Categories
Business

Fed policymakers worry growth plateauing, pledge more support

(Reuters) – A surge in coronavirus cases that threatens to pinch consumer spending and job gains just as some stimulus programs are due to expire has Federal Reserve policymakers worried, with at least one pledging more support ahead from the U.S. central bank.

“We have a lot of accommodation in place; there’s more that we can do, there’s more that we will do,” Fed Vice Chair Richard Clarida told CNN International on Tuesday.

There is “no limit” to the amount of bond buying the Fed can do, he said, adding that the Fed could also ease policy further with forward guidance and will keep its lending backstops in place as long as needed.

While evidence of an economic rebound in May and June was “very welcome,” Clarida said, the Fed is following the course of the virus closely as it will determine the course of the economy.

Business owners are “nervous again,” Ralph Bostic, president of the Atlanta Federal Reserve Bank, said in webcast remarks to the Tennessee Business Roundtable. “There is a real sense this might go on longer than we have planned for.”

The next three to six weeks could prove critical in the pace of an economic recovery that Bostic suggested may plateau sooner and at a lower pace than has been expected.

At an event sponsored by the National Association of Business Economists, San Francisco Fed President Mary Daly sounded a similar tone.

After large swathes of the U.S. economy reopened and trillions of dollars in fiscal stimulus passed by Congress in March began to reach the unemployed and hard-hit businesses, the economy created 7.5 million jobs in May and June.

Those gains mean the labor market is “in better shape than I thought it might be – but it’s nowhere close to where we need to be,” Daly said. U.S. firms today employ 14.7 million fewer people than in February, government data show, and unemployment, at 11.1%, is higher than it was in any downturn since the Great Depression.

“I am assuming that we’ll level off at some level that’s not where we want to be,” Daly said, noting the “untenable” position of state and local governments, which will need to cut staff as tax revenue declines and spending on safety net services increases.

With the virus still circulating, there’s a limit to how much people will want to risk their health eating out or undertaking other potentially risky economic activity, she and others said.

“We saw reopening in May and activity started to come back pretty well,” Cleveland Fed President Loretta Mester said in a CNBC interview. “Now over the past week or so there’s been some leveling off and I think it’s probably due to an increase in cases, not only in Ohio, but across the country.”

Florida, Texas and California are among roughly two dozen states that have experienced an alarming rise in infections in the past two weeks, and their governors have forced some businesses to shut down again to quell the spread.

A Fed survey released on Tuesday morning showed Americans may be hunkering down for a longer-than-expected fight against the virus and its economic fallout.

The poll of 1,869 people, which took place between June 3 and 12 as the first signs emerged of a newly growing coronavirus caseload, showed 46% of respondents think it will take more than a year for conditions to return to normal. That is up from 35% in an April survey.

At the end of July, some of the government programs to support businesses and families during the pandemic will expire, including a $600-a-week addition to unemployment benefits that has shored up spending among low-income households particularly.

“Individuals need more help and I think state and local governments need more help,” Cleveland Fed’s Mester said, adding that her forecast, which anticipates a “long recovery phase,” assumes Congress will deliver more such fiscal aid.

Related Coverage

  • Fed's Clarida says there is more the Fed can and will do
  • Fed's Mester says full recovery a long way off, more fiscal help needed

If not, Richmond Fed President Thomas Barkin said on Tuesday, the economy faces “some very real risks” as some businesses and households struggle to pay bills and repay debt.

Bostic agreed.

“It is pretty clear this is going to go on beyond the expiration of relief efforts,” Bostic said, adding that as that becomes clear, elected officials might “strongly consider doing more.”

Source: Read Full Article

Categories
Business

Fed's Bostic says U.S. recovery may be 'levelling off': FT interview

(Reuters) – Atlanta Federal Reserve Bank President Raphael Bostic said the U.S. economic recovery is in danger of stalling due to the recent spike in coronavirus cases across many American states.

High-frequency data had shown a “levelling off” of economic activity both in terms of business openings and mobility, he told the Financial Times newspaper in an interview published on Tuesday.

“There are a couple of things that we are seeing and some of them are troubling and might suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise,” he told the newspaper.

“And so we’re watching this very closely, trying to understand exactly what’s happening.”

California, Texas and Florida are all among two dozen U.S. states reporting high infection rates as a percentage of diagnostic tests conducted over the past week, an alarming sign of a virus still spreading largely unchecked throughout much of the country.

The U.S. death toll from the virus has topped 130,000, Reuters calculations show.

Source: Read Full Article

Categories
Business

Boston Fed says Main Street program now 'fully operational' and ready to purchase loans

NEW YORK (Reuters) – The Federal Reserve Bank of Boston said on Monday the Main Street Lending Program is now fully operational and ready to purchase eligible loans.

The Main Street lending facility, which opened for lender registration in mid-June, is meant to extend easy credit to small and mid-sized businesses that cannot get it elsewhere.

The Fed encouraged registered lenders to start submitting qualifying loans. The U.S. central bank also announced it intends to publish a state-by-state listing of registered lenders that are accepting new business customers under the program and that choose to be listed. 

Lenders had still not made any loans under the program as of July 1, according to data released by the Fed last week.

Large financial institutions that work closely with the Fed, known as primary dealers, slashed in half their expectations for how much take-up they expect from the Main Street lending program, according to a survey released last week by the New York Fed.

It is not entirely clear why the loans have not drawn more interest. When the Fed first proposed it, staff worked urgently on standing it up as thousands of letters poured in with suggestions for how to make it more useful and questions about where to find participating lenders.

The central bank tweaked its plan in response to many of those suggestions by lowering the minimum loan amount, making the program available to a wider range of businesses and introducing a proposal that would open it up to nonprofit groups.

So far 300 lenders have signed up to participate, Fed Chair Jerome Powell said last week. He also indicated the Fed was open to making further adjustments to the program.

Source: Read Full Article

Categories
Business

Fed's Bullard warns of financial crisis risks as virus cases spike: FT

(Reuters) – St. Louis Federal Reserve Bank president James Bullard has warned that a growing number of bankruptcies due to the coronavirus outbreak could lead to a financial crisis, the Financial Times reported.

“Without more granular risk management on the part of the health policy, we could get a wave of substantial bankruptcies and (that) could feed into a financial crisis,” Bullard said in an interview with the newspaper on Wednesday. (on.ft.com/31AlcUF)

He warned of “twists and turns” in the health crisis and said “it’s probably prudent to keep our lending facilities in place for now, even though it’s true that liquidity has improved dramatically in financial markets.”

New U.S. COVID-19 cases rose by nearly 50,000 on Wednesday, according to a Reuters tally, marking the biggest one-day spike since the start of the pandemic. The surge in cases across the country, including the populous states of California, Florida and Texas, threaten the budding recovery.

Bullard said that it is possible that the country could “take a turn for the worse at some point in the future”, but added that it was not his base case, according to the report.

The Fed moved aggressively in March to support the U.S. economy by cutting rates to near zero, buying up trillions of dollars in bonds and launching a slate of emergency lending tools to keep credit flowing to households and businesses.

The last of those programs was launched on Monday, which the Fed can use to buy newly minted corporate bonds.

“With all these programmes, the idea is to make sure the markets don’t freeze up entirely, because that’s what gets you into a financial crisis, when traders won’t trade the asset at any price,” Bullard added.

Source: Read Full Article

Categories
Business

Fed deluged by letters from needy over U.S. loan program

(Reuters) – The U.S. Federal Reserve on Wednesday released thousands of letters and emails from individuals, businesses and nonprofit groups this spring urging wider access to its Main Street Lending Program for Americans slammed financially during the pandemic.

The central bank announced the Main Street program in late March, offering loans to mostly medium-sized businesses with up to 15,000 employees or revenues up to $5 billion.

It asked for public feedback and got plenty. Correspondence poured in from a diverse cross-section of Americans reeling economically and in need of funds to tide them over. The Fed incorporated some of the suggestions into the planned program, which launched in mid-June but had yet to make a loan as of last week.

There were earnest pleas to make funds available to organizations that had originally been excluded. There were also glib requests for the Fed to just send money.

“Print me out $200,000,000,000,000.00 ($200 trillion),” wrote one correspondent whose name was withheld.

The writers included school-meal providers, the American Hospital Association, a tuxedo rental company, the U.S. Olympic & Paralympic Committee, local YMCAs and the California State University system. Requests also came from energy providers, Dallas hotel magnate Monty Bennett, and advocates for the needs of felons.

It paints a picture of a central bank, which once closely guarded its secrets, newly open to public feedback and willing to respond by reshaping its policies. Many groups pleaded with the Fed to allow nonprofits access to the program.

“I find the omission of nonprofits from the Main Street lending program not only unconscionable, but economically disastrous…the cost to society will be much greater in the long run than the cost to support these organizations with loans,” Lisa Gold of the New York-based Asian American Arts Alliance wrote in an email.

Others sought reduced minimum loans and a lower bar for borrowing.

“I would encourage you to lower the minimum loan amount from $1 million to $500,000,” Mitesh Ravel, a Subway franchise owner in Virginia, wrote in an email. “As a small business with 65 employees and about $5 million in revenue, $1 million is more than I need or can afford to finance.”

In tweaking the program, the Fed ultimately lowered the minimum loan threshold to $250,000. It also released a proposal to allow nonprofits to borrow alongside private companies.

So far 300 lenders have signed up to participate, Fed Chair Jerome Powell said this week. He also indicated the Fed was open to making further adjustments to the program.

Source: Read Full Article

Categories
Business

Fed deluged by letters from needy over U.S. loan program

(Reuters) – The U.S. Federal Reserve on Wednesday released thousands of letters and emails from individuals, businesses and nonprofit groups this spring urging wider access to its Main Street Lending Program for Americans slammed financially during the pandemic.

The central bank announced the Main Street program in late March, offering loans to mostly medium-sized businesses with up to 15,000 employees or revenues up to $5 billion.

It asked for public feedback and got plenty. Correspondence poured in from a diverse cross-section of Americans reeling economically and in need of funds to tide them over. The Fed incorporated some of the suggestions into the planned program, which launched in mid-June but had yet to make a loan as of last week.

There were earnest pleas to make funds available to organizations that had originally been excluded. There were also glib requests for the Fed to just send money.

“Print me out $200,000,000,000,000.00 ($200 trillion),” wrote one correspondent whose name was withheld.

The writers included school-meal providers, the American Hospital Association, a tuxedo rental company, the U.S. Olympic & Paralympic Committee, local YMCAs and the California State University system. Requests also came from energy providers, Dallas hotel magnate Monty Bennett, and advocates for the needs of felons.

It paints a picture of a central bank, which once closely guarded its secrets, newly open to public feedback and willing to respond by reshaping its policies. Many groups pleaded with the Fed to allow nonprofits access to the program.

“I find the omission of nonprofits from the Main Street lending program not only unconscionable, but economically disastrous…the cost to society will be much greater in the long run than the cost to support these organizations with loans,” Lisa Gold of the New York-based Asian American Arts Alliance wrote in an email.

Others sought reduced minimum loans and a lower bar for borrowing.

“I would encourage you to lower the minimum loan amount from $1 million to $500,000,” Mitesh Ravel, a Subway franchise owner in Virginia, wrote in an email. “As a small business with 65 employees and about $5 million in revenue, $1 million is more than I need or can afford to finance.”

In tweaking the program, the Fed ultimately lowered the minimum loan threshold to $250,000. It also released a proposal to allow nonprofits to borrow alongside private companies.

So far 300 lenders have signed up to participate, Fed Chair Jerome Powell said this week. He also indicated the Fed was open to making further adjustments to the program.

Source: Read Full Article

Categories
Business

Fed deluged by letters from needy over its loan program

(Reuters) – The U.S. Federal Reserve on Wednesday released thousands of letters and emails from individuals, businesses and nonprofit groups this spring urging the central bank to widen access to its Main Street Lending Program to more entities struggling to survive the coronavirus-triggered recession.

The writers included school-meal providers, the American Hospital Association, a tuxedo rental company, the U.S. Olympic & Paralympic Committee, local YMCAs and the California State University system. Pleas for help also came from energy providers, Dallas hotel magnate Monty Bennett, and advocates for the needs of felons.

The Fed launched it Main Street lending program in mid-June to help small and mid-sized businesses hurt by the recession which need funds to tide them over until the economy recovers.

Despite the yawning need evidenced in the letters, the program as of last week had not yet made a single loan. So far 300 lenders have signed up to participate, Fed Chair Jerome Powell said this week.

The correspondence, which the Fed had acknowledged previously, sketch the depth and breadth of the need created by the coronavirus crisis across the United States.

It paints a picture of a central bank, which once closely guarded its secrets, newly open to public feedback and willing to respond by reshaping its policies. Many groups pleaded with the Fed to allow nonprofits access to the program. Others asked for reduced minimum loans and otherwise a lower bar for borrowing.

After receiving the letters the Fed tweaked its program to meet many of those demands, and released a proposal to allow nonprofits to borrow alongside private companies.

Source: Read Full Article

Categories
Economy

Fed received thousands of letters asking it to widen Main Street program

July 1 (Reuters) – The U.S. Federal Reserve received thousands of letters and emails from individuals, businesses and nonprofit organizations this spring asking it to widen access to its Main Street Lending Program so more entities could tap it for funds to survive the recession triggered by the coronavirus pandemic.

Documents released by the Fed on Wednesday contained hundreds of pages of feedback on the unique program, through which the Fed is providing credit outside of the financial sector it typically backstops. Nonprofit organizations including the U.S. Olympic & Paralympic Committee, YMCA and California State University system pleaded with the Fed to allow nonprofits access to the program, which launched in late June but as of last week had not yet made a single loan. (Reporting By Dan Burns Editing by Chizu Nomiyama)

Source: Read Full Article

Categories
Business

Fed officials stress need to factor in structural inequities when evaluating economy

(Reuters) – Policymakers need to keep diversity and structural racial inequalities in mind when analyzing the labor market and other measures of the economy, two Federal Reserve officials said on Tuesday.

The standard metric used for evaluating U.S. unemployment is flawed because it does not capture the experiences of different groups, and officials should be open minded about how they evaluate full employment, Minneapolis Federal Reserve Bank President Neel Kashkari said during a virtual forum on race and economic mobility.

“It’s clear that the headline unemployment is deeply flawed as a measure. It does not count so many people who are not in the workforce who may want a job,” said Kashkari.

Fed officials have become more vocal about the ways different groups are faring in the economy and the focus on racial inequities is here to stay, even if the U.S. central bank is not able to target specific groups in its policies, said Atlanta Federal Reserve Bank president Raphael Bostic.

“I think what you’re looking at is a new Fed on some level,” said Bostic. “We’re going to make sure our institutions don’t sort of slink away as things move forward.”

The two Fed officials have been among the most vocal policymakers calling attention to racism and inequality in recent months. Bostic, the Fed’s lone Black bank president, penned a letter earlier this month calling for an end to racism and laying out the ways the Fed could help to reduce racial inequalities. Kashkari leads the Fed district in the city where George Floyd died in police custody, setting off a wave of protests across the country and kicking off a national conversation about racism.

Fed Chair Jerome Powell has also commented frequently about how Black and Hispanic workers were among the last to feel the benefits of the tight labor market, and were then hit disproportionately by the job losses caused by the pandemic.

Source: Read Full Article

Categories
Business

Mnuchin sees support for crisis loans to hotels, restaurants

WASHINGTON (Reuters) – Up to $140 billion in loans for small business could be refocused to support restaurants, hotels and other industries hit hardest by the coronavirus pandemic, U.S. Treasury Secretary Steven Mnuchin said on Tuesday.

Those funds, authorized under the $660 billion Paycheck Protection Program, are due to expire on Tuesday, when the Small Business Administration stops taking applications for the forgivable loans.

But Mnuchin said it appeared there was support among Democrats and Republicans to “repurpose” the money, perhaps by tailoring it to hotels, restaurants and other businesses most impacted by the social-distancing measures adopted to fight the spread of the novel coronavirus.

Mnuchin was testifying along with Federal Reserve Chair Jerome Powell before the U.S. House of Representatives Financial Services Committee about the U.S. fiscal and monetary response to the coronavirus crisis, including the nearly $3 trillion allocated by Congress to help businesses and individuals.

That response is reaching a critical point, with programs like PPP and enhanced unemployment benefits expiring in July – and perhaps depriving the economy of hundreds of billions of dollars in spending – even as coronavirus infections surge and tens of millions of Americans remain out of work.

“I see a brick wall at the end of July,” said Ed Perlmutter, a Democrat from Colorado, adding that local and state governments also face big budget shortfalls caused by lost tax revenue that could force them to lay off millions unless they get new funding.

Mnuchin said he is committed to continuing conversations on the topic with lawmakers from both sides of the aisle next month. He referred several times during the hearing to a “next” CARES act.

MASKS ON

The hearing took place against the backdrop of a surge in cases of COVID-19, the respiratory illness caused by the coronavirus. Infections more than doubled in at least 10 U.S. states, including Texas and Florida, in June, a Reuters tally showed.

The government’s top infectious disease control expert, Anthony Fauci said earlier Tuesday he was very concerned that the country is going “in the wrong direction.”

In prepared testimony released on Monday, Powell noted that the economic recovery had begun sooner than expected, but that output and employment are still far below pre-crisis levels, with the brunt of the pain borne by women and minorities.

A full recovery, he reiterated, is unlikely until people feel safe going out and about.

Asked what could happen in a renewed outbreak of the virus, Powell was blunt: it “could force governments and force people to withdraw again from economic activity, and I think the worst part of it would be to undermine public confidence, which is what we need to get back to lots of kinds of economic activity that involve crowds,” Powell told lawmakers.

As if to underscore the importance of simple acts like wearing masks – which public health officials widely agree reduce the spread of the virus – Powell kept his mask on throughout the session, as did most of the lawmakers.

Mnuchin took his mask off to speak.

Numerous Fed policymakers, including Powell, have said that more fiscal and monetary help will likely be required to keep what is expected to be a slow and uneven economic recovery on track.

The Fed has come under fire for a perception that it has prioritized Wall Street over Main Street, helping to fuel economic inequality by boosting the price of assets like stocks.

The central bank has bought trillions of dollars of bonds, and rolled out nearly a dozen programs to backstop and extend corporate credit and promote bank lending, arguing that the economy as a whole is helped when companies maintain access to the financing critical to their operations.

Data on Sunday showed the Fed bought $428 million in bonds of individual companies through mid-June, making investments in household names like Walmart Inc and AT&T Inc as well as in major oil firms, tobacco giant Philip Morris International Inc, and a utility subsidiary of billionaire Warren Buffett’s Berkshire Hathaway holding company.

At the same time, its newly launched Main Street Lending Program has yet to make a loan and has taken three months to come to fruition. Powell said Tuesday that some 300 banks have registered for the program so far, and have told him they expect increased use “in the next few months.” The central bank’s programs overall have so far seen modest use.

Source: Read Full Article