The Washington PostDemocracy Dies in Darkness

The Finance 202: The Fed sees a faster recovery ahead. But Powell signals Congress has to help.

with Brent D. Griffiths

The Federal Reserve is projecting a much swifter economic recovery than the one it forecast back in June. But Fed Chair Jerome H. Powell is warning a still-fragile rebound could buckle without another infusion of relief spending from Congress.

If there isn't additional support for those who have relied on emergency aid from Washington, “then that will start to show up in economic activity,” Powell told reporters after Fed officials wrapped up a two-day meeting. “I think the real question is when and how much and what will be the contents.” 

The Trump administration and congressional leaders continue struggling over those questions with no apparent progress. 

In the first update to their outlook in three months, monetary policymakers on Wednesday said they expect the jobless rate to fall to 7.6 percent by the end of this year on its way to a relatively healthy 4 percent by 2023. And they project gross domestic product to fall 3.7 percent in the fourth quarter compared with the same period last year, a marked improvement over their last call of a 6.5 percent drop.

Powell offered a downbeat spin on those numbers. He suggested the gains the economy has already locked up represent the easiest repairs to the damage wrought by the coronavirus pandemic shutdowns. Sustaining the pace, therefore, will get much tougher. 

“Overall activity remains well below its level before the pandemic, and the path ahead remains highly uncertain,” Powell said. The Fed is doing what it can with what it has, indicating it will keep interest rates near zero through 2023 and continue to expand its balance sheet. 

But the Fed’s sunnier estimates don’t account for some clear and present threats.

There is the possibility, for example, the upcoming flu season, combined with a new wave of coronavirus infections, could hobble the recovery. And it’s not clear what effect the failure of lawmakers to deliver new support would mean for struggling households and businesses, as Rachel Siegel notes.

Powell is fond of saying the central bank has “lending powers, not spending powers.” But he treads carefully when nudging Congress do its part to keep the emergency relief flowing. “I would just say there are still roughly 11 million people still out of work due to the pandemic,” he said Wednesday. “And a good part of those people were working in industries that are likely to struggle. Those people may need additional support as they try to find their way through what will be a difficult time for them.”

More from Powell:

“We’ve also got struggling small businesses, especially those in the business of facing directly to the public. And we have state and local governments dealing with a drop in revenue at the same time spending has gone up, much of it related to the pandemic and economic effects. So again, I would say the fiscal support has been essential in the good progress we see now. And finally, I’ll note that just about all, the overwhelming majority of private forecasters who project an ongoing recovery, are assuming there will be a substantial additional fiscal support.”

From Allianz chief economic adviser Mohamed El-Erian:

Powell’s comments came amid new stirrings in relief negotiations — but no breakthroughs.

President Trump threw a curveball into stalled talks by calling on congressional Republicans to embrace higher spending on an emergency package, including new stimulus checks to Americans.

His Twitter post and subsequent comments at a news conference could reframe talks that have stalled for more than a month, and put new pressure on leaders in both parties,” Erica Werner and Rachael Bade report. “They come at a moment when House Speaker Nancy Pelosi (D-Calif.) is facing a backlash from some House Democrats, including lawmakers in tough reelection races, over congressional inaction on new economic relief.”

Trump expressed interest in a $1.5 trillion plan crafted by a bipartisan group of moderates that so far has been rejected by Republican and Democratic leadership as, respectively, too expensive and not generous enough. Meanwhile, Pelosi had her first phone conversation in weeks on the matter with Treasury Secretary Steven Mnuchin.

A growing number of House Democrats continued to expressed the desire for action on legislation of some kind before Congress goes on recess early next month through the election. And Pelosi and Senate Minority Leader Charles E. Schumer (D-N.Y.) seized on Trump’s new position and suggested it validated their approach,” Werner and Bade report. 

But in one sign Republicans feel limited urgency to come back to the table, House Minority Leader Kevin McCarthy (R-Calif.) balked anew at the bipartisan proposal’s price tag.

Market movers

Futures point to a rough open.

The fizzle after the Fed meeting is heading into a full-on rout: “Dow Jones Industrial Average, which earlier traded just below the flatline, fell 244 points. S&P 500 and Nasdaq 100 futures also traded in negative territory,” CNBC's Fred Imbert reports.

“Normally, the prospects of lower rates for a prolonged time period spur buying in equities. However, that was not the case on Wednesday. The S&P 500 and Nasdaq both closed lower and the Dow ended well off its session high. Big Tech dragged down the S&P 500 and Nasdaq, with Apple, Facebook and Microsoft all closing lower.”

Snowflake more than doubles in debut, largest ever software IPO: “The stock began trading at $245 per share and closed at $253.93. A day earlier, Snowflake priced shares at $120, higher than the $100 to $110 range it estimated on Monday, and a huge bump from the $75 to $85 range it proposed last week,” CNBCs Jessica Bursztynsky reports of the cloud-based data storage company's public offering. 

“Investors had anticipated a blockbuster opening for the company, which is generating over $500 million in annualized revenue and grew over 130 percent in the first half of 2020.”

  • The Oracle of Omahas bet paid off handsomely: “Berkshire Hathaway bought $250 million worth of Snowflake stock at the IPO price and an additional 4.04 million shares from another stockholder at the debut price,” CNBCs Yun Li and Maggie Fitzgerald report. The massive surge boosted Berkshires stake to “about $1.55 billion from around $730 million based on the IPO pricing of $120 apiece. That’s a more than $800 million paper profit on day one.”

Steady Number of Unemployment Claims Points to Slowing Jobs Recovery (WSJ)

Campaign 2020

Key contenders emerge for Biden’s economic team.

The former vice president has a deep bench. Wall Street has also drawn up a hypothetical list: “The cast ranges from progressive favorite Sen. Elizabeth Warren (D-Mass.) to equitability economist Heather Boushey. Longtime Biden confidant Jared Bernstein is also thought to be a top contender for a role, while others speculate that Federal Reserve Governor Lael Brainard could be on the short list,” CNBCs Thomas Franck reports. Among other names mentioned for potential roles: Meg Whitman, former CEO of eBay and Hewlett Packard Enterprise; Morgan Stanley executive Tom Nides; and former Consumer Financial Protection Bureau director Richard Cordray. 

Sheldon Adelson is plotting a spending spree.: “Adelson, CEO of Las Vegas Sands, is looking to spend around $20 million to $50 million in a last-ditch effort to help Trump overcome Joe Biden, according to people familiar with the matter,” CNBCs Brian Schwartz reports.

“Most of the money is expected to go toward the new pro-Trump super PAC, Preserve America. … Other organizations, including the Trump campaign, the Republican National Committee and groups helping Republicans in Congress, could also see some of Adelson’s money.” 

Coronavirus fallout

The coronavirus vaccine might be available this year, but it is likely to be widely distributed in late 2021. (Video: The Washington Post)
From the U.S.:
  • Trump undercuts CDC director on vaccine: “Robert Redfield, the director of the Centers for Disease Control and Prevention, predicted Wednesday that most of the American public will not have access to a vaccine against the coronavirus until late spring or summer of next year — prompting a public rebuke from Trump, who declared the CDC chief was wrong,” Amy Goldstein and Sean Sullivan report.
  • Biden questions whether a vaccine approved by Trump would be safe: “Biden said Americans should trust a coronavirus vaccine developed under the Trump administration only if the president gives ‘honest answers’ to questions about its safety, effectiveness and equitable distribution. ‘I trust vaccines. I trust scientists. But I don’t trust Trump,’ Biden said. ‘And at this point, the American people can’t, either,’” Sean Sullivan reports.
  • The eviction moratorium varies widely in practice: “Some judges say the order, which was announced on Sept. 1, prevents landlords from even beginning an eviction case, which can take months to play out. Some say a case can proceed, but must freeze at the point where a tenant would be removed — usually under the watchful eye of a sheriff or constable,” the New York Timess Matthew Goldstein reports. Some judges have allowed cases to go forward.
  • Low-income students are dropping out of college this fall in alarming numbers: “Some 100,000 fewer high school seniors completed financial aid applications to attend college this year, according to a National College Attainment Network analysis of Free Application for Federal Student Aid (FAFSA) data through August …Students from families with incomes under $75,000 are nearly twice as likely to say they ‘canceled all plans’ to take classes this fall as students from families with incomes over $100,000, according to a U.S. Census survey in late August,” Heather Long and Danielle Douglas-Gabriel report.
  • Big Ten football is coming back: “Five weeks after postponing its football season over safety concerns, the Big Ten Conference reversed course, saying it would play this fall even as its colleges and surrounding communities struggle to contain the novel coronavirus,” Rick Maese, Emily Giambalvo and Ben Strauss report.
From the corporate front:
  • Businesses with “windfall” pandemic profits are showering them on investors: "The worsening inequality crisis triggered by covid-19 is fueled by an economic model that has allowed some of the world’s largest corporations to funnel billions of dollars in profits to shareholders,” Oxfam concludes in a new report, Christopher Ingraham writes. “At the same time, it has left low-wage workers and women to pay the price of the pandemic without social or financial protection.”
  • Airlines, labor unions push for another $25 billion in federal aid: “Several airline executives plan to meet with White House chief of staff Mark Meadows to discuss the situation [today] … U.S. airlines could furlough or lay off more than 30,000 workers, starting Oct. 1,” CNBC's Leslie Josephs reports.
  • Struggling Carnival is selling 18 cruise ships: “Carnival Corp. has already sold eight older-model cruise ships. It has not disclosed the cruise lines the ships are from or to whom they are being sold. The company will also delay delivery of new ships scheduled for 2021 as a cost-saving measure,” Shannon McMahon reports.
Around the world:
  • Red Cross warns covid is worsening discrimination in Asia: “The warning is based on a 4-country survey of around 5,000 people conducted by the organization, along with the WHO, UNICEF and others, showing widespread tendencies to blame ‘particular groups for spreading the coronavirus,’” Rick Noack reports, the four countries are Indonesia, Malaysia, Myanmar and Pakistan.
  • Australian airline sells out scenic flight to nowhere: “To comply with restrictions on interstate travel, the flight will depart Sydney on Oct. 10 and return on the same day, with no stops along the way. But passengers are promised views of the Great Barrier Reef, the Uluru monolith and the Australian outback as the plane flies over the country at low altitudes,” Antonia Farzan reports of the Qantas flight.

Pocket change

Trump says he ‘conceptually’ doesn’t like the TikTok deal.

Oracle might not have sealed things yet: “Trump said he was ‘not going to be happy’ if the viral video app TikTok continues to be majority-owned by ByteDance, its Chinese parent company,” CNNs Brian Fung reports.

“Trump said he expects to be briefed on the proposal [today]. ‘It has to be 100% as far as national security is concerned, and no, I'm not prepared to sign off on anything,’ the president said. ‘I have to see the deal.’”

The backstory on the GOPs tax plan: “The Trump Administration promised the Tax Cuts and Jobs Act of 2017 would pay for itself and boost the middle class. But in truth, the tax cuts funnelled hundreds of millions into the pockets of the rich and ballooned the national debt,” the Center for Public Integrity teases of its new podcast, “The Heist,” that will trace how the sweeping changes happened and what it says about Trumps America.

The Heist

Business Roundtable endorses market-based climate policy (Politico)

McDonald’s Travis Scott promotion is so popular, it’s causing Quarter Pounder shortages (CNBC)

Money on the Hill

House committee subpoenas labor board.

Lawmakers are looking into possible conflicts of interests at the NLRB: “The legal request comes after more than a year of attempts by the committee to acquire ethics related documentation from the National Labor Relations Board— the federal body charged with upholding workers’ rights to organize and raise safety concerns — on issues that involve an NLRB board member’s former law firm,” Eli Rosenberg reports.

“Committee chairman Rep. Robert C. “Bobby” Scott (D-Va.) said that the board’s ongoing refusal to provide the documents suggests that the board is covering up malfeasance, according to a letter from Scott to the panel to NLRB Chairman John Ring.”



  • The Labor Department reports the latest weekly jobless claims
  • A Financial Services investor protection subcommittee holds a virtual hearing on insider trading and corporate integrity during the coronavirus pandemic
  • A House Ways and Means trade subcommittee holds a virtual hearing on enforcing the ban on imports produced by forced labor in Xinjiang, China

The funnies

Bull session