The Washington PostDemocracy Dies in Darkness

The Finance 202: Governors are inviting extended economic pain by reopening too quickly during the coronavirus pandemic.

with Brent D. Griffiths

The handful of states rushing headlong into lifting economic restrictions are inviting a new wave of coronavirus infections. And they in turn would set off another series of shutdowns that extend the pandemic’s economic devastation.

That is the bracing picture a number of public health experts, economists, and industry chiefs are presenting as some elected leaders move to reopen businesses and send people back to work as soon as this week.

Patience with shelter-in-place orders that began rolling out seven weeks ago is wearing thin in some quarters as economic fallout mounts: More than 22 million Americans have filed jobless claims over the last four weeks, a number expected to climb by more than 4 million when the Labor Department releases fresh data this morning, according to a Reuters survey of economists. 

That would mean the economy has erased in about a month all of the jobs it has gained since the Great Recession.

President Trump is complicating an already-fraught debate. 

He is sending contradictory messages to governors, who are making the key calls about when to reopen. On Wednesday, hours after tweeting, “States are safely coming back. Our Country is starting to OPEN FOR BUSINESS again,” Trump said he disagreed “strongly” with Georgia Gov. Brian Kemp’s (R) decision to allow certain small businesses to open their doors again.

“At the same time,” Trump said, the Republican governor “must do what he thinks is right.”

Some math models suggest Georgia is “one of the last states that should be reopening,” William Wan, Carolyn Y. Johnson and Joel Achenbach report. “The state has had more than 830 covid-19 deaths. It has tested less than 1 percent of its residents — low compared with other states and the national rate. And the limited amount of testing so far shows a high rate of positives at 23 percent.”

Kemp took to Twitter to defend his decision to open operations including gyms and hair salons starting Friday, followed by others including restaurants and movie theaters Monday:

Kemp is not alone. 

The governors of Florida, Mississippi, Ohio, Tennessee, Texas, and South Carolina and all have said they plan to authorize some businesses to reopen in coming days, too. Based on the widely cited University of Washington model, most of them should keep social distancing policies in place for at least another month:

And Las Vegas Mayor Carolyn Goodman is drawing criticism nationally for urging casinos to reopen and proposing health officials use the city as a “control group” to study the effects of easing restrictions. "We’ll find out the facts afterward,” Goodman said in an interview on MSNBC. 

As Philip Bump notes, Clark County, home to the city and the famed Las Vegas Strip south of it where the large hotels and casinos cluster, already has data showing Nevada's statewide stay-at-home order has reduced spread of the disease:

Those interested in what happens when people continue to gather in confined spaces can look to the meatpacking industry. Recent coronavirus outbreaks have forced shutdowns of more than a dozen plants so far, including a Smithfield Foods pork processing facility in Sioux Falls, S.D.; a JBS pork plant in Worthington, Minn.; Tyson Foods’ largest pork plant, in Waterloo, Iowa; and another Tyson facility in Logansport, Ind.

“As of Tuesday night, coronavirus infections had spread in at least 48 U.S. meatpacking plants, sickening more than 2,200 people and killing 17,” an investigation by USA Today and the Midwest Center for Investigative Reporting found. The spread of the virus in the industry is deepening fears of meat shortages, Rachel Siegel reports

The return of the coronavirus is inevitable.

Anthony Fauci, the nation’s top infectious disease expert, stated so flatly at the White House briefing Wednesday, contradicting Trump in the process. “There will be coronavirus in the fall,” Fauci said. “I am convinced of that because of the degree of transmissibility that it has.” (Trump had said, “It might not come back at all.”)

That raises the specter of a W-shaped recovery that is already looming if decision makers reopen too quickly. And “something else could also cause a W pattern: a wave of bankruptcies and defaults later this year,” Heather Long writes. “As companies go belly up, a domino effect ensues: Workers aren’t rehired, suppliers aren’t paid, and fear rises about who will be next to fall.”

Top business lobbyists are counseling a go-slow approach. 

Manufacturing executives joined a conference call with the White House coronavirus task force Wednesday to discuss recommendations by the National Association of Manufacturers, one source familiar with the call said. The manufacturers lobby, in its “American Renewal Action Plan,” warns the nation “is not prepared for the near-constant demand for personal protective equipment that will come from all industries as states prepare to reopen their economies.”

NAM CEO Jay Timmons recently sounded off on protestors agitating for leaders to lift lockdowns, calling them “IDIOTS” in a Facebook post, the New York Times’s Jim Tankersley reports. Timmons wrote, “Every one of us wants some sense of normalcy. But I can tell you this: We’ll never have it if our manufacturing workers can’t do their jobs, if they can’t get that personal protective equipment manufactured, so that everybody has access to it to go back out into public.”

And Josh Bolten, the Bush White House chief of staff now leading the Business Roundtable, told CNBC last week that the nation’s ability to administer testing widely remains insufficient. “We’ve clearly got a long way to go, but there’s progress being made every day … all the CEOs in our organization agree that testing is an absolutely crucial gating element to getting us back and running safely,” he said.

Governors are also pleading with the federal government for help securing “swabs, chemical reagents and testing kits, a national supply problem they cannot solve independently,” William, Carolyn, and Joel write. “Even if a handful of states find some way to shore up testing and contact tracing, the virus could rage on in neighboring states, throwing off sparks that can ignite new outbreaks.”

Nobel Prize winning economist Paul Romer calls for a “test-and-isolate” policy.

The plan, which Romer rolls out here this morning, aims to make it safe for Americans to return to work before a vaccine is developed and deployed while keeping the infection rate below 5 percent.

It recommends the government sponsor testing of essential workers by a network of national and university labs. Health-care workers and others on the front line would get the first tests, and that roster would widen to grocery store clerks and others as testing capacity rises. Anyone who tests positive would isolate, and their family and close colleagues would get tested, too. Eventually, the testing would expand to the entire population.

“There is no question whether we can do each of these steps,” Romer writes. “The only question is whether we will; and if we will, when we start. "

The latest on PPP

Mnuchin says larger companies could face probes if they don't return money.

At issue is whether big companies received funds that were supposed to go to small businesses: Treasury Secretary Steven Mnuchin "said on Fox Business Network it was ‘questionable’ whether some larger companies qualified for the Paycheck Protection Program (PPP), based on a self-certification step in the loan process. He said businesses need to look carefully at their applications to be sure they can certify that the forgivable loans of up to $10 million are necessary," Reuters's David Lawder and Sarah N. Lynch report.

“In the PPP application form, companies need to certify that ‘current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.’” Shake Shack returned its $10 million after raising $150 million in a stock offering; and Harvard University said Wednesday it will forego its $8.6 million allocation under a separate aid program after Trump criticized it. 

Big banks prioritized wealthy clients for PPP loans that were supposed to be first come, first served.

Here's what the experience was like for them: Customers of Citi’s private bank, where the minimum account size is $25 million, didn’t have to use an online portal to apply for a loan; they could simply submit paperwork to their banker, who would put in an application on their behalf. At Chase, the nation’s largest bank, nearly all private and commercial banking clients who applied for a small-business loan got one, whereas only one out of every 15 retail banking customers who sought loans was successful. Some banks provided highly personalized, so-called concierge service to their richest clients by enlisting representatives to walk them through every step and submit their paperwork,” the New York Times's Emily Flitter and Stacy Cowley report.

“The two-tiered system paid off for well-to-do customers: By the time the Paycheck Protection Program ran out of money last week, many top clients of national and regional banks had already had their loans approved. Other business owners were left empty-handed, and many had struggled from the start."

A family-owned Nebraska bank has doled out some of the most PPP loans: “Union Bank & Trust is nowhere near the top of the banking leagues. Last year the family-owned institution, with 900 employees, was the nation’s 202nd largest bank by assets, according to the Federal Reserve. Yet 72 hours into the emergency lending program, it ranked second in the nation for number of loans approved, according to the Small Business Administration,” Jeanne Whalen and Renae Merle report.

  • Community banks have been a bright spot for a program that has struggled: “They did this by planning round-the-clock, shifting hundreds of employees to the effort, and cranking out approvals as soon as the program opened, even as the government was still clarifying the rules.”

Dallas Hotel Owner Is Biggest Beneficiary of Coronavirus Loan Program (WSJ)

Coronavirus fallout

Director of the Centers for Disease Control and Prevention Robert Redfield said April 22 that his statement on covid-19 in the fall is "accurately quoted." (Video: The Washington Post)
In the U.S.:
  • The nation now has at least reported 842,000 cases, and more than 46,700 deaths.
  • Trump bans immigration for 60 days with big exceptions: “The order, which takes effect [today], will not apply to immigrants who already are living and working in the United States and are seeking to become legal permanent residents. Medical professionals, farmworkers and others who enter on temporary ‘nonimmigrant’ visas are unaffected, and the suspension also exempts the spouses and underage children of U.S. citizens, among other carve-outs,” Nick Miroff, Maria Sacchetti and Arelis R. Hernández report.
  • Scientists toe the line under Trump: “The result is a culture in which public health officials find themselves scrambling to appease and placate Trump, a mercurial boss who is focused as much on political and economic considerations as scientific ones,” Ashley Parker, Josh Dawsey, Yasmeen Abutaleb and Lena H. Sun report.
  • Republican leaders want lawmakers to return to Congress: “Top Republican leaders said they want Congress to return to business as usual amid the coronavirus pandemic — in effect bringing hundreds of lawmakers, aides and support staff back to Capitol Hill despite the warnings of public health officials that reopening parts of the country too soon could cause a spike in the deadly disease,” Mike DeBonis and Paul Kane report.
Corporate impact:
  • Larry Kudlow: Businesses shouldn't be liable for workers or customers getting sick. "Businesses, particularly small businesses that don’t have massive resources, should not be held liable — should not be held to trial lawyers putting on false lawsuits that will probably be thrown out of court,” the top White House economic advisor told CNBC.
  • Hard-hit restaurants, gyms and other businesses are fighting insurers: “The battle hinges on whether insurance providers should have to pay claims to companies that have shuttered unexpectedly as a result of the deadly pandemic. The dispute has attracted the attention of [Trump], triggered lawsuits in courtrooms nationwide and touched off a massive lobbying blitz on Capitol Hill, where some insurers say the federal government instead should be the one providing financial help to those that need it most,” Tom Hamburger and Tony Romm report.
  • Victoria's Secret seeks to cancel takeover: “Private-equity firm Sycamore Partners wants to scrap its plans to take control of Victoria’s Secret, a high-profile legal test of whether the coronavirus pandemic allows a buyer to walk away from an agreement reached before the outbreak,” the WSJ's Khadeeja Safdar and Cara Lombardo report.
Around the world:
  • E.U. leaders discuss economic response: “It could be a decisive meeting for the ‘survival of the E.U.,’ according to Germany’s leading weekly Der Spiegel. After a preliminary discussion on Monday, Reuters reported, it is unlikely that any final deal on a potential recovery fund will be announced [today], however,” Rick Noack reports from Berlin ahead of an expected virtual meeting of the bloc's leaders. 
  • U.N. head warns of human rights crisis: “It is an economic crisis. A social crisis. And a human crisis that is fast becoming a human rights crisis,” U.N. Secretary General António Guterres said, urging that “people and their rights must be front and center,” Rick Noack reports.
  • Australia PM pushes for independent review: “Australian Prime Minister Scott Morrison pushed for an independent review of the coronavirus pandemic, which Morrison said should be supported by all World Health Organization (WHO) members,” Rick Noack reports. “China has so far resisted an inquiry, framing criticism of its initial handling of the crisis as a propaganda effort by the Trump administration and its allies, including Morrison’s government.”

Market movers

Global markets rebounded as oil prices stabilized.

The Dow closed up over 450 points, roughly 2 percent. “The blue-chip index had clawed back some of the 1,000 points it gave up the first two days of the week with help from technology stalwarts like Apple, Intel and Microsoft, and surprising gains from oil giants Chevron and ExxonMobil,” Thomas Heath and Jacob Bogage report.

“The Standard & Poor’s 500 index closed up 63 points, or 2.3 percent, to 2,799.31. The tech-heavy Nasdaq finished up 232 points, or 2.8 percent, to 8,495.38. All 11 U.S. stock market sectors were positive, led by energy, technology and utilities. Nearly all 30 Dow blue chips gained. European markets surged across the board, as did most of Asia.”

  • Oil prices stabilize: “West Texas intermediate crude oil, which sold for less than $0 a barrel earlier in the week, hovered above $14 on Wednesday on its June contract, a 22.7 percent gain. Global benchmark Brent crude, which briefly dipped to a 21-year low early Wednesday, saw its price advance 8.4 percent, to $20.96 a barrel. The improvement remains a fraction of the $50 or so needed for a producer to make money.”

Hedge funds saw largest quarterly withdrawals since 2009. Bloomberg's Melissa Karsh: “Investors pulled a net $33 billion from hedge funds in the first quarter, the most in more than a decade. The total is about 1% of of industry capital, and the largest quarterly outflow since investors yanked about $42 billion in the second quarter of 2009, according to a report Wednesday from Hedge Fund Research Inc. In all of 2019, investors pulled $43.1 billion.”

Money on the Hill

McConnell was lambasted by governors after suggesting some of their states should go bankrupt.

The Senate Majority leader took a hardline on funding for states: "I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” McConnell said in an interview with the conservative radio host Hugh Hewitt. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”

McConnell’s comments were an explicit rejection of a top priority of Democrats who have pushed to spend tens of billions of dollars to help states. His staff members highlighted their partisan cast in a news release circulated a short time later, in which his statement appeared under the heading ‘Stopping Blue State Bailouts.’ The phrase suggested that the top Senate Republican was singling out for scorn some of the hardest-hit, heavily Democratic states such as California, Illinois and New York,” the Times's Carl Hulse reports.

  • New York Gov. Andrew Cuomo (D) slammed McConnell: “One of the dumb statements of all time,” Cuomo told his brother CNN anchor Chris Cuomo.

A Republican lawmaker went further:

Mnuchin: Spend what it takes. The Treasury secretary in his Fox Business interview said low interest rates and the urgent need for relief should overwhelm deficit considerations for now. "This is a war, and we need to win this war and we need to spend what it takes to win the war,” he said

Pocket change

Hackers may have been able to steal data for years due to flaw in iPhones and iPads.

Apple is planning to fix the bug that was found by a security firm: ZecOps, a San Francisco-based mobile security forensics company, [discovered the flaw] while it was investigating a sophisticated cyberattack against a client that took place in late 2019. Zuk Avraham, ZecOps’ chief executive, said he found evidence the vulnerability was exploited in at least six cybersecurity break-ins," Reuters's Christopher Bing and Joseph Menn report.

“An Apple spokesman acknowledged that a vulnerability exists in Apple’s software for email on iPhones and iPads, known as the Mail app, and that the company had developed a fix, which will be rolled out in a forthcoming update on millions of devices it has sold globally. Apple declined to comment on Avraham’s research, which was published on Wednesday, that suggests the flaw could be triggered from afar and that it had already been exploited by hackers against high-profile users.”

Chart topper

From Bloomberg's Tracy Alloway: 



  • Eli Lily, Southwest Airlines, Domino's Pizza, Aaron's, Union Pacific, Intel, Blackstone and Capital One Financial are among the notable companies reporting their earnings


The funnies

Bull session