates , intervening in markets , buying corporate assets or helping banks to keep lending to businesses .
The People ’ s Bank of China has injected billions @ @ @ @ @ @ @ of Japan boosted asset purchases to stabilize markets .
The U.S. Federal Reserve cut its benchmark interest rate to near zero .
But this time the onus may be on governments in part because central banks have used up a lot of their interest-rate ammunition over the last decade .
“ The response should be fiscal , first and foremost , ” European Central Bank President Christine Lagarde said .


washingtonpost--2020-04-01--SoftBank-Backed Lender Kabbage Cuts Off Businesses as Cash Needs Mount

“ This is very bad business ethics , ” said Joydeep Paul , who runs Medserv Healthcare Solutions LLC , an emergency-medical training company in Princeton , New Jersey .
He says his line of credit was cut from $ 22,000 to $ 0 .
“ You just turn it off without saying a word -- not an email , not a phone call , nothing.
” Online lenders have spent years touting themselves as the opposite of banks .
But as the coronavirus pandemic ravages cities across the U.S. , they ’ ve turned to a playbook that banks @ @ @ @ @ @ @ than a decade ago : reducing access to credit when the economy is contracting .
Other lenders , including On Deck Capital Inc. and Fundbox Inc. , have also tightened their underwriting standards or limited lines of credit .
“ They ’ ve left me high and dry when I needed them the most , ” said Rob Jacques , co-founder of theCodery , a software consulting company in Petaluma , California .
He said he was particularly galled to be cut off without notice because until recently Kabbage called him every day @ @ @ @ @ @ @ Kabbage , based in Atlanta , says it has loaned more than $ 9 billion to thousands of small businesses since it was founded in 2009 .
The company furloughed hundreds of its workers this week as it contends with a slowdown in spending at small businesses , which have suffered as consumers nationwide have been ordered to stay inside to slow the spread of the deadly coronavirus pandemic .
Kabbage is now trying to position itself as a middleman that will connect people with loans from the Small Business Administration .
It @ @ @ @ @ @ @ small businesses sell gift certificates to consumers .
“ Like many other fintechs , we have temporarily adjusted our lines of credit and are focused on supporting the SBA ’ s Paycheck Protection Program , ” Paul Bernardini , a spokesman for Kabbage , said in a statement .
“ Just as manufacturers have retooled their processes to build ventilators and masks , we ’ re doing the same to reallocate our resources to respond to the national emergency and provide financial products that small businesses need most.
” The credit reductions come @ @ @ @ @ @ @ shops across the country .
In normal times , small businesses have about a month of cash on hand , according to a 2016 study by JPMorgan Chase & Co. That means they ’ re particularly vulnerable as major cities across the country continue to expand shelter-in-place orders .
On Deck began putting holds on customers ’ ability to draw on their lines of credit if they hadn ’ t done so in the last 30 days .
Customers affected by the holds have been asked to send the company recent bank statements @ @ @ @ @ @ @ Larkin , a spokesman for On Deck , said the firm will “ continue to serve and support our existing customers and are selectively lending to new customers.
” “ Like many companies that serve small businesses , we ’ ve had to make changes that have affected some of our customers , ” Tim Donovan , a spokesman for Fundbox , said in emailed statement .
“ While these decisions have not been easy , it will allow us to continue to serve the majority of our small-business customers now and in @ @ @ @ @ @ @ to ask what happened were told that their accounts were under review .
An employee at Kabbage , who asked for anonymity to protect their job , said that customer-service agents were instructed not to tell borrowers that the company had suspended credit lines across the board .
Michael Figueroa , a security contractor in Fort Lauderdale , Florida , said the representative he talked with was apologetic .
“ Hey , I don ’ t even know if I ’ m going to be working here tomorrow , ” he recalled the @ @ @

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washingtonpost--2020-04-02--Analysis | I Manage Money for a Living. Here’s What I’m Telling My Clients.

Three questions came up routinely in those conversations , which makes me think they ’ re on a lot of investors ’ minds .
My thoughts are certainly not novel .
They borrow liberally from investing giants such as Warren Buffett , Jack Bogle , Seth Klarman and others too numerous to name , and financial writers who have covered similar ground over the years and in recent days .
But given the opportunity for costly mistakes during market upheavals , it never hurts to revisit some common pitfalls .
The question that came up most is whether investors should @ @ @ @ @ @ @ back later when they decline further .
The spread of coronavirus and the resulting economic damage is expected to worsen .
As it does , the thinking goes , stocks will continue to decline .
It ’ s a natural impulse , but it misses a crucial aspect of the way markets work , which is that prices instantly reflect investors ’ expectations about the future .
That ’ s probably why , to many investors ’ surprise , the U.S. stock market held its ground after dreadful news last Thursday that 3.28 @ @ @ @ @ @ @ week , nearly quintupling the previous record .
While exact numbers are never known in advance , a surge in initial jobless claims was widely expected well before the Labor Department released its official tally .
More bad news is expected .
Goldman Sachs Group Inc. said on Tuesday that it expects the U.S. economy to shrink by an annualized 34 % in the second quarter and unemployment to rise to 15 % by mid-year before a recovery takes hold in the third quarter .
That , too , is reflected in stock @ @ @ @ @ @ @ depends on whether expectations become even more dire .
But unless investors can predict if the outlook will darken further , there ’ s no reason to think they can anticipate the market ’ s next move .
And that ’ s only half the battle .
Those who manage to get out before another market drop must decide when to get back in , which is never clear .
Market turns tend to be sudden .
By the time it feels safe , the market is often sharply higher , leaving investors @ @ @ @ @ @ @ Then comes the temptation to wait for the market to revisit its lows , an opportunity that may never come .
I know investors who sold their stocks when Lehman Brothers collapsed in September 2008 , months before the market bottomed around the financial crisis .
What seemed like a stroke of genius at the time became a harrowing trial .
The market unexpectedly turned higher in March 2009 and never looked back .
More than a decade later , some of those investors are still waiting for that elusive re-entry despite the @ @ @ @ @ @ @ to that September 2008 level .
There ’ s plenty of evidence showing that binary market timing , or all-in-all-out moves around markets , is a good way to lose money .
I ’ ve never even seen it work in back tests , which have the formidable advantages of perfect hindsight , zero emotion and no cost .
Every time someone tells me binary market timing is possible , I ask for a successful back test , and I have yet to see one .
A second question is whether retirees have @ @ @ @ @ @ @ .
If history is any guide , the answer is most likely yes .
There have been 10 bear markets in the U.S. since 1948 , excluding the current one , as measured by a 20 % or greater decline in the S & P 500 Index .
The average number of years from peak to recovery — that is , the time it took for the S & P 500 to climb back to its previous high — was 3.9 years , and the median was 2.7 years .
On five of @ @ @ @ @ @ @ two years or less .
In other words , market downturns tend to feel a lot longer than they are .
The third question cuts entirely in the opposite direction : With markets down and interest rates at historic lows , should investors borrow money to buy stocks ?
The answer is no .
While it ’ s safe to assume that markets will recover eventually , the path is unknowable .
That ’ s a problem for investors playing with other people ’ s money .
If markets fall further before recovering @ @ @ @ @ @ @ uncertainty , particularly in the U.S. , where stocks aren ’ t cheap — those investors may be forced to sell at even lower prices to meet margin calls .
Borrowed money robs investors of time , which is arguably their only edge .
Market downturns tend to provoke extreme reactions , and this one is no different .
Yes , savvy investors can pick up some bargains by rebalancing their portfolios or even tilting toward their most beaten-down investments .
U.S. investors might also lighten up on home bias , as there @ @ @ @ @ @ @ But when markets are roiling , don ’ t discount the value of doing nothing .
I had a seventh-grade shop teacher who used to say , “ Sometimes I sit and think , and sometimes I just sit.
” For many investors , this is probably a good time to just sit .


washingtonpost--2020-04-02--Analysis | Coronabonds Could Save Europe, or Sink It

Volcker was referring to a controversy about “ euro bonds , ” as they were called then , which has now resurfaced under the label ( what else ? )
“ coronabonds.
” The circumstances are different — a sovereign debt crisis then , a pandemic now — but the idea is the same .
The euro area would raise new debt for which all 19 members of the currency union would be jointly and severally liable .
Countries such as Italy and Spain , which are suffering the most from the coronavirus , would get cheaper access to the @ @ @ @ @ @ @ like Germany , which currently borrow at negative rates , would pay only trivially higher interest costs .
What better way to finally show European solidarity ?
That has infuriated many southerners .
A group of Italian politicians this week took out a full-page ad in a German newspaper , accusing the Dutch of “ a lack of ethics and solidarity , ” and unsubtly reminding the Germans of the solidarity Europe showed them after the war , when Germany ’ s debts were forgiven or restructured at a conference in 1953 .
@ @ @ @ @ @ @ As indeed they were in 1790 , when intellectual titans including Alexander Hamilton and Thomas Jefferson had a similar debate , the one Volcker had in mind .
Hamilton , America ’ s first treasury secretary , wanted to assume the debts of the 13 states that had recently joined together to fight off the Brits .
Jefferson and his followers were against the idea , fearing that the federal government would become a behemoth threatening the liberties of the states .
Both were right .
The U.S. did assume the states ’ @ @ @ @ @ @ @ huge Treasury-bond market .
And the federal government did balloon , as it took on ever more functions over time , especially after the New Deal of the 1930s .
But the result was the United States of America as we know it .
So what European dilemma was Volcker putting his finger on with his analogy ?
Since it started in the 1950s , the European project also aimed , at least in theory , to become a United States of Europe , as implied in the phrase “ ever closer union.
@ @ @ @ @ @ @ in that direction .
To work , it now requires full banking , capital-markets and fiscal unions .
European bonds to rival U.S. Treasuries would seem like the way to go .
The devil ’ s in the differences .
Hamilton cleanly took the debts from the states and transferred them to a different entity , the federal government .
That same entity was simultaneously handed the power to raise tax revenues to repay its new debt .
In this role it was given legitimacy by having the people ’ s and states @ @ @ @ @ @ @ .
Moreover , the U.S. from that point on stuck to a much more ruthless form of Europe ’ s “ no-bailout ” rule .
The federal government has never rescued a state , letting several go bankrupt in the 1840s .
The states understood they were fiscally on their own , and all but Vermont eventually gave themselves balanced-budget rules not unlike Germany ’ s .
In turn , the federal government took on functions such as fiscal policy to manage aggregate demand .
By contrast , the thinking behind euro bonds @ @ @ @ @ @ @ envisioned , they would still be issued by the member states but guaranteed by all countries in the euro area .
In effect , this would be like California selling debt and all 50 U.S. states vouching for it .
How enthusiastic would the Texans be about that ?
And how delighted would the Californians be when the Texans show up in Sacramento to tell them how to cut the Golden State ’ s budget ?
Now swap in Italians for Californians and Germans for Texans , and you get the idea .
@ @ @ @ @ @ @ subsequently ( this overview counts at least eight versions ) .
But no matter the design , they kept that crucial divergence from Hamilton ’ s clean cut .
The most prominent idea is to divide the debt of member states into two tranches , blue bonds worth up to 60 % of each nation ’ s GDP and red bonds for everything in excess .
The blue bonds would be “ mutualized , ” perhaps jointly issued and certainly guaranteed by all , and thus be rated AAA .
The red bonds @ @ @ @ @ @ @ liability , and rated lower .
But the tax revenues to repay the bonds would still be harvested by the individual member states , and national legislatures would still decide how to tax and spend .
Unsurprisingly , the Dutch , Germans , Austrians and Finns , among others , fear that the southern parliaments may just tax too little and spend too much , knowing that in a pinch the northern tax euros will repay their creditors .
Academics call this “ moral hazard.
” To mitigate it , the north would @ @ @ @ @ @ @ but Rome and Madrid wouldn ’ t be happy about those .
It ’ s Texans and Californians again .
Here , then , are two of the many ways in which the euro area , and perhaps the whole EU , could blow up in the coming generation .
In the first scenario , the north obstinately balks at all forms of “ mutual ” debt issuance .
Southerners , resenting this lack of solidarity , turn to nationalist and Brussels-bashing populists like Italy ’ s Matteo Salvini , who take their @ @ @ @ @ @ @ out of the EU , possibly accepting cash from China instead , or whichever new friend they can find .
In the second scenario , the north agrees to mutualized debt , starting with coronabonds and then expanding from there .
But the south is humiliated by the austerity rules imposed from Brussels once the conoravirus depression is over .
And northerners settle on the narrative of the dreaded “ transfer union , ” in which their hard-earned tax euros flow into the bottomless pit of the Mezziogiorno .
Now it ’ s @ @ @ @ @ @ @ Brussels-bashing populists and leaves the EU .
So what ’ s needed is indeed Hamilton bonds .
Europe must take that historic step and issue bonds , levy direct taxes , and vote on all of this at the top — meaning federal — level .
In effect , the euro area needs a government , with a treasurer and a legislature , which could be a subgroup of the European Parliament .
It could start small , but over time would have to take roles from the states ( like unemployment insurance @ @ @ @ @ @ @ require changes in Europe ’ s treaties and , more importantly , minds .
Just as it did in Hamilton ’ s time .
But maybe that ’ s the ultimate difference : The Americans in 1790 really did want a United States , whereas the Europeans of 2020 don ’ t .
If Volcker were around , he would repeat : There ’ s no European Hamilton in sight .
Unfortunately , this means that the EU only has bad options .


washingtonpost--2020-04-02--U.S. Doubles Small-Business Loans’ Rate to 1% After Lenders Balk

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washingtonpost--2020-04-02--Analysis | When God Appears in Contracts, That’s ‘Force Majeure’

French for “ superior force , ” the phrase typically describes an unexpected , external event that makes it impossible for a party to fulfill its obligations under a contract .
Force majeure clauses are a common feature of supply agreements and other business deals , and consumers will also find them in the fine print they agree to when they buy such things as plane tickets .
Natural disasters such as earthquakes , hurricanes and floods are frequently specified as force majeure events .
So are human activities such as war , political unrest , terrorist attacks and labor @ @ @ @ @ @ @ listed as force majeure events , though courts don ’ t have a lot of experience deciding whether a particular disease fits the bill .
That may not be critical when it comes to the coronavirus .
The closures and other unexpected disruptions that have accompanied the spread of the virus bear “ all the hallmarks of force majeure , ” said Dallas-based lawyer Beth Petronio , noting the disease ’ s effects on businesses have been comparable to those of a hurricane or other large-scale natural disaster .
Given the scale of @ @ @ @ @ @ @ in just about any commercial contract .
Interrupted supply agreements are an obvious example .
Another widespread concern is the ability of commercial tenants to pay rent on stores and offices that have been designated non-essential businesses by the authorities and told to close .
One New York law firm has already claimed force majeure to try to get out of its lease .
Landlords have some incentive to work things out , but many face their own contractual obligations to mortgage lenders and investors .
One party can challenge another ’ s @ @ @ @ @ @ @ The decision may hinge on the specific language in the contract and the jurisdiction .
Many international commercial contracts operate under English or U.S. law and specify courts in London or New York to decide any disputes .
Chinese authorities can issue force majeure certificates , which give “ a certain authenticity ” to a declaration , said Brian Perrott , a partner at HFW law firm and former head of litigation at Cargill Inc. “ But ultimately you have to establish that a clause is triggered.
” In the U.S. , the @ @ @ @ @ @ @ to a party if its performance is made impossible or impracticable by unforeseen outside events , said Jennifer Semko , a partner with Baker & McKenzie LLP in Washington .
In California , for instance , the civil code excuses failure to perform a contract “ when it is prevented or delayed by an irresistible , superhuman cause , or by the act of public enemies of this state or of the United States.
” Many jurisdictions will also terminate a contract if an event occurs that totally frustrates its purpose .
In @ @ @ @ @ @ @ court said a man didn ’ t need to pay a day ’ s rental on an apartment overlooking the coronation procession of King Edward VII after the event was postponed due to the new monarch ’ s illness .
On the other hand , some agreements , particularly those in the field of equipment leases , might include so-called hell-or-high-water clauses , which are designed to make sure the terms are honored no matter what .
It isn ’ t a legal term but a joke among traders about some buyers using @ @ @ @ @ @ @ contract when prices have moved against them .


washingtonpost--2020-04-02--Startups Are Scrambling for Access to $349 Billion in Relief Loans

Not adjusting these rules could lead to more economic pain , and not just for startups , according to Justin Field , senior vice president of government affairs for the National Venture Capital Association , or NVCA .
“ I think you ’ re looking at several hundreds of thousands jobs lost across the country and many more in businesses who rely on these workers as customers , ” he said .
“ I think you ’ re going to have a huge sweep of layoffs in several weeks if they can ’ t get this figured out.
” The @ @ @ @ @ @ @ minority shareholders with more than a 20 % stake in the business .
They ’ d require venture investors to risk being held criminally liable if a startup misuses money it receives as part of the program , Field said .
There are also other complicated disclosure requirements that could make qualifying for the money difficult for most startups , according to Field .
The Treasury Department and the Small Business Administration did not respond to requests for comment .
Startups have been shedding thousands of employees as state-level stay-at-home orders shut down @ @ @ @ @ @ @ companies could benefit from the loans , which turn into grants if they ’ re used to pay employees—often startups ’ biggest expense .
Industry groups for tech and venture capital have been pressuring officials to state explicitly that startups would be eligible for the loans under the existing rules , or to issue new guidelines .
Given the urgency of the need , advocates for startups would would like to see the administration waive rules about minority investors .
Private equity firms are similarly lobbying the government to allow their companies to @ @ @ @ @ @ @ those efforts have been unsuccessful .
Startup advocates argue that venture capital firms ’ investments are often too complicated to meet the disclosure requirements and that minority shareholders don ’ t typically have sufficient control over the companies that they invest in .
“ Our guys want the money to go to payroll , the government certainly wants the money to go to payroll here , ” said Field of the NVCA .
Some people in the tech industry have framed the changes they ’ d like to see as technical fixes .
@ @ @ @ @ @ @ wrote on his blog , “ It is my hope that this ‘ bug ’ in the law will get fixed over the next week or so.
” But there are plenty of reasons that startups would be treated differently than other small businesses .
Unlike restaurants or hair salons , there is an ecosystem of deep-pocketed investors dedicated to funding them .
Also unlike most small companies , venture-backed startups are built on the idea of striking it big or flaming out trying .
There is no shortage of businesses in need @ @ @ @ @ @ @ elsewhere .
Groups representing startups are vociferously arguing to that they are subject to the same virus-related headwinds as non-tech companies , and provide important benefits to the economy .
“ Similarly to other small businesses in New York , many New York founded startups are experiencing financial hardship , ” wrote Julie Samuels , executive director of Tech : NYC , an industry group , in a letter to the Small Business Administration on March 27 .
She said Wednesday that she had not received a reply .


washingtonpost--2020-04-02--Analysis | When and How Will I Get That $1,200 Stimulus Payment?

If you earn less than $ 75,000 , or you and your spouse collectively make less than $ 150,000 , you ’ ll get $ 1,200 for each of you plus $ 500 for each child under 17 .
Those amounts are reduced for people with higher incomes , and individuals with $ 99,000 in earnings ( or $ 198,000 for a couple ) get nothing , even if they have children .
You must have a Social Security number to be eligible for a payment , which will not be taxed .
Kyle Pomerleau , a resident fellow at @ @ @ @ @ @ @ 165 million people , or 93 % of all tax filers , will get some benefit , with about 140 million of them getting the full amount .
Seniors whose only income is from Social Security and veterans who rely solely on disability payments will receive the payments .
If you ’ ve filed a tax return this year , the IRS will use the information you provided there about your 2019 income , marital status and dependents .
( The usual deadline for filing tax returns , April 15 , has been @ @ @ @ @ @ @ in another response to the pandemic . )
For those who haven ’ t submitted tax documents this year , the IRS will use data from last year ’ s filings .
Americans who don ’ t earn enough to be required to file a tax return can submit one to the IRS now to make sure the agency has accurate information on them .
Social Security beneficiaries who aren ’ t required to file a tax return do not need to submit any additional paperwork , because the IRS will send them @ @ @ @ @ @ @ disburse their other monthly benefits .
How quickly is an open ( and important ) question .
Treasury Secretary Steven Mnuchin has said he wants the payments out by April 17 .
Senate Minority Leader Chuck Schumer said President Donald Trump hoped the Internal Revenue Service could start sending the money on April 6 .
The IRS has not weighed in on timing , but former agency officials say both of those timeframes are overly optimistic ; they point to previous stimulus check payments that took about two months to reach taxpayers .
@ @ @ @ @ @ @ Republican aide who helped draft the legislation said that for households for which the IRS has direct-deposit information -- which is about half of those eligible for the money -- those payments will go straight into people ’ s accounts .
Checks sent in the mail will take longer to reach people , the aide said .
The government is also contemplating using pre-loaded debit cards to send the payments to people who don ’ t have bank accounts .
Recipients will , of course , be anxious for the money to help @ @ @ @ @ @ @ want to know when the U.S. economy might see a burst of consumer spending .
If a payment doesn ’ t hit your bank account or mailbox , or you get less than you think you ’ re owed , you can make claim for what you think you ’ re owed on the tax return you file in 2021 .
You also could try calling the IRS in hopes of reaching someone on the other end .
When the IRS sent stimulus checks in 2008 , calls to the agency more than @ @ @ @ @ @ @ t able to get their questions answered , according to a report by the Government Accountability Office .
The Joint Committee on Taxation , the official congressional scorekeeper on such matters , says the cost will be $ 292.4 billion over a decade .
The Committee for a Responsible Federal Budget , a think tank , had offered a similar estimate , $ 290 billion .
Another group , the Tax Foundation , pegs the cost at $ 301 billion .


washingtonpost--2020-03-25--Small Banks Are Struggling Just When the World Needs Them Most

At smaller lenders from the U.S. to Japan to South Korea , profits had already been pressured by historically low interest rates .
The virus adds to their woes , boosting the risk that bad loans will pile up at the smaller businesses they serve .
Four South Korean regional banks were placed on review for downgrade this week by Moody ’ s Investors Service , which said the pandemic will hurt economic growth as well as banks ’ credit quality .
In the U.S. , dozens of small banks called on lawmakers to delay major loan-loss accounting rules they @ @ @ @ @ @ @ .
Regionals are more exposed to “ the plain old squeezing of the margin between where banks borrow and where banks lend , ” Wells Fargo & Co. analyst Mike Mayo said in an interview .
“ As a group they ’ re more exposed ” to the Federal Reserve ’ s recent rate cuts , he said .
Rate cuts worldwide have crimped banks ’ net interest margins , the difference between what they earn from loans and pay for deposits , as well as interest income abroad .
Analysts say that @ @ @ @ @ @ @ jump in China , while more regional lenders in Japan may start to post losses if the central bank there cuts rates further .
“ Rising loan losses would be a chief concern with the virus slowing economic activity globally , ” said Bloomberg Intelligence analyst Herman Chan .
“ The outlook for U.S. regional banks is challenging with loan losses set to rise and revenues weakening after the Federal Reserve rate cuts.
” The KBW Regional Banking Index of 50 U.S. lenders has tumbled more than 40 % this year , with @ @ @ @ @ @ @ as virus fears sap demand and Saudi Arabia and Russia engage in a price war .
Shares of Houston-based Cadence BanCorp , the worst performer in the group , have plunged almost 70 % .
Investors are hungry for details about how the economic impact of the pandemic will hit firms ’ geographies and industry concentrations -- and how a stimulus package could alleviate some problems .
“ What ’ s unique is that it ’ s not one concentration that ’ s an issue , this is going to affect a lot @ @ @ @ @ @ @ lend to , ” KBW analyst Brian Klock said in an interview .
“ They ’ re Main Street lenders , and that ’ s where it ’ s going.
” In South Korea , the asset quality of Busan Bank , Daegu Bank , Jeju Bank and Kyongnam Bank could deteriorate , Moody ’ s said .
That ’ s because they have concentrated exposures to the regions worst-hit by the virus , namely Daegu and North Gyeongsang province , and highly affected sectors such as small- and medium-size enterprises in the @ @ @ @ @ @ @ , and retail sectors .
In China , the virus may cause the nation ’ s non-performing loan ratio to more than triple to about 6.3 % , amounting to an increase of 5.6 trillion yuan ( $ 787 billion ) in bad debt , according to S & P Global Ratings .
A deterioration in banks ’ asset quality and profitability are raising concerns that more regional lenders will come under pressure after at least three banks were rescued last year.
“ We have no doubt there will be more , ” @ @ @ @ @ @ @ director at research firm Rhodium Group LLC .
“ What we are waiting for is a kind of a road map or a path to how these restructuring will take place in the future .
”


washingtonpost--2020-03-25--Analysis | Why BlackRock Has a Role in the Fed Bond-Buying Spree: QuickTake

The Fed ’ s stimulus plan extends aid to U.S. companies and local governments borrowing money as an increasing number of American businesses screech to a halt .
It vowed to buy unlimited amounts of Treasury bonds and mortgage-backed securities , to keep borrowing costs cheap .
The central bank reached even further , offering direct support for companies , pushing into territory typically reserved for federal government spending , or fiscal policy .
The Fed ’ s plans include buying newly issued corporate bonds , existing investment-grade bonds and exchange-traded funds that are based on highly rated debt .
@ @ @ @ @ @ @ lower interest rates to near-zero levels , an emergency step that encourages investment and spending .
The Fed is turning to New York-based BlackRock to oversee three separate debt-buying efforts .
It will buy and manage portfolios of newly issued bonds from U.S. companies as well as portfolios of investment-grade bonds and ETFs , according to the Federal Reserve Bank of New York .
( BlackRock is the world ’ s largest issuer of ETFs . )
BlackRock will also oversee purchases of packages of mortgages on commercial real estate guaranteed by one @ @ @ @ @ @ @ Mortgage Association ( Ginnie Mae ) , Federal National Mortgage Association ( Fannie Mae ) , and Federal Home Loan Mortgage Corp. ( Freddie Mac ) .
Still to be determined is how much money BlackRock will direct in these efforts .
Parts of the Fed ’ s bond-buying program fit more squarely in an asset manager ’ s wheelhouse .
While the Fed ’ s main job is to set big-picture monetary policy by purchasing Treasury debt , a fund firm like BlackRock can be tapped for its expertise in evaluating and @ @ @ @ @ @ @ portfolios of corporate bonds -- something that ’ s not a main skill set of the central bank .
BlackRock Financial Markets Advisory , an arm that consults with government agencies and institutions , will manage the projects .
Aladdin , the risk-monitoring software that BlackRock will use in the process , already watches over more than $ 20 trillion , with a client base including insurers , pensions and fellow asset managers .
( Bloomberg LP , the parent company of Bloomberg News , sells financial software that competes on certain fronts @ @ @ @ @ @ @ the aftermath of the 2008 financial crisis , the Federal Reserve turned to BlackRock to oversee $ 130 billion in distressed debt formerly on the books of Bear Stearns Cos. and American International Group .
Back then , BlackRock wasn ’ t nearly as large a force in global finance as it is today .
The firm oversaw a total of $ 1.3 trillion at the end of 2008 .
At the beginning of 2020 , it had about $ 7.4 trillion in assets under management .
BlackRock drew some objections for its @ @ @ @ @ @ @ financial crisis .
“ Why is it that BlackRock is the only firm qualified to manage the assets of special-purpose vehicles ?
” Senator Chuck Grassley , the top Republican on the Senate Finance Committee , asked at at a January 2009 hearing , questioning the no-bid government contracts awarded to the firm .
( “ They come with a world-class reputation , ” answered Timothy Geithner , who was then the Treasury secretary . )
It ’ s worth noting that the Fed will not buy more than 20 % of the @ @ @ @ @ @ @ it purchase more than 10 % of any individual issuer ’ s outstanding bonds ) .
No information on fees has been made public .
Bloomberg News reported in 2009 that BlackRock stood to earn tens of millions or even hundreds of millions of dollars in fees from its government-assigned work helping the private sector shed toxic assets .


washingtonpost--2020-03-25--What’s in Congress’s $2 Trillion Coronavirus Stimulus Package

Here are some of the provisions .
• Big Businesses : About $ 500 billion can be used to back loans and assistance to companies , as well as state and local governments .
• Airlines : $ 25 billion in strings-attached grants and $ 25 billion in loans to passenger carriers , $ 3 billion to airline contractors providing ground staff such as caterers , while cargo haulers would see $ 4 billion in grants .
• Hospitals : A $ 150 billion boost for hospitals and other health-care providers for equipment and supplies .
• Individuals : Direct @ @ @ @ @ @ @ $ 1,200 for each adult , as well as $ 500 for each child .
Senate Minority Leader Chuck Schumer said checks would be cut April 6 .
• Unemployed : Unemployment insurance extension to four months , bolstered by $ 600 weekly .
Eligibility would be expanded to cover more workers .
• Restrictions on Business Aid : Any company receiving a government loan would be subject to a ban on stock buybacks through the term of the loan plus one additional year .
They also would have to limit executive bonuses @ @ @ @ @ @ @ • Transparency : The Treasury Department would have to disclose the terms of loans or other aid to companies , and a new Treasury inspector general would oversee the lending program .
• Democrats : Won language that would bar any business owned by President Donald Trump or his family from getting loans from Treasury .
Businesses owned by members of Congress , heads of executive departments and Vice President Mike Pence also would be blocked .
• Elections : States get $ 400 million in election assistance for 2020 voting amid the @ @ @ @ @ @ @ the ability to vote by mail , expand early voting and online registration .
For more articles like this , please visit us at bloomberg.com


washingtonpost--2020-03-25--Record $2 Trillion Stimulus Risks Falling Short of Full Relief

Even with a price tag that represents about 10 % of the nation ’ s total output , not all Americans who may need direct payments will receive them , and timing remains an issue .
The draft text of the legislation had not been released as of 10:30 a.m. in Washington .
The bill -- the third phase of coronavirus aid from Congress -- was tweaked after House Democrats proposed their own $ 2.5 trillion version .
The S & P 500 fluctuated in the morning session , following Tuesday ’ s 9.4 % surge in anticipation of the @ @ @ @ @ @ @ .
Federal Reserve Bank of St. Louis President James Bullard said Wednesday on CNBC that the package is “ about right for the situation ” but said it was temporary relief : “ This is not stimulus.
” Further stimulus will be needed in coming days and weeks to further bolster the economy and leaders should begin working on that now , according to Jason Furman , a member of Barack Obama ’ s economic team during the 2008 recession .
For individuals , the package provides direct payments to lower- and middle-income @ @ @ @ @ @ @ , as well as $ 500 for each child .
House Democrats had been pushing for bigger payments .
Checks also will be sent to those without income , or whose income comes from government programs like senior citizens and the disabled receiving Social Security payments , according to bill details .
Those getting more than $ 99,000 a year don ’ t get the stimulus .
The one-time payment simply isn ’ t enough depending on the duration of a lockdown and slower business , according to Bloomberg Economics ’ s Andrew @ @ @ @ @ @ @ Sahm , a former economist at the Fed , say it ’ ll be necessary to send multiple rebates over the course of many months of the downturn .
The credit will not have the same impact as the 2008 version that sent $ 800 to Americans , according to Bill Hoagland , a former Senate Republican aide now with the Bipartisan Policy Center .
The impact on the economy is lessened because “ we are all sequestered away in our houses and not going out to shops or restaurants.
” The payment @ @ @ @ @ @ @ making more than $ 75,000 , just above the nation ’ s median household income .
That could prove limiting as many technical , manufacturing and technology positions are cut and those workers find a smaller safety net .
Speed remains a key question , as millions of workers have lost jobs in recent weeks and require those checks to pay rent , make mortgage payments at the beginning of April and satisfy ongoing credit-card , auto , student-debt payments , as well as afford other daily costs .
Trump indicated the checks @ @ @ @ @ @ @ according to Senate Democratic leader Charles Schumer , but during the prior recession , it took about two months for those to go out .
Under the agreed language , unemployment insurance would be extended by four months , the benefits would be bolstered by $ 600 weekly and eligibility would be expanded to cover more workers .
That would help address a surge in joblessness unprecedented since the Great Depression .
Unemployment-insurance claims are projected to skyrocket to 1.5 million for the week ended March 21 , after not long ago touching @ @ @ @ @ @ @ survey of economists by Bloomberg .
Forecasts are as high as 4 million .
But this income usually accounts for 50 % or less of an employee ’ s regular pay , so it doesn ’ t offset the income loss , Bloomberg Economics ’ s Husby says .
Also , many state websites administering claims have been slow amid overwhelming traffic , so some Americans may be waiting longer than normal to receive funds .
Corporations and state and local governments get about $ 500 billion in assistance .
Large firms -- @ @ @ @ @ @ @ account for roughly half the private U.S. workforce , according to the ADP Research Institute .
States disperse much of the healthcare spending .
This component was one of the more contentious in discussions between Democrats and Republicans .
About a quarter of private U.S. jobs are in firms with fewer than 50 employees with a similar share at midsize firms , according to ADP .
They ’ ve been among the hardest hit so far with retail and restaurant closures so any support for them is key to holding up the broader @ @ @ @ @ @ @ Group Inc. suggested that the government should guarantee loans for companies so they can retain and pay their workers throughout business disruptions .
The bill includes more than $ 350 billion in loans to small business .
Amherst Pierpont Securities economist Stephen Stanley , who broadly saw small firms as well-covered in the bill , said in a note to clients Tuesday that “ there are a lot of difficulties in vetting applicants , but getting money out the door quickly will be vital to keeping small businesses alive and hence keeping workers @ @ @


washingtonpost--2020-03-25--Central Banks Look at Japan Playbook for Yield Control Lessons

The advantage of targeting a yield rather than promising to buy a specific amount of bonds is the greater flexibility it allows monetary authorities .
If bond markets behave and yields fall into line with the targets , the program can be easier to manage with fewer purchases needed .
The BOJ adopted that approach in late 2016 -- it targets a 10-year yield around zero -- after its earlier QE program appeared on an unsustainable path given the huge volume of bond buying and resulting market distortions that were involved .
Federal Reserve Governor Lael Brainard has floated the @ @ @ @ @ @ @ U.S. recently too .
“ The surprise in the RBA package was that it leapt past the Fed and other central banks to take a leaf out of the Bank of Japan ’ s book , ” said Paul Sheard , a senior fellow at Harvard University ’ s Kennedy School who had a front row seat during Japan ’ s multi-decade struggle to battle stagnation and deflation as an economist in Tokyo .
To complement his version of yield curve control , RBA Governor Philip Lowe adopted forward guidance , saying he @ @ @ @ @ @ @ its current level for some years .
He also announced a funding facility for the banking system to support lending to small- and medium-sized businesses .
“ One important benefit is that this approach would smoothly move to capping interest rates on the short-to-medium segment of the yield curve once the policy rate moves to the lower bound and avoid the risk of delays or uncertainty that could be associated with asset purchases regarding the scale and timeframe , ” she said .
The Fed on Monday unveiled a sweeping series of measures @ @ @ @ @ @ @ buy unlimited amounts of Treasury bonds and mortgage-backed securities to keep borrowing costs at rock-bottom levels and to help ensure markets function properly .
It also set up programs to ensure credit flows to firms and state and local governments .
Adam Posen , who heads the Peterson Institute for International Economics in Washington and was a crisis-era U.K. policy maker , reckons that while a Fed move to yield curve control isn ’ t imminent , it is likely to come at some point .
He argues the policy enables easy fiscal @ @ @ @ @ @ @ independence because it isn ’ t judging or responding to a government ’ s programs .
“ Monetary policy is going to shift from keeping credit markets open to keeping rates low but positive , ” Posen says .
“ They can all learn from the Bank of Japan ’ s yield curve control .
When governments are doing repeated fiscal expansion , this is the least politically fraught and most transparent way to accommodate fiscal policy.
” Australia escaped the financial crisis of 2008 without a recession or the RBA needing to @ @ @ @ @ @ @ unorthodox ” monetary policies .
That meant it was able to observe the experience of other central banks including the Fed , BOJ , Bank of England and European Central Bank .
Lowe , for instance , has ruled out negative interest rates , all too aware of their adverse side effects on banks and asset managers .
Policy makers Down Under expect that they will need to buy bonds to help achieve the target yield level and keep markets functioning smoothly but , the announcement effect and market credibility will assist the @ @ @ @ @ @ @ s stock of outstanding government debt isn ’ t nearly as large as some global peers because its budget deficits haven ’ t been as deep , meaning they can probably manipulate yields with fewer purchases .
Lowe ’ s view that Australia would be able to stick to conventional rates policy this year was shattered by the spread of coronavirus , which has some economists predicting unemployment will soar to 11 % and the economy slump into recession for the first time since 1991 .
There are some key differences between Australia @ @ @ @ @ @ @ The latter came to yield curve control in 2016 after many years of quantitative easing and an entrenched deflationary mindset that Governor Haruhiko Kuroda continues to wrestle with today .


washingtonpost--2020-03-25--Analysis | Hedge Funds Do a Lucy on Charlie Brown Investors

That ’ s my take on the news that a bunch of hedge funds that have suffered losses as the Covid-19 pandemic roils markets are seeking to raise fresh money , pitching it as the chance to get in on a once-in-a-lifetime opportunity .
They include LMR Partners , Baupost Group , Citadel and Capital Four Management , my Bloomberg News colleagues Nishant Kumar and Hema Parmar reported earlier this week .
It ’ s easy to see why the funds want more chips to play with in the casino .
The tables are getting wilder , with successive central @ @ @ @ @ @ @ in equity and bond prices .
Even the most dispassionate gambler can get swept up in the thrill of the pursuit of profit .
And the hedge fund crowd is not exactly renowned for its shy , retiring personalities .
For funds that have already lost money , as the four above all did in the first two weeks of March , they have to claw back the losses on their existing cash piles before they can earn performance fees by improving performance .
Fresh money would reset the bar , allowing them @ @ @ @ @ @ @ they expect — or claim — to be able to generate .
And there are undoubtedly opportunities in the market carnage .
Billionaire Bill Ackman said this week his Pershing Square Capital Management firm has done “ about the most bullish thing we ’ ve done , ” investing $ 2.5 billion in equities in a “ recovery bet ” in recent weeks .
“ We are all long , ” the activist investor said in a Bloomberg Television interview .
“ No shorts.
” In fixed income , Robeco , a Rotterdam-based @ @ @ @ @ @ @ euros ( $ 183 billion ) of assets that describes itself as pursuing a conservative investment style , reckons it ’ s time to buy corporate debt .
“ This is the big sell-off that we have been waiting for — for years , ” Victor Verberk , co-head of the company ’ s credit team , said in an email earlier this week .
“ In just four weeks , valuations have collapsed to levels seen only four times in the last 80 years.
” But for hedge funds , which typically @ @ @ @ @ @ @ counterparts in asset management , the current market dislocations may , if anything , make it harder to get in and out of trades quickly and profitably .
Trading in S & P 500 index futures , typically a way to hedge short-term equity investments , all but dried up in recent weeks .
In U.S. government debt , it ’ s taken massive intervention by the Federal Reserve to stem a similar dysfunction between futures contracts , liquid Treasuries and their less actively traded off-the-run counterparts .
All of this makes it @ @ @ @ @ @ @ in the past for a particular hedge fund will bring success in the current environment .
Investing in a hedge fund is bound to have good times and bad times ; clients have to be willing to accept there will be periods of losses , provided the performance over time is good enough to justify the fees .
But it takes a certain amount of chutzpah to ask investors to increase their allocations to a losing strategy , even in normal financial times .
As things stand , it ’ s outrageous .
@ @ @ @ @ @ @ losers among the hedge fund crowd .
But identifying in advance which firms have the best compasses to navigate the current market storm profitably is impossible .
It would take a special kind of optimism — the blind kind , perhaps — to throw good money after bad by investing in a hedge fund that has failed to distinguish itself so far in the prevailing maelstrom .
Mark Gilbert is a Bloomberg Opinion columnist covering asset management .
He previously was the London bureau chief for Bloomberg News .
He is also the @ @ @ @ @ @ @ and Collusion Made the Credit Crisis Unstoppable .
”


washingtonpost--2020-03-25--Treasury Will Have $454 Billion for Fed to Leverage, Toomey Says


washingtonpost--2020-03-25--Uber and Airbnb Lobby for Gig Worker Bailout

Uber Technologies Inc. and Airbnb Inc. , the leaders of the so-called sharing economy , are suffering during the Covid-19 shutdown , but not in the same way as traditional travel companies like airlines or hotel chains .
They ’ ve built their business models on offloading as many costs and as much risk as possible to their suppliers .
Uber doesn ’ t have to pay salaries for drivers with little or nothing to do .
Now it ’ s those Uber drivers , as well as Airbnb ’ s hosts , who have to worry about paying for @ @ @ @ @ @ @ income as they depreciate in value .
The companies are hardly immune to the fallout from the pandemic .
Uber has lost about 20 % of its market value since the end of trading on on Feb. 26 , and Airbnb ’ s board considered revising its plan to go public at a recent meeting .
But executives from both companies have focused on drivers and hosts when working the phones to secure some government relief .
Uber also sent a letter to the White House and congressional leadership .
Airbnb penned a @ @ @ @ @ @ @ .
After an early morning agreement , the massive bailout bill Congress is working seems set to extend unemployment benefits to independent contractors and sole proprietorships , bringing relief even to workers for platforms that haven ’ t been paying for unemployment insurance .
In a letter to colleagues Minority Leader Chuck Schumer wrote that the bill “ ensures that all workers are protected whether they work for businesses small , medium or large , along with self-employed and workers in the gig economy.
” Khosrowshahi has spoken to at least 10 members @ @ @ @ @ @ @ according to two people familiar with the matter who asked not to be named discussing private matters .
Perhaps his most fruitful call came with Schumer , where the senator seemed to indicate support for protecting independent contractors , the two people said .
A spokesman for the minority leader did not return a request for comment.As he makes the rounds , Khosrowshahi has been reminded that being the chief executive of a $ 45.5 billion company doesn ’ t automatically make someone a power player in Washington .
When he attempted to @ @ @ @ @ @ @ Mitch McConnell , for instance , Khosrowshahi was shunted off onto a staffer .
“ He ’ s not even demanding to talk to the principals , ” said Justin Kintz , Uber ’ s head of policy .
“ He ’ s willing to speak to anyone on the Hill who is willing to listen.
” Similarly , Airbnb ’ s three co-founders have spoken with more than a dozen members of Congress , making sure that U.S. hosts— who often file their taxes as sole proprietors—benefit from the bailout package , @ @ @ @ @ @ @ matter who asked not to be named discussing private matters .
They ’ ve also enlisted thousands of hosts to urge lawmakers to include people who earn income by renting property on Airbnb in their unemployment protections .
Airbnb also wants to make sure hosts are eligible for Small Business Administration emergency loans .
While both companies are familiar with controversy , they believe they have a winning political issue .
“ To put it in a really fine perspective , 14 % of our hosts are from households that include teachers , @ @ @ @ @ @ @ Democratic operative who runs Airbnb ’ s policy shop .
Uber is the leader of a larger group of companies who have pushed the boundaries of traditional employment that also includes Lyft Inc. , Postmates Inc. , and DoorDash Inc. All of them consider their workers to be independent contractors , and don ’ t provide benefits like health insurance .
Airbnb hosts aren ’ t independent contractors , but are taking on financial risk in much the same way that ride-hail or delivery drivers do .
Critics of sharing economy companies have @ @ @ @ @ @ @ circumstances that would make workers vulnerable during a downturn .
By offloading risk onto workers , they ’ re also putting pressure on the governments to whom it will inevitably fall to support them .
For its part , Uber has been arguing that states or the federal government create a new status of worker that is neither totally an employee or an independent contractor .
“ The company has been pushing for a third way for seven years , ” said Lane Kasselman , a former Uber executive who advises startups .
@ @ @ @ @ @ @ said , is “ proof of what they ’ ve been saying all along.
” Patricia Smith , who was solicitor of labor under President Barack Obama , said Uber was “ taking advantage of a crisis ” by pushing for a new legal status of work , predicting such a move would inspire other companies to push employees into situations with fewer benefits .
“ All you ’ re going to do is open the door to even more misclassification , ” she said .
While Uber is eager to advocate for @ @ @ @ @ @ @ to use the $ 10 billion it had in cash as of the end of February to provide relief itself .
Doing so could increase the likelihood the company would be compelled to continue paying out those benefits going forward , the company says .
Uber has however said it will compensate drivers who suffer from coronavirus .
Uber ’ s turn towards driver advocacy hasn ’ t gone unnoticed .
“ A little ironic , right ?
Uber has spent so much time and money fighting reclassification , ” ” said Bradley @ @ @ @ @ @ @ worked with Uber but sold his shares .
“ Now there ’ s all of a sudden an upside of people being treated as employees and they want it .
”


washingtonpost--2020-03-25--A Rent Wipeout Could Ignite a Mortgage Crisis

This , more or less , is the catastrophic “ domino effect ” that real-estate investor Tom Barrack , chief executive officer of Colony Capital Inc. , warned about this week .
Simply put , if commercial tenants don ’ t pay rent because of a lack of cash , then property owners might be squeezed and default on their mortgage payments .
The same goes for homeowners .
That could bring the problem squarely onto the balance sheets of large U.S. banks , which will suffer steep losses on their loans .
At first , it might have seemed @ @ @ @ @ @ @ book .
But as more details emerged about the carnage across the $ 16 trillion U.S. mortgage market , it ’ s clear that the complex web of financial obligations tied to real estate could again be the flashpoint that leads to a financial crisis without some sort of intervention .
Part of the reason that mortgages are again veering into crisis mode is because the modern market has so many moving parts .
My Bloomberg Opinion colleague Matt Levine laid it out in a five-part list , which you can ( and @ @ @ @ @ @ @ to say , if money is being lent twice-over in the repo market , the players are highly leveraged and vulnerable to an unexpected shock .
The coronavirus outbreak certainly qualifies as such — some 47,000 U.S. chain stores temporary closed in the span of a week , Bloomberg News reported Tuesday .
The median estimate for initial jobless claims on Thursday is 1.5 million , up from 281,000 previously .
This mortgage-market meltdown is happening largely because everyone in the money chain is anxious and wants to cash out at the same @ @ @ @ @ @ @ to rent .
It ’ s anyone ’ s guess when the American economy will be up and running again and what sort of assistance the federal government will provide to those companies forced to close and those individuals suddenly out of a job .
It ’ s hard to blame banks for not wanting to wait around for answers and instead issue margin calls on mortgage real estate investment trusts .
Those jitters caused emergency sales from the REITs , including relatively safe ( and more liquid ) agency debt .
But @ @ @ @ @ @ @ On Tuesday , Invesco Mortgage Capital Inc. said it could longer fund margin calls , following in the footsteps of AG Mortgage Investment Trust Inc. , which said it failed to meet some margin calls on Friday and doesn ’ t expect to meet them in the future , and TPG RE Finance Trust Inc. , which is seeking flexibility from lenders .
They ’ re almost certainly not the only ones .
For now , there ’ s only so much the Federal Reserve can do to address these strains .
It @ @ @ @ @ @ @ and agency mortgage-backed securities on Monday .
The central bank is wasting no time flexing its muscle : It ’ s targeting $ 250 billion of agency MBS purchases this week after buying $ 67 billion last week .
The previous record was $ 33 billion in March 2009 , according to Morgan Stanley .
Many observers are confident that the Fed ’ s “ whatever it takes ” model will restore order to the agency MBS market in no time .
For non-agency securities , there ’ s not yet a dedicated @ @ @ @ @ @ @ Ashworth suggests these assets may be the next order of business for the Fed .
It ’ s hard to argue with that , given the central bank ’ s already unprecedented moves into the corporate and municipal markets .
Before the Fed launches yet another emergency facility , though , central bankers should assess the fiscal stimulus package from Congress .
If lawmakers provide enough relief for the most affected Americans to get through these next few months and cover their rent , lease and mortgage payments , it might be enough @ @ @ @ @ @ @ in Barrack ’ s example .


washingtonpost--2020-04-09--Banks Given Capital Break for Small Business Loans Amid Crisis

Such loans will be backed by a recently announced Fed lending facility , and the rule ’ s text says the regulators would agree to “ allow banking organizations to neutralize the regulatory capital effects of participating in the facility.
” The rule change is meant to smooth the path for banks to facilitate Small Business Administration loans to companies facing the risk of bankruptcy amid the shutdown of the U.S. economy .
Roughly $ 350 billion in rescue funds were made available as part of the $ 2.2 trillion stimulus package passed last month .
Lawmakers are negotiating a @ @ @ @ @ @ @ billion to the SBA program .
The capital relief is being granted through an interim final rule , meaning it takes effect immediately while still giving the public the chance to offer comments .
The move is similar to what was previously done for banks participating in the Fed ’ s Money Market Mutual Fund Liquidity Facility .
Banks ranging from Wall Street giants to community lenders have already benefited from a number of de-regulatory moves by the Fed and other agencies amid the worsening coronavirus pandemic .
The Fed on Wednesday said @ @ @ @ @ @ @ asset growth for Wells Fargo & Co. to allow it to boost lending through the SBA program .
The penalty was imposed on the bank for opening millions of accounts without customers ’ approval , one of the biggest industry scandals in recent years .
The Fed had announced its new lending facility Monday in a brief statement , saying it would provide term financing to banks against loans issued under the SBA program .
Under the initiative , banks provide loans to small businesses to cover payroll , rent and utilities for @ @ @ @ @ @ @ loans convert to grants if the companies retain or rehire their workers .
For more articles like this , please visit us at bloomberg.com


washingtonpost--2020-04-08--Analysis | Don’t Let This Billion Dollar Bailout Fool You

All told , China ’ s aid package adds up to around 8 billion yuan ( $ 1.13 billion ) , according to Goldman Sachs Group Inc. That ’ s a far cry from the 25 billion yuan to 30 billion yuan spent just on electric vehicle incentives last year , or the 100-billion-yuan-plus laid out in the 2015 to 2017 stimulus cycle .
There ’ s a bigger problem than fiscal constraints , though .
Beijing ’ s policies will do little to boost consumer demand and only add volume — exactly what a market awash in supply doesn @ @ @ @ @ @ @ items like cars are unlikely to top post-coronavirus shopping lists , even if people are initially wary of public transportation .
In recent weeks , policymakers have laid out a slew of measures to boost sales , which were slumping even before Covid-19 .
Subsidies that were supposed to end this year have been extended to 2022 .
The government is incentivizing auto companies in several provinces to meet targets and high growth rates , and urging them to offer sweeteners for bulk purchases .
In other cities , like Hangzhou , restrictions @ @ @ @ @ @ @ excessive sales — are being loosened and quotas expanded .
Yet all this easing of limits on conventional cars has come at the cost of the drive toward greener ones .
Electric-vehicle specific policies have been lackluster .
The latest program looks a lot like the U.S. ’ s cash for clunkers experiment of 2009 .
In places like Tianjin and Hebei , the central government is turning to vouchers and coupons instead of the usual subsidies .
In Beijing , for instance , car owners can get 7,000 yuan this year , @ @ @ @ @ @ @ for scrapping older , higher emission models or transferring them out of the city .
Local officials are also urging automakers to match or exceed government offers for shoppers who then go and buy new vehicles .
In theory , this program cleans out old stock , encourages sales and makes people feel like they can start spending again .
In the U.S. , this ultimately backfired because it shifted demand to cheaper cars and reduced spending .
Most of the perks laid out , if they stick , will result in soaring @ @ @ @ @ @ @ Electric car sales , meanwhile , will remain subdued . )
Local brands like Geely Automobile Holdings Ltd. , SAIC Motor Corp. , Guangzhou Automobile Group Co. and BYD Co. will likely post figures closer to those before the viral outbreak .
But things will look good for all the wrong reasons .
For clues about the health of China ’ s auto market , investors may be better served looking elsewhere .
Dealership traffic and sales of foreign , especially luxury , carmakers that stayed ahead of the broader market will be @ @ @ @ @ @ @ 98.8 % of dealers have re-opened and are aggressively luring consumers , showroom traffic is still around 66 % .
The SAIC-General Motors Corp.-Wuling venture for instance , is subsidizing buyers with a targeted total amount of 1 billion yuan , according to CLSA Ltd. Last month , they launched a no-questions-asked return policy within 30 days for their newly launched Baojun series .
Another area to watch is premium car sales and pricing .
Big luxury automakers haven ’ t been major beneficiaries partly because some of the perks are focused on @ @ @ @ @ @ @ joint ventures with foreign players that haven ’ t done so well .
No one ’ s scrapping a Beemer anytime soon .
Since many of the incentives are coming from local governments , it will also be important to assess sales on a city-by-city or regional basis .
Shanghai and Hangzhou are saturated markets – their ability to significantly boost purchases by loosening restrictions is much lower than areas in central and western China , where numbers may start rising a lot faster .
The other lever Beijing will lean on is @ @ @ @ @ @ @ on auto financing than other countries , the sector is still growing quickly .
The market for auto asset-backed securities , backed by pools of car loans , is also booming , so performance here will be key .
Prepayments will be another tell-tale sign ; who is paying and who isn ’ t .
Already , delinquency rates for some buyers are rising faster than others .
In the bust , boost and boom cycle of China ’ s car market , there will be more losers than winners — the glossy @ @ @ @ @ @ @ find them .
It ’ ll take a bit more digging .


washingtonpost--2020-04-09--Analysis | Italy’s Debt Is Less Terrifying Than It Looks

Italy has always benefited from an elevated level of household savings , with plenty of retail investors putting their money into relatively high-yielding domestic government debt ; Italian banks are big holders too .
These factors alone wouldn ’ t be enough to prevent a repeat of the market exodus that battered Italian bonds in May 2018 , when the populist coalition of the League and the Five Star Movement took power .
That ’ s why the current Italian government is pushing so hard for a bigger European Union response , including easy terms on loans from the bloc @ @ @ @ @ @ @ Stability Mechanism .
But with the European Central Bank already doing everything it can to keep Italian borrowing costs low , the nation is capable of weathering this storm .
Indeed , it still offers a more attractive yield than the rest of Europe ( at least for the most liquid paper ) .
It helps that the fiscal restraint imposed by Brussels on Italy means the country ’ s budget deficit coming into this year was lower than it might have been .
The country ’ s planned net new bond issues @ @ @ @ @ @ @ 50 billion euros .
Of course , the picture is changing rapidly with Italy ’ s gross debt sale total for 2020 likely to zoom from 250 billion euros to 400 billion euros , according to Imogen Bachra , a European rates strategist at NatWest Markets .
But the ECB will snap up much of this through its quantitative easing programs , meaning the net requirement for sales probably won ’ t change much .
Italian debt made up one-third of the ECB ’ s asset purchases in March .
And Rome could @ @ @ @ @ @ @ euros of additional pandemic response purchases by the euro zone ’ s central bank .
After President Christine Lagarde ’ s initial miscalculation on the necessary crisis strategy , she deserves a lot of credit for turning things around .
The country ’ s debt balance might even improve , according to NatWest analysts , depending on how substantial the virus response package is from the EU .
Including the possible help from the ESM and other bodies , and “ after accounting for very significant ECB purchases , the ‘ free float @ @ @ @ @ @ @ have to absorb this year could be less than last year , ” the analysts said .
None of this factors in the very real danger that market sentiment toward Italy could deteriorate rapidly if the coronavirus takes another ugly turn or the country ’ s unstable political landscape shifts adversely .
The ever-increasing debt to GDP burden has to be resolved permanently at some point , and that can only come from sustained growth .
However , in the short term the monetary response has propped up Rome in its hour of @ @ @ @ @ @ @ the euro zone ’ s finance ministers have a united response to the Covid-19 crisis might see Italy ’ s sovereign bonds regain their poise .


washingtonpost--2020-04-08--Analysis | China Tech Looks Unready for What’s Coming Next

That ’ s a risky tone to take .
A global recession is upon us , and they ’ re not fully taking it in.China is looking at the reopening this week of Wuhan , the epicenter of the outbreak , after months of lockdown and seeing it as a sign that things are getting better .
The messaging is obvious : China is back in business , and its domestic companies are in the clear .
Overseas markets are not OK .
Millions of consumers around the world will be left without the ability to pay rent or buy @ @ @ @ @ @ @ to remain on the must-have list .
All told , more than 1 billion workers are at risk of a pay cut or losing their jobs , the International Labor Organization warns .
In the space of just two weeks , the U.S. stunned economists with a record 10 million people filing for unemployment benefits .
That may not seem like much in a world of 7.8 billion , yet America remains the world ’ s largest economy and each of those now jobless is a consumer who carries a lot more spending @ @ @ @ @ @ @ China , it ’ s going to be difficult for even domestically focused enterprises to avoid any impact .
While Xiaomi sounds optimistic , its biggest competitor is more cautious .
Huawei Technologies Co. , which gets more than half its revenue from handsets and mostly at home , recently told reporters that 2020 will be a challenging year but that it ’ s too early to make a forecast .
Tencent Holdings Ltd. has a taken a pragmatic approach to preserving its bottom line as revenue declines : cutting costs .
Still @ @ @ @ @ @ @ spending on marketing is one not flowing to other internet and media companies that depend on advertising sales to run their businesses .
The social-media and online-games company is confident it can offset any short-term weakness with a push into new services , like cloud computing .
China ’ s coronavirus outbreak helped boost demand for Tencent ’ s enterprise products , part of a long-term trend , President Martin Lau told investors last month .
While that may be true , it won ’ t help much if thousands of companies cut @ @ @ @ @ @ @ That ’ s a real possibility .
Chinese gross domestic product growth could slow to 1.5 % for 2020 , pushing the labor market to its toughest situation in 20 years , Wang Tao , chief China economist for UBS AG , said in a note to clients this week .
Instead of urban employment growing by 10 million annually as in recent years , the figure may decline by a few million .
Downward pressure is likely to continue for China ’ s international trade , pushing exports down 12 % for @ @ @ @ @ @ @ China remains at the center of global technology manufacturing , and the outlook has deteriorated markedly .
Researcher IDC Corp. just cut its 2020 forecast for global information technology spending growth to minus 2.7 % from 5.1 % .
Beyond the drop in economic activity , many purchases will be delayed or cancelled purely due to the uncertainty surrounding the pandemic ’ s conclusion .
Hon Hai Precision Industry Co. posted a 12 % drop in first-quarter revenue .
The Taiwanese company employs up to 1 million people in China to churn out @ @ @ @ @ @ @ consumer electronics .
If demand for gadgets like Apple Inc. ’ s iPhones falls , the need for those workers disappears , and with it their spending power .
That same scenario will play out for auto workers , garment makers , and machinery operators .
The flow-on effect from declining exports will be unavoidable .
As my colleague Anjani Trivedi wrote last week , the country ’ s stimulus measures are paltry compared to what ’ s being meted out in the rest of the world .
That means domestic consumer markets @ @ @ @ @ @ @ fewer people will have the disposable income to shop on Alibaba Group Holding Ltd. ’ s Taobao marketplace , or JD.com ’ s online outlets .
They won ’ t be able to afford games or the products advertised on them , and many will need to tighten their belts when it comes to home delivery or eating out .
Chinese technology companies have spent the last few months adjusting to consumers who are stuck spending their money from home .
They ’ ll soon need to grapple with the reality of customers @ @ @ @ @ @ @ all .


washingtonpost--2020-04-09--Analysis | ‘Coronabonds’ Could Bail Europe Out, Tie It Together

Pre-coronavirus they were known as euro bonds , and they were something many EU leaders have argued for since the creation of the euro in 1999 : a shared debt instrument to finance borrowing , where the money can be directed to the countries that need it most .
National governments currently sell their own debt to fund projects and annual budgets , but do so at wildly varying costs .
Germany can effectively be paid to borrow , due to its impeccable credit rating and tight spending rules , while Italy -- with its less-stellar credit rating -- has @ @ @ @ @ @ @ at least a full percentage-point more .
Though the idea has failed to garner sufficient support , a coronabond could “ mutualize ” risk among nations , possibly cutting borrowing costs .
While the 19-member euro area has long battled with how to narrow differences between rich and poor members , the coronavirus has exposed those inequalities like never before .
Some of the most indebted nations such as Italy and Spain have been hardest hit , with deaths spiraling into the thousands .
At the same time , the European Central Bank @ @ @ @ @ @ @ by purchasing more than 1 trillion euros ( $ 1.1 trillion ) of bonds this year through its so-called quantitative easing programs .
It also scrapped its self-imposed purchasing limits .
But it may still need to take further steps to calm the volatile markets for government bonds .
A new debt instrument could allow the central bank more flexibility .
President Christine Lagarde is a huge proponent .
Italy is , too .
Germany .
Europe ’ s economic powerhouse has long opposed the idea of euro bonds , wary that it @ @ @ @ @ @ @ financing of poorer nations in Europe ’ s south , and 57 % of the population is supposedly against the idea .
It ’ s less than a decade since the region ’ s sovereign debt crisis threatened to sink the common currency .
Back then , with Greece requiring a series of bailouts , Germany resisted calls for euro bonds .
Those fears have come back to the surface with finance ministers across the bloc squabbling over even a hint of possible joint issuance to come .
Any move now to issue @ @ @ @ @ @ @ by Germany ’ s legislature and there are doubts over whether Chancellor Angela Merkel would be able to secure the required support .
Proponents of coronabonds contend the current crisis is an external shock that requires a joint solution .
The idea is for a jointly backed bond sale of up to 1.5 trillion euros that would fund government action to contain the virus and reboot euro-area economies .
The leaders of Spain , Italy , France , Portugal , Greece , Belgium , Luxembourg Slovenia and Ireland said the bloc needed to @ @ @ @ @ @ @ size in order to ensure “ stable long-term financing for the policies required to counter the damages caused by this pandemic.
” Germany and the Netherlands were notable absentees .
There ’ s no clear understanding of whether such a bond sale would be a one-off measure or a gateway to recurring sales .
But they could possibly help the ECB find more bonds to buy , given there are still constrained by the capital key , which dictates purchases according to the size and population of each country .
Richer countries like @ @ @ @ @ @ @ long complained that their southern neighbors don ’ t use the good times of solid economic growth to put their houses in order , arguing it ’ s not their fault those countries lack the means to battle their way out of a crisis .
The “ moral hazard ” argument -- that bailouts encourage further bad behavior -- has long been a roadblock .
This time , though , the damage was not caused by profligate spending but by an unforeseen global health crisis .
That ’ s unclear .
Borrowing costs @ @ @ @ @ @ @ converge , with yields on German bonds rising and those of riskier nations ’ debt such as Italy ’ s falling .
Much would depend on the size of the program , though .
For James Athey , a money manager at Aberdeen Standard Investments , the first tranches are likely to be small so Germany could retain control over its fiscal liabilities .
Longer term , Athey says holders of Italian government debt could lose out if coronabonds were judged as being superior , meaning that the holders of those securities would @ @ @ @ @ @ @ of any default .
Governments can of course sell their own debt to fund crisis-response measures , and the ECB ’ s huge bond-buying program will likely keep borrowing costs in check .
But spending domestically to combat a disease that does not respect national borders may not be the most efficient strategy .
Alternatives include activating the region ’ s bailout fund , called the European Stability Mechanism , which could make available credit lines worth up to 2 % of each country ’ s output .
That would likely come with @ @ @ @ @ @ @ reluctant to take the money , worried they ’ ll be stigmatized as weak and potentially subjected to demands for changes in local regulation and other economic reforms .
France has proposed a plan that would create a temporary reserve worth 3 % of EU gross domestic output , but closely resembles coronabonds .
Another tool in the ECB arsenal is its crisis-era program known as Outright Monetary Transactions , which has never been used .
Under that program , the ECB could theoretically buy unlimited amounts of sovereign bonds in the secondary @ @ @ @ @ @ @ bailout agreements with the ESM .


washingtonpost--2020-04-09--Community Banks to Seek More U.S. Help in Small Business Program

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washingtonpost--2020-04-09--Fed to Slow Pace of Treasury Buying Again Under Its QE Program

“ It ’ s a healthy and encouraging sign that the Fed can pull back on its purchases , ” said Peter Tchir , head of macro strategy at Academy Securities .
“ We don ’ t want the Fed ’ s buying overwhelming things and there ’ s also enough investors with concerns about that outlook that are willing to purchase Treasuries.
” The current round of Treasury purchase operations began March 13 and peaked in size at $ 75 billion per day from March 19 to April 1 .
It has made purchases on Monday through Thursday this @ @ @ @ @ @ @ on April 10 because the Treasury market will be closed for a holiday .
There will be at least four operations a day covering either nominal Treasuries or inflation-protected securities , according to the schedule .
“ We ’ re substantially better than where we were three weeks ago in the Treasury market , ” said Tony Farren , a managing director at broker-dealer Mischler Financial Group in Stamford , Connecticut .
“ Fed policy makers have learned from some mistakes in the 2008-2009 financial crisis in that when they give medicine to @ @ @ @ @ @ @ recover , they should take some of the medicine back.
” Treasury futures ease from near session highs after the Fed ’ s announcement on bond buying , although they remained up on the day .
The market for cash Treasuries closed early ahead of the Friday holiday .
Earlier on Thursday , the Fed announced another series of sweeping steps to provide as much as $ 2.3 trillion in additional aid during the coronavirus pandemic , including starting programs to aid small- and mid-sized businesses as well as state and local governments @ @ @ @ @ @ @ priority must be to address this public health crisis , providing care for the ill and limiting the further spread of the virus , ” Fed Chair Jerome Powell said in a statement accompanying that announcement .
“ The Fed ’ s role is to provide as much relief and stability as we can during this period of constrained economic activity.
” For more articles like this , please visit us at bloomberg.com


washingtonpost--2020-04-09--GOP, Democrats in Standoff Over Boosting Small-Business Aid

Democratic Senator Ben Cardin , a co-sponsor of the small business Paycheck Protection Program , objected to the majority leader ’ s proposal , calling it “ a political stunt.
” Cardin said the PPP hasn ’ t run out of money but other programs have , and he said the PPP process needs to be streamlined to make it easier for small businesses to get loans .
“ We want to make sure it is done in the best way for the most people , ” Pelosi said .
“ We have time to negotiate to see how and @ @ @ @ @ @ @ money there.
” Over the past week , borrowers said they were turned away by banks when they didn ’ t already have a lending account .
Banks have been wary about hastily approving loans for new customers and blame time-consuming federal rules requiring them to verify customer identity to catch terrorists and money launderers .
As part of his plea for urgency , McConnell cited Thursday ’ s report that showed an additional 6.6 million people filed for unemployment benefits last week .
That brings the three-week total to 16.8 million claims @ @ @ @ @ @ @ .
Mnuchin had asked Congress to approve by the end of the week an additional $ 250 billion for the program , bringing the total amount available to $ 600 billion .
The only way to accomplish that with lawmakers out of town would be if no member of the House or Senate objected .
There have been no negotiations between Republican and Democratic leaders on a compromise , and Pelosi signaled she had no intention of bringing McConnell ’ s proposal to the House .
It could be harder for the House @ @ @ @ @ @ @ , since some Republicans say members should have to go on record with their votes to spend taxpayer money .
Pelosi said House leaders are considering voting by proxy or other measures to protect members from having to risk virus infection by traveling to Washington .
” I will be very frank with you .
We don ’ t want anybody coming back at a time that might not be healthy for them , ” said Pelosi .
The Payroll Protection Program is a key part of the $ 2.2 trillion pandemic response @ @ @ @ @ @ @ orders across the country have particularly squeezed small businesses , which account for almost half of U.S. private employment .
McConnell said that program is the only one immediately short of funding .
About a third of the $ 350 billion designated for the small business loan program has already been committed in the first few days since lenders began accepting applications .
Technical and regulatory difficulties have frustrated many small business owners , sparking concerns that the fund could run out before they access the loans .
Pelosi and Schumer on Wednesday @ @ @ @ @ @ @ and $ 150 billion for state and local governments to Mnuchin ’ s request .
They also want half of the additional small business aid -- or $ 125 billion -- channeled through community-based and other financial institutions that serve companies owned by farmers , families , women , minorities and veterans .
The two Maryland Democrats in the Senate chamber Thursday argued that there are other issues with the PPP that need to be addressed , rather than simply adding more money .
Cardin and Senator Chris Van Hollen urged bipartisan talks @ @ @ @ @ @ @ pass the CARES Act stimulus package .
“ We know we need more money for this program -- many of us predicted this before we passed the Cares Act , ” Van Hollen said .
“ But for goodness ’ s sakes , let ’ s take the opportunity to make some bipartisan fixes to allow this program to work better for the very people it ’ s designed to help .
”


washingtonpost--2020-04-16--Hedge Funds Want Taxpayers to Think They’re ‘Small’

Predictably , the Trump administration ’ s carnivalesque management practices , this time engineered by Treasury Secretary Steven Mnuchin , have hamstrung the rescue effort .
Mnuchin launched the bailout without much clarity about banks ’ roles , and small businesses were left in the dark about how to apply for aid .
There were no transparent guidelines for determining which entrepreneurs could secure money , and computer glitches fouled up the application process .
A separate emergency lending effort overseen by the Small Business Administration “ has all but collapsed under an unprecedented crush of applications and a shortage @ @ @ @ @ @ @ prompting urgent calls for action on Capitol Hill , ” the Washington Post reported .
It ’ s been messy and , at least for the time being , it ’ s all gone .
Who got the funding ?
That ’ s not yet clear .
The Government Accountability Office and the Congressional Oversight Commission have been tasked with following the money , but it will take time — weeks , maybe months — for their reports to appear .
The SBA said it has approved about 1.4 million loan applications , @ @ @ @ @ @ @ of the $ 349 billion committed to small business .
This suggests that , on average , each applicant got about $ 215,000 .
Here ’ s what ’ s curious : There are 30 million small businesses in the U.S. , according to the SBA ’ s own data , so less than 5 % of them have gobbled up most of the bailout money in just two weeks .
Who are the lucky — or well-connected — winners ?
We ’ ll have to wait and see , but in the @ @ @ @ @ @ @ entrepreneurs who also consider themselves small business owners are worth some attention .
According to Bloomberg News , hedgies and other trading firms have been taking cues from their accountants and lawyers and making bids for some of that $ 350 billion .
When the Coronavirus Aid , Relief and Economic Security Act passed earlier this month , it mandated that small businesses would be defined as any entity with fewer than 500 employees .
Sure enough , lots of hedge funds fall under that umbrella .
The top 10 or so funds @ @ @ @ @ @ @ 500 to about 2,500 people each , but once you move down the rankings the headcount ( as well as the amount of assets under management ) shrinks rapidly .
So sure , hedge funds are “ small ” by the government ’ s definition , and right now , with the economy falling apart and bottom lines evaporating , “ small ” is a good thing to be if you want a handout .
A hedge fund ’ s mission is to navigate risk and make money for clients .
They get @ @ @ @ @ @ @ effectively , and are meant to suffer the financial consequences when they don ’ t .
Some hedge funds even specialize in profiting off the existential mistakes of others , and typically insist on enforcing survival-of-the-fittest rules to get paid — even if it ’ s a distressed territory like Puerto Rico , for example .
It ’ s only fair that hedgies should hold themselves to the same standard and man-up under duress .
Consider me old-fashioned , but I think “ small businesses ” are the relatively modest retail , manufacturing @ @ @ @ @ @ @ the country .
They are run by people like Mike Guerriero , a gelati vendor I recently profiled .
Mike hasn ’ t taken home $ 827 million from his business in any year , ever .
You can argue that a gelati vendor isn ’ t as important to the economy as a hedge fund and is thus less worth bailing out , but that ’ s a separate and subjective rabbit hole .
At least one counterargument is that a vendor may get permanently sidelined by the corona-crisis , while a @ @ @ @ @ @ @ been smart , has already saved years ’ worth of survival money and can bounce back more readily after things settle down .
In that context , it might have been useful for legislators to move beyond headcount when defining eligibility for a small business bailout .
Being “ vulnerable ” is just as important as being “ small , ” and right now some businesses are more vulnerable than others .
Hedgies who think I ’ m being too strict can find solace in the tax code .
More than 80 % @ @ @ @ @ @ @ legislators embedded in the CARES Act will reportedly go to those who earn more than $ 1 million annually on “ pass-through ” income — making hedge fund investors and real estate developers like President Donald Trump prime beneficiaries .


washingtonpost--2020-04-16--Eight Weeks of Relief Is Not Enough for Small Firms Facing Failure

” We ’ re not going to open our hotels in April , and we ’ re not going to open our hotels in May , ” said Richard Born , a longtime New York City hotelier who has shut 40 operations qualifying as small businesses .
“ We ’ re hoping for July , and we are the poster child for the industries that have been hurt the most.
” With money from the $ 349 billion package for small businesses running out , the focus in Washington is on pushing for more funding to shore up a key @ @ @ @ @ @ @ a change in the structure of the loans , advocacy groups say , many small businesses will fail despite the hundreds of billions in relief that have been laid out for them .
“ A month or two , they might manage , but by the third month you get in the questionable zone , ” said Richard Prisinzano , director of policy analysis at the University of Pennsylvania ’ s Penn Wharton Budget Model .
“ This is a short-term relief bill .
It is predicated on the shutdowns being over in @ @ @ @ @ @ @ the conditions of the Paycheck Protection Program , known as PPP .
Borrowers must use the loans to cover payroll over about eight weeks for the debt to be forgiven , and keep or rehire the same number of employees as before the shutdowns .
The point is to ensure people continue to receive paychecks even as unemployment has skyrocketed in recent weeks .
That timing doesn ’ t work for Clara Osterhage , who owns hair salons in Ohio and other states and had to lay off hundreds of employees .
She @ @ @ @ @ @ @ her employees if her businesses are still closed or limited at the end of the eight weeks .
Almost half of small businesses in a recent survey published in a National Bureau of Economic Research paper said they think the crisis will still be going on at the start of July .
Many respondents to that question weren ’ t confident about their answers , reflecting the uncertainty of today ’ s world , according to the paper .
Rather than bringing back staff for a few weeks and then letting them go @ @ @ @ @ @ @ use the funds later , perhaps when they ’ re reopening in the late summer or fall , said the restaurant group ’ s executive vice president of public affairs , Sean Kennedy .
“ If they have more certainty that there is a chunk of cash that will be available to them , that is going to be the difference between them saying , ‘ I ’ m turning my keys back in to the bank , ’ or , ‘ I ’ m going to try to ride this out , @ @ @ @ @ @ @ 12 to 18 months for the travel business to return after 9/11 and the 2008 recession , according to Brian Crawford , executive vice president of government affairs for the American Hotel & Lodging Association , a lobbying group .
Businesses will have to contend with the social reality that customers may be scared to find themselves wedged into an airplane seat beside a coughing stranger .
“ People are not going to travel until they feel safe again , ” Crawford said .
“ The notion that we would be at 75 @ @ @ @ @ @ @ in our opinion and probably not workable.
” The International Franchise Association -- a lobbying group representing franchises in hotels , retail , restaurants and business services -- is pushing for a series of demands , including extending the maximum loans to cover eight times the average monthly cost of all expenses , an additional $ 600 billion in funding and extending the time covered to December .
“ Whether the public comes back is the biggest thing right now , and the longer this goes on , I think the longer people @ @ @ @ @ @ @ said .
Christ , who owns a Florida business that cleans kitchen exhaust systems , Hoodz of Orlando , said he ’ d received $ 290,000 under the program .
Now he must decide whether to use the money to pay his staff for the next two months and get the loan forgiven , or keep it on the books as a hedge against his concerns about Florida ’ s economic prospects for the rest of the year while his laid-off workers can draw unemployment .


washingtonpost--2020-04-16--Meet Fed’s Nine New Offspring, Each With Different Market Role

Never in Fed history has it done so much , so fast .
But of the nine programs , so far four are fully operational -- as the central bank races to roll out some it ’ s used before and others that are brand new .
While the dizzying acronyms of the Fed ’ s special lending facilities are confusing , an easier way to look at them is to put them into three buckets : Since the Fed reached for its emergency lending powers on March 17 , many of the programs it introduced qualify as classic lender-of-last-resort @ @ @ @ @ @ @ businesses vital to short-term funding markets usually at a premium and in exchange for solid collateral .
The central bank also launched a backstop for U.S. government bond dealers to preserve liquidity in this cornerstone of the global financial market known as the Primary Dealer Credit Facility .
The facility had $ 33 billion in loans outstanding as of April 8 .
In addition , the Fed created the Term Asset-Backed Securities Loan Facility -- like it did in the 2008-2009 financial crisis -- to help financial institutions securitize short-term credits , from @ @ @ @ @ @ @ facility is not operational yet .
The Fed has entered an unusually close relationship with Congress -- its boss and at times hostile critic -- to combat the pandemic ’ s economic damage .
The $ 2 trillion virus rescue plan approved by lawmakers appropriated $ 454 billion for the central bank and Treasury Department to lever up into trillions of dollars of aid as they see fit .
Two of them together make up the Main Street lending program , which will buy up to $ 600 billion in loans from banks @ @ @ @ @ @ @ mid-sized businesses with up to 10,000 employees and less than $ 2.5 billion in revenues .
Eligible banks may use the facilities to originate new loans or increase the size of existing credit to businesses .
Lenders will retain a 5 % share of the debt , selling the remaining 95 % to the Fed .
Another program facilitates the $ 349 billion Congress designated for Small Business Administration lending , which operate through banks around the country .
By serving as a backstop buyer of these assets -- through the Paycheck Protection @ @ @ @ @ @ @ free up banks ’ capacity to make more of these loans to small businesses .
The Fed ’ s Municipal Liquidity Facility will buy up to $ 500 billion in short-term notes issued by large cities and counties and states .
It ’ s designed as bridge liquidity to support them through a period when revenues have been flattened by the shutdown and tax payments are delayed .
Status : The facility is under development and Fed officials are watching the muni market ’ s stability and have indicated they could do more @ @ @ @ @ @ @ Fed to be able to buy longer-term municipal debt directly outside of an emergency facility .
The scale of these actions are new for the Fed in the post-war period and contain long-term political risk .
What ’ s to stop Congress from asking the Fed to administer disaster relief loans after the next big storm ?
“ Why is the Fed in charge of all this ?
” said Aaron Klein , an economic fellow at the Brookings Institution .
“ The answer is because Congress told them to be .
Ironically @ @ @ @ @ @ @ ” ends up running programs that Congress can ’ t organize because of partisanship , he said .
One , called the Primary Market Corporate Credit Facility , will buy debt or loans directly from corporations .
The other -- named the Secondary Market Corporate Credit Facility -- will buy corporate debt in secondary markets , including exchange-traded funds that specialize in high-risk , high-yield debt .
The Fed said the combined size of the two facilities could reach $ 750 billion .
But there is a big difference .
The CPFF is @ @ @ @ @ @ @ three month maturity , and companies access it at a penalty rate .
The Fed ’ s secondary bond market facility will buy term debt , some of it at less than investment grade , and will demand more protection from taxpayers as a result .
There isn ’ t much clarity on pricing for either vehicle but Fed officials want to steer away from discretionary choices if possible and have clear gates and metrics on when and what bonds they buy , and how they determine loan eligibility .
It ’ s @ @ @ @ @ @ @ Primary Market Corporate Credit Facility , the Fed is willing to be the sole investor in a debt issue .
John Weinberg , a policy adviser at the Richmond Fed , calls the corporate facilities “ the biggest departure ” from traditional lender-of-last resort measures.
“ We are not buying corporate debt to protect the holders of corporate debt , ” said Weinberg .
“ We are buying corporate debt to make sure that the markets for those securities remain liquid .
”