The pressure to be transparent is poised to increase with the revelation that four lawmakers have benefited from the program. “It’s a bipartisan group of lawmakers who have acknowledged close ties to companies that have received loans from the program — businesses that are either run by their families or employ their spouse as a senior executive,” Politico’s Sarah Ferris, Melanie Zanona, and Zachary Warmbrodt report this morning.
The lawmakers are Republican Reps. Roger Williams of Texas and Vicky Hartzler of Missouri and Democratic Reps. Susie Lee of Nevada and Debbie Mucarsel Powell of Florida. “And there are almost certainly more, according to aides and lawmakers. But only the Small Business Administration and Treasury Department have that information, and the Trump administration is refusing to provide any details,” Politico reports.
Though the federal economic rescue faces oversight from several separate panels, they have yet to get rolling. That has changed dramatically in just the last several days.
In that short time:
- Inspectors general warned four congressional committee chairs that Treasury Department lawyers had determined the administration didn’t need to detail the beneficiaries of more than $1 trillion in federal rescue programs, according to reporting from Tom Hamburger, Jeff Stein, Jonathan O’Connell, and Aaron Gregg.
- Mnuchin has faced a firestorm of criticism from Democrats and some Republicans on Capitol Hill when he revealed last Wednesday he wouldn’t name PPP borrowers or their loan amounts. He argued the information is “proprietary” and “confidential” despite earlier pledges by officials to publish it. Mnuchin appeared to reverse himself at least in part Monday, tweeting he is working with lawmakers to “strike the appropriate balance for proper oversight.”
- House Democrats are keeping the heat on. Their own bailout oversight panel, led by House Majority Whip James Clyburn (D-S.C.), wrote to the CEOs of JPMorgan Chase, Bank of America, Wells Fargo, Citibank and four other major banks requesting they hand over information about the PPP loans they originated. “We have significant concerns that the two-tiered system that some banks reportedly developed for wealthy clients may have diverted PPP funds intended for vulnerable small business owners in underserved and rural markets,” they wrote, asking for internal communications and policies related to the program, too.
- Five Democratic lawmakers, including Sen. Elizabeth Warren (D-Mass.), introduced legislation aiming to beef up oversight of the bailouts by shoring up the independence of inspectors general, handing subpoena power to the congressional watchdog panel and offering new protections to whistleblowers, among other measures. Warren said lawmakers should roll the measure into the next stimulus package but ithas no Republican support yet. A spokeswoman for Senate Appropriations Committee Chairman Richard C. Shelby (R-Ala.) endorsed the notion of adding oversight teeth to the next relief package, telling The Post, “American taxpayers have a right to know how their money is being spent.”
In the immediate term, Mnuchin is drawing the bulk of the criticism over his push to block disclosure of PPP recipients. His resistance to transparency is tougher to defend in light of the fact the program’s loan application specifically states the borrower’s identity and loan amount will be disclosed, notes Bharat Ramamurti, a former Warren staffer now serving as one of the four members of the congressional oversight commission on the bailout.
“There's no justification for the administration reversing themselves and keeping PPP information hidden from the people who are picking up the tab,” he tells me.
Despite Mnuchin's latest pledge to work with lawmakers, the administration hasn't earned the benefit of the doubt when it comes to cooperating with those examining how rescue funds are spent. “President Trump has moved since the earliest days of the rescue package to curb oversight of the law. Almost immediately after signing the bill, Trump questioned the constitutionality of its requirement that a new special inspector general for pandemic recovery notify Congress immediately if the administration ‘unreasonably’ withholds information requested by investigators,” The Post team reports. “In early April, Trump also ousted acting Pentagon inspector general Glenn Fine, who was chairman of the federal panel created by Congress to oversee the implementation of the stimulus package.”
Ramamurti’s committee is set to deliver its second report Wednesday. But in a further sign of the challenges facing watchdogs, it still lacks a chair. Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi (D-Calif.) need to name one jointly but haven’t reached an agreement yet. And without a chair, the panel can’t hire staff.
For comparison, the committee that oversaw the 2008-2009 Wall Street bailout — headed by Warren — had 46 staffers. They are critical for the panel’s ability to dig through complex material and “help spotlight when things weren’t going the way they should,” says Lisa Gilbert, executive vice president of Public Citizen.
Latest on the federal response
The Trump administration is preparing a nearly $1 trillion infrastructure plan.
This would be part of the administration's stimulus push: “A preliminary version being prepared by the Department of Transportation would reserve most of the money for traditional infrastructure work, like roads and bridges, but would also set aside funds for 5G wireless infrastructure and rural broadband,” Bloomberg's Jenny Leonard and Josh Wingrove report.
“House Democrats have offered their own $500 billion proposal to renew infrastructure funding over five years. It’s unclear how long the administration’s draft would authorize spending or how it would pay for the programs.”
Top Senate Republicans are not embracing a $2 trillion rescue package: White House trade adviser Peter Navarro said over the weekend that Trump wants “at least $2 trillion” in the next phase of economic support. Asked about that price tag, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said "that senators still need to assess how the existing stimulus dollars -- nearly $3 trillion worth -- have been spent to determine what additional legislation is needed. Grassley said there are still outstanding questions about how the economy has been impacted by covid-19, how $150 billion already given to states and localities is being spent and how health care money has been handled," CNN's Manu Raju and Ted Barrett report. McConnell repeated Senate Republicans won't make a decision on another package until next month.
The Federal Reserve finally launched its Main Street lending program.
After months of delays, the effort for wobbly mid-sized businesses went live Monday: “The program, targeted at companies that were in good shape before the pandemic but may now need financing to retain workers and fund operations, will offer up to $600 billion in loans through participating financial institutions to U.S. businesses with up to 15,000 employees or with revenues up to $5 billion,” Reuters's Jonnelle Marte, Lindsay Dunsmuir, Ann Saphir report.
“Unlike the PPP, which was established by Congress in late March and offers loans that can be converted to grants if businesses meet certain requirements, the loans offered under the Fed program must be repaid."
- The Fed also proposed opening the program to nonprofits. “The Fed said it was considering extending loans to small and midsize nonprofit organizations that had been operating for at least five years and that had endowments of no more than $3 billion,” The Wall Street Journal's Nick Timiraos writes.
The central bank will also start buying individual corporate bonds: “As part of a continuing effort to support market functioning and ease credit conditions, the Fed added functions to its Secondary Market Corporate Credit Facility,” CNBC's Jeff Cox reports.
“The program has the ability to buy up to $750 billion worth of corporate credit…Under the latest guidelines, the Fed said it will buy, on the secondary market, individual bonds that have remaining maturities of five years or less. Those purchases will go along with the ETFs the Fed already has been buying, which are balanced toward investment-grade indexes but also include some junk bond funds that track debt which had been investment grade before the crisis but had been downgraded after."
Fed Chair Jay Powell is on the Hill later today. The world looks like a very different place since he last appeared there in February, as “the unemployment rate has climbed from 50-year lows to its highest levels recorded in more than 80 years—the result of the coronavirus pandemic,” Timiraos writes. “The central bank’s asset portfolio, at $7.2 trillion, is nearly double its size one year ago.”
Look for him to face more questions on the economic outlook he outlined last week — which projected the unemployment rate could fall back into single digits by the end of the year — since it “could shape congressional debates on providing additional financial assistance this summer.”
Dow closes slightly higher after dramatic swing
A Fed announcement help spark a comeback from massive losses: “The Dow Jones industrial average started with a loss around 500 points, or 2 percent, shortly after it opened at 9:30 a.m. But it recovered those losses by shortly after noon and, following the Fed’s announcement, closed up 158 points, or 0.6 percent. The Nasdaq closed up 1.4 percent,” Hannah Denham reports.
“American Airlines Group Inc. initially dropped nearly 5 percent but jumped back to less than one percentage point in the red by the time the market closed. Norwegian Cruise Line Holdings slid around 8 percent before ending about minus 2.5 percent by 4 p.m., and United Airlines Holdings dropped around 7.2 percent before recovering and closing down 1.6 percent.”
Robinhood traders nailed the market bottom: “Robinhood investors piled into equities at the perfect time to cash in on stocks’ epic rally, according to Societe Generale,” CNBC's Maggie Fitzgerald reports.
“The Wall Street firm sorted through data from Robintrack, a third party aggregate of Robinhood trading data, and found that the Silicon-Valley stock trading app’s clients nailed the market bottom. Robinhood users total holdings increased in March, exactly when stocks bottomed and started their stunning trek upward.”
Influential model predicts 200,000 Americans dead by October.
Covid-19 is getting worse in many areas throughout the country: “Infections continued to rise in many parts of a divided nation with public health recommendations under attack from communities tired of staying home and officials eager to restart local economies,” Lenny Bernstein, Rachel Weiner and Joel Achenbach report.
“Two associations of local health officials released a statement warning that ‘public health department officials and staff have been physically threatened and politically scapegoated,’ and ‘the vital work of public health departments is also being challenged …’ Ten states — Alabama, Arkansas, California, Florida, Nevada, North Carolina, Oklahoma, South Carolina, Tennessee and Texas — hit new highs for hospitalized patients on Sunday, according to data maintained by The Washington Post.”
More from the U.S.:
- CDC finds patients with underlying conditions were 12 times more likely to die: “People with underlying medical conditions such as heart disease and diabetes were hospitalized six times as often as otherwise healthy individuals infected with the coronavirus during the first four months of the pandemic, and they died 12 times as often, according to a federal health report,” Lena H. Sun reports.
- Trump signals he is moving on by planning rallies: “Trump is defying Tulsa’s top public health official by pressing ahead with a massive indoor political rally there. Scores of his aides have been reporting to work in their office cubicles at his campaign headquarters. Virtually nobody around the president — neither White House staffers nor Secret Service agents — regularly wears a mask anymore. And social distancing is a thing of the past,” Philip Rucker, Joshua Partlow and Isaac Stanley-Becker report.
- FDA pulls emergency approval for antimalarial drugs: “The Food and Drug Administration withdrew its emergency use authorization for hydroxychloroquine and chloroquine, drugs that [Trump] repeatedly promoted for treatment of covid-19, reversing a decision that led to harsh criticism it had put politics ahead of science," Laurie McGinley and Carolyn Y. Johnson report.
The corporate front:
- Chesapeake Energy prepares to file for bankruptcy: The company “is preparing to file for bankruptcy as soon as this week … becoming the largest oil and gas producer to unravel after an energy market rout caused by the coronavirus outbreak,” Reuters's David French and Mike Spector report.
- NYSE to reopen trading floor to some market makers on Wednesday: “More designated market makers, who oversee trading in the exchange’s 2,200 listed companies, will be permitted to come back this week, adding to the 25 percent of participants who returned when the trading floor partially reopened on May 26,” Reuters's C Nivedita and Bharath Manjesh report. And JPMorgan is bringing more traders back to its New York headquarters next week, CNBC's Hugh Son reports.
- Hertz says it expects stockholders to lose all their money: “Hertz said in a government filing that it would sell up to $500 million in common stock. In that very same filing, the company said those shares won’t be worth anything unless those with higher priority in a bankruptcy, such as the company’s debt holders, are paid in full,” CNBC's Thomas Franck reports.
Around the world:
- Morgan Stanley economists double down on V-shape global recovery: “'We have greater confidence in our call for a V-shaped recovery, given recent upside surprises in growth data and policy action,' economists led by Chetan Ahya wrote in a mid-year outlook research note on June 14,” Bloomberg's Enda Curran reports. "Predicting a ‘sharp but short’ recession, the economists said they expect global GDP growth will trough at -8.6 percent year on year in the second quarter and recover to 3.0 percent by the first quarter of 2021.
- BlackRock injects $18 billion in European firms: The world’s biggest asset manager pumped that sum "into 810 European companies since the end of January, more than half of them in distress," Reuters's Simon Jessop reports.
When superpowers collide
China warms to Trump's reelection.
Beijing thinks it will be squeezed no matter what: “Interviews with nine current and former Chinese officials point to a shift in sentiment in favor of the sitting president, even though he has spent much of the past four years blaming Beijing for everything from U.S. trade imbalances to covid-19. The chief reason? A belief that the benefit of the erosion of America’s postwar alliance network would outweigh any damage to China from continued trade disputes and geopolitical instability,” Bloomberg News reports.
“While the officials shared concerns that U.S.-China tensions would rise regardless of who was in the White House, they broke largely into camps of those who emphasized geopolitical gains and those who were concerned about trade ties. Biden, the former vice president, was viewed as a traditional Democrat who would seek to shore up the U.S.’s tattered multilateral relationships and tamp down trade frictions … The general assumption underlying their views was that little could be done to halt the slide in relations between the world’s two biggest economies.”
Commerce Department will ease up on Huawei standards: The United States ”confirmed a Reuters report that it will amend its prohibitions on U.S. companies doing business with China’s Huawei to allow them to work together on setting standards for next-generation 5G networks," Karen Freifeld and David Shepardson report.
“The U.S. Commerce Department and other agencies signed off on the rule change, which is awaiting publication in the Federal Register, Reuters reported, citing people familiar with the matter. The rule was sent to the Federal Register on Friday and is set to be published as early as [today].”
Andrew Olmem, deputy director of the National Economic Council, is leaving.
He served as the point person for the administration's financial regulatory rollback. This is his last week, WSJ's Kate Davidson reports. “Mr. Olmem, who joined the NEC in 2017 under then-director Gary Cohn, had planned to leave earlier but stayed on to help with the economic response to the new coronavirus pandemic. Mr. Olmem coordinated administration efforts to scale back financial regulation, culminating in bipartisan legislation in 2018 that cut regulations for small lenders and raised the asset threshold at which larger regional banks automatically face stricter rules.”
Supreme Court says LGBTQ workers are protected by federal law in landmark ruling.
Justice Neil Gorsuch wrote the 6-3 decision: “The Supreme Court ruled that a landmark federal civil rights law from the 1960s protects gay and transgender workers, a watershed ruling for LGBTQ rights written by one of the court’s most conservative justices,” Robert Barnes reports.
“Major employers had urged the court to find that Title VII provided protection, and unions were happy as well. Jerame Davis, the executive director of Pride at Work, a nonprofit focused on LGBTQ employment rights funded by the AFL-CIO and other unions, said “the Supreme Court has seen our humanity … The court combined two cases to consider whether gay workers are protected under the law. Gerald Bostock claimed that he was fired from his job as a social worker in Clayton County, Ga., after he became more open about being gay, including joining a gay softball league. Donald Zarda said he was fired as a skydiving instructor after joking with a female client to whom he was strapped for a tandem dive that he was gay. (Zarda died in 2014.)”
Amazon says CEO Jeff Bezos is willing to testify before Congress: “Lawyers for the e-commerce giant indicated its openness to dispatching Bezos under certain conditions after initially resisting demands issued by the House Judiciary Committee, where a competition-focused panel previously accused Amazon of deceiving investigators about its business practices," Tony Romm reports.
“Lawmakers also have asked Apple CEO Tim Cook, Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichai to join Bezos and testify at an upcoming hearing, a potentially high-profile gathering that is supposed to cap off more than a year of work by the House committee to study Silicon Valley for potential antitrust violations. It is unclear if those companies have agreed to dispatch their top executives, and all three did not respond to requests for comment.” (Bezos owns The Washington Post.)
Tesla negotiating incentives for possible Texas plant: “Tesla is negotiating terms of a possible incentives deal with Travis County that could bring the electric car maker’s next U.S. assembly plant — and thousands of jobs — to Austin,” the Austin American-Statesman's Lori Hawkins and Shonda Novak report.
“The Travis County Commissioners Court is scheduled to discuss the potential incentives deal in an executive session [today]… vote is expected in the coming weeks. The terms of the potential incentives deal have not been disclosed.”
DOJ charges former eBay staff with “cyberstalking”: “The U.S. Department of Justice has charged six former workers at eBay Inc. with leading a cyberstalking campaign against a Massachusetts couple who publish an e-commerce blog, EcommerceBytes, that criticized the company,” WSJ's Sebastian Herrera reports.
“The alleged actions by the employees, whom eBay fired in September after an investigation, followed criticism of EcommerceBytes by top executives that included Devin Wenig, the company’s chief executive at the time, according to the complaint, which doesn’t identify Wenig by name.”
- Fed Chair Jerome H. Powell is set to testify in front of the Senate Banking Committee
- U.S. retail sales and industrial production data for May is released
- Oracle, Groupon, Lennar and H&R Block are among the notable companies to report their earnings, per Kiplinger
- Powell is set to testify in front of the House Financial Services Committee
- The Labor Department releases weekly jobless claims
- The House Select Subcommittee on the Coronavirus holds hearing on “the unemployment pandemic”
- The House Ways & Means Subcommittee on Select Revenue Measures holds a hearing on tax relief during covid-19
- Smith & Wesson Brands is among the notable companies reporting its earnings
- CarMax is among the notable companies reporting its earnings