with Brent D. Griffiths

Jerome H. Powell keeps ringing the alarm, urging Congress to spend more to contain the growing economic wreckage from the pandemic lockdowns.

The Federal Reserve chairman made the case in a “60 Minutes” interview last night setting the stage for a high-profile appearance Tuesday before the Senate Banking Committee.

He suggested lawmakers consider providing more support to state and local governments and extend enhanced unemployment benefits that run through July.

The approximately $3 trillion package of new emergency relief that House Democrats passed Friday included funding for both. Senate Republicans have said they won’t consider the bill and want to observe the effects of the $3 trillion Congress has already approved in coronavirus aid before acting again and President Trump issued a formal veto threat last week.

Powell — who entered the fray last week, saying Congress needs to do more to jump-start the economy — told CBS’s Scott Pelley lawmakers should prioritize “policies that help businesses avoid avoidable insolvencies and that do the same for individuals — keep workers in their homes, keep them paying their bills. Keep families solvent so that when this comes, we come out the other end of this, we're in a position to have a strong recovery.”

Powell’s advocacy for an even bigger fiscal response thrusts him into fraught territory. 

After moving with what in Washington terms counts as lightning speed to approve the largest economic rescue in U.S. history, lawmakers are split along party lines over what to do next. And the central bank chief is stepping gingerly. 

Republicans favoring a wait-and-see approach could find support for their views in his latest comments. Powell noted to Pelley he doesn’t give Congress advice on specific policies, adding the response from lawmakers has been “vastly larger than anything they've ever done. And also very, very quick. So a lot of that money is just starting to flow through the economy.”

“The thing is that the coronavirus shock is also the biggest shock that the economy's had in living memory,” Powell continued. “And the question is, will it be enough? And I don't think we know the answer to that. It may well be that the Fed has to do more. It may be that Congress has to do more. And the reason we've got to do more is to avoid longer-run damage to the economy.” 

But as Pelley noted in a voice-over, Powell’s push for lawmakers to keep spending helped motivate his appearance on the broadcast. “It is true that deficits are going to be big for a couple of years here,” Powell said. “And that we'll have to deal with that. The time to deal with that though is when we're through this recovery.”

Expect senators on the banking panel to try eliciting more support for their preferred view when he appears before them tomorrow morning. Powell will be testifying alongside Treasury Secretary Steven Mnuchin on the last economic relief package as part of a new quarterly requirement that law established. 

Powell said there is “no limit” to what the Fed itself can do.

“There’s a lot more we can do,” Powell said of the central bank. “We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot. No, there's really no limit to what we can do with these lending programs that we have. So there's a lot more we can do to support the economy, and we're committed to doing everything we can as long as we need to.”

Powell named some options: enlarging its lending programs; setting up new ones; changing its “asset purchase strategy”; and making its policy “even more accommodative,” though he continues emphasizing the Fed is not considering negative interest rates.

The comment about asset purchases “could be a veiled reference to yield curve control, where the Fed undertakes to hold yields out to a certain maturity at a certain level, as the Bank of Japan already does,” Bloomberg’s Alister Bull writes. "Some analysts expect the Fed to move in that direction later this year."

On negative interest rates, Powell said, “There's no clear finding that it actually does support economic activity on net. And it introduces distortions into the financial system, which I think offset that. There’re plenty of people who think negative interest rates are a good policy. But we don't really think so at the Federal Reserve. And I think it's an area of real uncertainty in the central banking world.”

Powell struck a hopeful note about the economy’s potential.

But he said the recovery will be slow. “In the long run, and even in the medium run, you wouldn't want to bet against the American economy,” he said. “This economy will recover,” though he added the process “could stretch through the end of next year.”

In the meantime, Powell predicted joblessness could peak at 25 percent. And he expects the economy to shrink at an annualized rate “in the twenties or thirties” this quarter. Then, he said, there’s a “good chance” for growth in the third quarter, and “it's a reasonable expectation that there'll be growth in the second half of the year.”

Powell said that scenario is predicated on dodging a second wave of major coronavirus infections. Forcing another round of shutdowns if there’s a resurgence of the disease “would be quite damaging to the economy and also to public confidence.”

The Fed chief said even as the recovery gets rolling, it will be staggered, since activities that encourage people to cluster — watching sports or shows, flying — will take longer to return. The economy won't fully recover "until people feel confident that they're safe,” he said.

Market movers

Futures point to strong open. 

European markets, oil prices are jumping too. “U.S. equity futures climbed with stocks on Monday as major economies showed further signs of re-opening and the Fed stressed it has more ammunition to combat a downturn. Crude oil advanced,” Bloomberg's Todd White reports

S&P 500 contracts jumped as much as 1.8% after the underlying gauge’s worst week since mid-March. The move came in the wake of news that California’s economy is now 75% open after virus restrictions were eased. Apple Inc. said it will open more than 25 U.S. stores this week, adding to almost 100 globally. The Stoxx Europe 600 Index rose on gains in mining and travel shares, including airlines IAG SA and Ryanair Holdings Plc. Stock indexes in Japan, Hong Kong and South Korea all posted modest advances."

Stocks are coming off a down week. “Stocks recorded their biggest weekly percentage drop in nearly two months last week, a sign that recent gains are just one step of what many analysts say will be a long and painful recovery,” the Wall Street Journal's Amrith Ramkumar writes

“While many investors remain hopeful that stimulus measures from central banks and governments will ease pressure on the world economy, there is a growing belief that the fallout from the coronavirus pandemic will last longer than anticipated. Fueling the caution: the prospect that lockdowns could linger or stimulus measures could prove insufficient to keep pace with job losses and business closures.”

Latest on the federal response

More changes are coming to the PPP.

Slowing demand, ongoing complaints are prompting the administration to consider tweaks to its small business lending program, the Wall Street Journal's Yuka Hayashi reports.

Here's what's on the table: “The changes are likely to include giving businesses more flexibility to spend the money … Under the original terms, 75 percent of the funds were required to be spent on employee salaries for the loans to be forgiven. 

“The government also is expected to extend the time to spend the loan money beyond the two months it originally set. Both changes follow complaints from restaurants, hair salons and others who say they can’t hire back staff while they are closed during the pandemic and need more money to cover their overhead costs … The steps being considered will mean a shift in the program’s focus—from one that was primarily aimed at keeping employees on the payroll, to also helping to keep small businesses from failing.”

Companies rush to return money before today's deadline: The companies are scrambling to give back the Paycheck Protection Program loans before a … deadline the administration set for borrowers to return the aid if there's any doubt they need the money, or else face audits. Hundreds of millions of dollars have been returned by companies that file with the Securities and Exchange Commission," Politico's Zachary Warmbrodt reports.

“In the past week, organizations including the Aspen Institute think tank, biotech firm 22nd Century Group, mattress fabric manufacturer Culp and medical device company CHF Solutions announced they were relinquishing funds.”

… But legal experts say actual legal risk may be quite low: “Lawyers advising corporate boards on their use of the PPP … said that the certification required is so vague and open-ended that most companies qualify for the program,” CNBC's Hugh Son and Thomas Franck report.

“'I don’t see anybody being convicted for this, honestly,' said Scott Pearson, a partner at Manatt, Phelps & Phillips. ‘What will scare people away is the threat of being accused. The suggestion there is criminal liability for a company that has a good argument that they were eligible for these loans based on the structure of the CARES Act is ludicrous …' At the heart of the matter is a one-sentence certification in the PPP application form that ‘current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’”

Coronavirus fallout

From the U.S.:
  • At least 1,480,000 cases have been reported; at least 88,000 people have died
  • There's a new problem with testing: “A Washington Post survey of governors’ offices and state health departments found at least a dozen states where testing capacity outstrips the supply of patients. Many have scrambled to make testing more convenient, especially for vulnerable communities, by setting up pop-up sites and developing apps that help assess symptoms, find free test sites and deliver quick results,” Steve Thompson, Juliet Eilperin and Brady Dennis report.
  • Trump appears to be taking a back seat: The president “has proclaimed the latest phase of pandemic response the ‘transition to greatness.’ But Trump appears poised to preside over the eventual transition more as a salesman and marketer than a decider,” Ashley Parker and Philip Rucker report.
  • Major nursing home chain violated federal standards: “Nursing homes operated by Life Care Centers of America, one of the largest chains in the industry, violated federal standards meant to stop the spread of infections and communicable diseases even after outbreaks and deaths from covid-19 began to sweep its facilities from the Pacific Northwest to New England, inspection reports show,” Debbie Cenziper, Sidnee King, Shawn Mulcahy and Joel Jacobs report.
Reopening the auto industry is likely to be a long process.

Like other industries, there's less consumer demand: “Many manufacturers have spent the past several weeks putting new procedures in place to keep workers safe upon return and plan to gradually increase production this month,” WSJ's Ben Foldy and Mike Colias report.

“But rebooting more than 40 U.S. assembly plants—as well as the thousands of component makers that supply them—is likely to be a slow and arduous process, say industry executives and consultants. With paltry revenues for weeks, auto-parts suppliers are stretched financially and many still lack enough orders to recall the bulk of their staff. Factories in Mexico, which produce nearly 40 percent of the car parts imported to the U.S., aren’t yet permitted to reopen, and in many parts of that country the pandemic has yet to peak.”

More from the corporate front: 
  • U.S. crude contract date approaches: “A month after sellers had to pay nearly $40 a barrel to get rid of U.S. oil futures, the next watershed moment looms with the expiry of the June contract on Tuesday - and so far there is little sign of a repeat of the historic plunge,” Reuters's Devika Krishna Kumar reports.
  • JC Penney wants to spin its properties into a real estate company: “As part of a plan filed with the bankruptcy court, Penney would reorganize into a new retailer (“JCP”), along with a REIT that would collect rent checks from the retail business," CNBC's Lauren Thomas reports.
Around the world:
  • Japan falls into a recession: This is the first time the nation has hit a recession in four years. “Government statistics show that [Japan's] economy shrank by an annualized rate of 3.4 percent between January and March,” Antonia Farzan reports.
  • Brazil's largest city warns of hospitals on the brink: “Bruno Covas, the mayor of Sao Paolo, … told reporters that intensive care units in the city’s hospitals had reached 90 percent occupancy,” Antonia Farzan reports.

When superpowers collide

China defends Huawei after latest U.S. action.

Beijing is readying retaliatory measures: China's Commerce Ministry “said in a statement that it urges the United States to immediately stop the wrong actions,” Reuters's Yilei Sun, Yingzhi Yang and Se Young Lee report.

“The Trump administration on Friday moved to block global chip supplies to blacklisted telecoms equipment company Huawei Technologies, spurring fears of Chinese retaliation and hammering shares of U.S. producers of chipmaking equipment. The new rule went into effect on Friday but would have a 120-day grace period. China’s state-run newspaper Global Times, citing an unidentified source, reported that Beijing, in response to the new limits on Huawei, was ready to put U.S. companies on an ‘unreliable entity list’ as part of the countermeasures.”

Peter Navarro suggests China purposely spread virus: “The Trump administration stepped up its campaign of blaming China for the deadly [pandemic], with a top aide suggesting Beijing sent airline passengers to spread the infection worldwide,” Bloomberg News's Steve Geimann reports.

“'The Chinese, behind the shield of the World Health Organization, for two months hid the virus from the world and then sent hundreds of thousands of Chinese on aircraft to Milan, New York and around the world to seed that,' [White House trade adviser Peter Navarro said]. Milan and New York went on to become hotspots for the pandemic.”

Trump is frustrated about the China deal, but lacks obvious remedies: “The president, who [last] week ruled out renegotiating the deal, said he still expects China to buy the $200 billion in goods and services it promised. The president had threatened to ‘terminate’ the deal if China did not deliver. But for now, he seems inclined to confine his response to public grumbling while counting on an export surge later this year — even though some experts say it is now impossible for China to meet the deal’s targets,” David J. Lynch reports.

“The deteriorating economy may limit Trump’s ability to act. Imposing a fresh round of tariffs, the president’s preferred trade war weapon, could prove unpopular with tens of millions of Americans out of work and the economy in free fall.” 

Pocket change

SoftBank is in talks to sell T-Mobile shares. 

The Japanese conglomerate is seeking to sell a big stake to Deutsche Telekom. “The transaction, if completed, would boost Deutsche Telekom’s nearly 44% stake in T-Mobile above 50%, according to people familiar with the matter,” WSJ's Drew FitzGerald and Cara Lombardo report. "The German company already has voting control of the U.S. mobile-phone giant under a prior agreement with SoftBank, which recently held almost 25% of T-Mobile’s common stock, according to FactSet."

The Chinese tycoon’s disclosure came just hours before the company announced a major hit to its annual financial results from the coronavirus and a slump in the tech sector.



  • SoftBank and Trivago are among the notable companies reporting their earnings, per Kiplinger.


  • Powell and Mnuchin testify in front of the Senate Banking Committee
  • Walmart, Home Depot, Advance Auto Parts and Urban Outfitters are among the notable companies reporting their earnings


  • The Fed releases minutes from its April 28-29 policy meeting
  • The House Education and Labor Workforce Protections Subcommittee holds a hearing on protecting workers from covid-19
  • Target, Lowe's, Expedia Group, McKesson and L Brands are among the notable companies reporting their earnings


  • The Labor Department releases weekly jobless claims
  • The National Association of Realtors releases existing home sales for April
  • Best Buy, Hormel Foods, Intuit and BJ's Wholesale Club are among the notable companies reporting their earnings


  • China kicks off its annual legislative session, the National People's Congress
  • Alibaba Group, Deere, Foot Locker and Buckle are among the notable companies reporting their earnings

The funnies

Bull session