“It’s crazy,” says Tony Fratto, a Treasury and White House official in the Bush administration who is now a partner at Hamilton Place Strategies. “Except for a handful from the neo-austerity caucus among Senate Republicans, everybody else would see the boost from it, and they would get credit for helping people in the middle of a crisis. It’s bad economics but also just really dumb politics.”
Talks between Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi (D-Calif.) toward a stimulus package continue crawling forward. But the effort is largely academic at this point, given the wall of opposition it faces from GOP lawmakers.
Some Senate Republicans are openly worried about the price tag of a rescue package. But other GOP senators are concerned about the lack of assistance to Americans during the economic downturn caused by the pandemic.
More than 34 million Americans are struggling to meet basic expenses. A temporary boost to unemployment benefits expired weeks ago, as did moratoriums on evictions and utility shutoffs, prompting Federal Reserve officials to warn Congress needs to approve more stimulus to save the recovery. New weekly jobless claims out this morning beat expectations by dropping to 787,000 — but that marks the 31st straight week the figure has come in above its previous one-week record of 695,000 set back in 1982.
"Waiting until after the election to reach an agreement on the next covid-19 relief package is a huge mistake," Sen. Susan Collins (R-Maine), locked in a tough reelection fight, said earlier this month.
And Sen. Marco Rubio (R-Fla.) indicated he would be willing to accept a package on the scale of what Mnuchin and Pelosi are negotiating to ensure the economy gets more support now:
Trump has said he wants a bigger package than either party is proposing — perhaps wise to the political implications of leaving millions without a financial lifeline during a worsening pandemic. But aside from the occasional tweet, he has largely washed his hands of the stimulus negotiations, neither seeking to build public support during campaign rallies nor applying direct pressure to senators.
And on Wednesday, Trump appeared to throw in the towel, just after a Pelosi spokesman said she was close to reaching agreement with Mnuchin:
McConnell, far from rallying his troops to the Trump administration’s cause, drove home the futility of the ongoing negotiations this week when he revealed he has warned the White House against cutting a deal with Pelosi.
What’s clear now is that roughly three-quarters of Senate Republicans oppose a big deal.
Sen. John Thune (R-S.D.) put Senate GOP antipathy to a deal costing between $1.8 trillion and $2 trillion in stark terms. “The dimensions of what they’re talking about today, I don’t think there are 13 Republicans for it. That’s my assessment based on the math,” Thune said Wednesday, Paul Kane reports.
Without that bare minimum, even a deal that draws support from every Senate Democrat would fail to clear the filibuster it would certainly face.
It’s impossible to know whether a sustained push from the White House and McConnell, starting months ago, could have meaningfully changed sentiment among Senate Republicans.
McConnell did try in July to muster support for a $1 trillion package as a counter to the $3 trillion bill House Democrats approved in May. “Rather than rallying behind McConnell’s proposal, rank-and-file Republicans loudly opposed it, with even the GOP leader admitting that at least 20 in his conference were opposed to any further aid,” Paul writes.
McConnell has since tried twice, including Wednesday, to advance a $500 billion “skinny” package that Democrats sunk both times for being too paltry in their judgement. In the meantime, he has left the negotiations toward a comprehensive deal to Pelosi and Mnuchin.
But if a deal can't pass before the election, its prospects won't brighten in the lame duck, Sen. Roy Blunt (R-Mo.) told reporters on Wednesday. From Erica Werner:
What Blunt didn’t say: A Trump loss would vaporize whatever sway the president has left with Senate Republicans resistant to more spending. Those senators, a handful of whom are eyeing their own White House bids, will be looking to reestablish themselves as deficit hawks after years of runaway red ink under Trump.
Senate Republicans similarly faced a severely distressed economy in need of a massive Washington bailout in the teeth of the financial crisis twelve years ago. Back then, they swiftly rallied to approve a package that stabilized a teetering financial system. But this bunch has already authorized some $4 trillion in relief spending to stem the health and economic fallout of the pandemic, bringing about what former senior McConnell aide Antonia Ferrier calls “spending exhaustion” in the conference.
She says McConnell is “trying to make the best of a difficult situation. He understands the need for further action… He has said there will be a vote on whatever deal Pelosi and Mnuchin come up with. He has not said when, and he is not guaranteeing an outcome.”
Traders continue to ride the stimulus coaster.
Shares closed lower as talks continued: “The Dow Jones Industrial Average was down 98 points, or 0.4%. Earlier in the day, the 30-stock average traded more than 100 points higher. The S&P 500 dipped 0.2% and the Nasdaq Composite slid 0.3%.” CNBC’s Fred Imbert and Pippa Stevens report.
“Netflix shares fell nearly 7 percent after the company reported disappointing earnings and reported fewer-than-expected subscriber additions. Goldman Sachs and Boeing were the worst-performing Dow members, falling 2.5 percent and 2 percent, respectively. Those declines were somewhat mitigated by a 28.3 percent jump in Snap shares. The social media company’s stock rallied on the back of on stronger-than-expected results for the previous quarter.”
Europe challenges U.S. with bond sale: “The European Union issued debt in a big way for the first time this week to finance pandemic relief programs, generating exceptionally strong demand from investors eager for an alternative to the United States Treasuries that dominate the government bond market,” the New York Times’s Jack Ewing reports.
“The bloc has borrowed from the bond markets before, for example to help Greece recover from a financial crisis, but never on the scale it did on … The European Commission sold 17 billion euros ($20 billion) in 10-year and 20-year bonds, the first of a series of issues that will raise a total of €900 billion during the next five years.”
Bitcoin surges after PayPal’s embrace: “Bitcoin surged past $13,000 for the first time since July 2019 after PayPal Holdings Inc. announced it will allow customers to use cryptocurrencies,” Bloomberg News’s Vildana Hajric reports.
“The largest digital coin increased $950, or 8 percent during tradition trading hours in New York. It climbed another 2 percent to $13,119 in early Asian trading. Gains among so-called alt coins were even bigger … with Litecoin jumping more than 13 percent and Bitcoin Cash surging more than 9 percent.”
- Central Banks are exploring their own digital currencies: “China has been at the forefront of such efforts. In April, Beijing said it would expand its pilot program for a homegrown electronic-payment system, which shares some features with bitcoin and other private cryptocurrencies, to a number of large cities. Even the Federal Reserve, which has long said it doesn’t have plans to launch a digital currency, plans to build and test a hypothetical design,” the Wall Street Journal’s Caitlin Ostroff reports.
From the U.S.:
- CDC expands definition of a “close contact”: “The change by the Centers for Disease Control and Prevention is likely to have its biggest impact in schools, workplaces and other group settings where people are in contact with others for long periods of time … The updated guidance, which health departments rely on to conduct contact tracing, now defines a close contact as someone who was within six feet of an infected individual for a total of 15 minutes or more over a 24-hour period,” Lena H. Sun reports.
- Vaccine trials are on track to begin releasing results: “In a matter of weeks, one of the most closely watched human experiments in history will start to report early results, with data on prospective coronavirus vaccines possibly coming this month or in November from the pharmaceutical giant Pfizer and the biotechnology company Moderna,” Carolyn Y. Johnson reports.
- Obama slams Trump over pandemic management: “Former president Barack Obama delivered a lacerating critique of Trump in his debut on the 2020 campaign trail, denouncing his successor’s handling of the pandemic and ridiculing him for being unable to even ‘protect himself’ from covid-19,” David Nakamura reports.
From the corporate front:
- Flight attendants consider calling it quits: “Many flight attendants have been grounded for months, but since the furloughs were announced, the number has shot up … And while the future of travel remains uncertain, some are considering giving up a career that has afforded them stability and adventure, and become a way of life,” the New York Times's Valeriya Safronova reports.
- AstraZeneca shares dive after volunteer in vaccine study dies: “The Federal University of Sao Paulo, which is helping coordinate late-stage trials in Brazil, separately said that the volunteer was Brazilian …,” CNBC's Berkeley Lovelace Jr. reports. The drugmaker said a review of what happened did not "le[ad] to any concerns about continuation of the ongoing study.”
- Regal begins slow reopening: “The 11 cinemas resuming operations are all outside New York City, where theaters remain closed because of the risk of the coronavirus. Operations in other markets remain suspended, the company said,” Bloomberg News's Kelly Gilblom reports.
- Snap had a blowout quarter: Snap Chief Business Officer Jeremi Gorman said “the company saw positive momentum in the ad market, including in brand advertising, which was weak during the early days of the pandemic. Snap’s ad revenue growth was 52 percent year-over-year,” CNBC's Megan Graham and Jessica Bursztynsky report.
Around the world:
- Ireland is first European country to reimpose a lockdown: “At 12:01 Thursday morning, Ireland entered a six-week lockdown that includes a raft of new restrictions. Schools, however, remain open,” Karla Adam reports.
- Spain health minister says country is failing to control spread: “Spain is not succeeding at controlling the spread of the coronavirus and will need to take more drastic measures to stop it, Health Minster Salvador Illa said ... His warning came hours after Spain became the first Western European nation to report more than 1 million cases, amid record-breaking numbers of infections in other parts of Europe,” Antonia Farzan reports.
Purdue Pharma agrees to plead guilty to criminal charges over the opioid epidemic.
The Justice Department announced a historic $8.3 billion settlement with the OxyContin maker: “As part of the deal — the largest such settlement ever reached with a pharmaceutical company, officials said — Purdue Pharma agreed to plead guilty to three felonies. But state authorities and families who have lost loved ones to its products said the Justice Department’s terms, which include a $225 million civil settlement with the billionaire Sackler family that once ran the firm, are too lenient,” Meryl Kornfield, Christopher Rowland, Lenny Bernstein and Devlin Barrett report.
“Wednesday’s announcement comes as the Justice Department has pushed to settle a number of outstanding investigations involving major corporations. Administrations often seek to resolve significant cases as they near the possible end of their time in office … A multibillion-dollar settlement with Goldman Sachs over alleged financial misdeeds is expected to be announced later this week.”
Apollo and its CEO will seek a review of his ties to Epstein: “Apollo Global Management Inc said on Wednesday it would launch an independent review of Chief Executive Leon Black’s ties with late financier and convicted sex offender Jeffrey Epstein, as some of the private equity firm’s investors issued statements for the first time expressing concerns,” Reuters’s Jessica DiNapoli, Anirban Sen and Chibuike Oguh report.
“The news has sent shock waves through Wall Street, where Apollo reigns as one of the largest investors in corporate credit and leveraged buyouts, with $414 billion in assets under management as of the end of June.”
Boeing is discussing a new plane as it emerges from the 737 Max fiasco: “The company is gauging interest again in a new commercial aircraft … a move that could help it make up lost ground to rival Airbus,” the Wall Street Journal’s Benjamin Katz reports.
“Talks about a potential new aircraft are at a very early stage … and may not lead to an eventual formal development program. A new plane can take years to move from an idea to a fully supported development program, and then even longer to make it to production.”
Wall Street is on an electric-vehicle startup power trip: “Early this summer, electric-vehicle startups Hyliion Inc., Fisker Inc. and Lordstown Motors Corp. were tiny companies with staff numbers measuring in the dozens. Two had built little more than a prototype. None have reported any revenue. Today, they are valued at more than $3 billion apiece by stock-market investors,” the Wall Street Journal’s Eliot Brown reports.
“Never before have so many companies with no revenue pursued a public listing at such high valuations, according to data provided by University of Florida finance professor Jay Ritter.”
- Cruise and GM want to uninvent the wheel: The self-driving carmaker, where General Motors is the majority shareholder, said it “would seek U.S. regulatory approval in coming months to deploy a limited number of Cruise Origin vehicles without steering wheels or pedals,” Reuters's Jane Lanhee Lee, David Shepardson and Paul Lienert report.
Obama blasts Trump.
The former president was gobsmacked by a report that his successor has a secret Chinese bank account: ““Can you imagine if I had a secret Chinese bank account when I was running for reelection?” Obama said, referencing a Times story. “You think Fox News might have been a little concerned about that? They would have called me ‘Beijing Barry,' " David Nakamura reports of Obama's first event on the 2020 campaign trail in Philadelphia.
The 44th president was equally taken aback by other Times reports that found Trump paid $750 in federal income taxes in 2016. “My first job was at a Baskin Robbins when I was 15 years old," Obama told the crowd. "I think I might’ve paid more taxes working that year — dispensing ice cream. How is that possible? How many people here paid less than that?”
Wall Street could call the election first: “Investors will be closely scrutinizing the results from pivotal battleground states, especially ones on the East Coast that got a head start counting ballots. Although TV networks may not have enough confidence in the immediate hours after polls close to announce whether Trump has been reelected, the writing may already be on the wall in financial markets,” CNN Business's Matt Egan reports.
“Like seasoned poker players, investors will be searching for ‘tells’ of a Democratic sweep that paves the way for trillions of dollars in federal spending that could boost the economy. That would likely boost stocks … Markets will be on high alert for signs of a contested election — a nightmare scenario for Wall Street that would send markets tumbling because of the vast uncertainty it would pose.”
Financial firms gear up for Biden: “Lenders are worried the days of a business-friendly Consumer Financial Protection Bureau are numbered,” the WSJ's Orla McCaffrey and AnnaMaria Andriotis report.
"A Biden administration is expected to embrace a more aggressive role for the CFPB, which in many ways has grown less forceful during President Trump’s time in office. For the financial sector, a reinvigorated CFPB could be one of the most immediate impacts of a Biden presidency.
- What this means in practice: “The Biden team expects the agency would issue more fines, try to recover more money for consumers and give priority to protecting people hurt by the coronavirus recession … For example, Biden’s team wants to make sure lenders who have let borrowers temporarily skip mortgage payments don’t rush to foreclose on them next year.”
From economist Adam Tooze:
- The Labor Department reports weekly jobless claims
- The final presidential debate is held in Nashville
- American Airlines, Coca-Cola, AT&T, Southwest Airlines, Union Pacific and Mattel are the notable companies reporting their earnings
- American Express and Bloomin' Brands are the notable companies reporting their earnings