October 24, 2020

Pelosi and Mnuchin Discuss Airline Aid as Broad Stimulus Plan Is Shelved

18 min read
Here’s what you need to know: Dozens of mothballed jets parked at the Kansas City...
Credit…Charlie Riedel/Associated Press

Speaker Nancy Pelosi of California and Steven Mnuchin, the Treasury secretary, spoke Wednesday about the prospects of a stand-alone bill for airline relief, as President Trump continued to walk back his own retreat from negotiations on a broader coronavirus relief package and to push for more narrow legislation.

During a conversation in the morning, Mr. Mnuchin asked about the possibility of a stand-alone bill, as a critical payroll program for airline workers lapsed last week and airlines have warned of tens of thousands of more furloughs and layoffs without federal intervention.

Ms. Pelosi noted that Democrats had already thrown their support behind such a measure and reminded Mr. Mnuchin that Republicans had objected to unanimous passage of such a bill in the House on Friday, a spokesman for Ms. Pelosi said. She asked Mr. Mnuchin to review the legislation, championed by Representative Peter DeFazio of Oregon, the chairman of the House Transportation and Infrastructure committee.

A Treasury spokeswoman confirmed that the call took place but would not say what was discussed.

The two talked again for about 20 minutes on Wednesday evening and agreed to talk again on Thursday, according to Drew Hammill, the speaker’s deputy chief of staff.

Since approving nearly $3 trillion in economic relief this spring, Congress and the White House have failed to reach agreement on another package, despite warnings from economists, including the Federal Reserve chair, Jerome H. Powell, that follow-up aid is needed to maintain the country’s economic recovery.

“A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy,” Mr. Powell said on Tuesday. “That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.”

Though talks all but collapsed in early August, Ms. Pelosi and Mr. Mnuchin have resumed discussions in recent days as companies continue to furlough or lay off tens of thousands of Americans and as local governments, schools and industries across the country lobby for more congressional relief.

Talks to secure a more comprehensive bill collapsed on Tuesday after Mr. Trump said in a tweet that he had directed his negotiators to stand down on a stimulus bill until after the election. But the president quickly began backtracking on Tuesday night, saying on Twitter that he would sign a stand-alone bill to send Americans $1,200 stimulus checks. On Wednesday morning, he urged Ms. Pelosi to “move fast” on the proposal.

People close to Mr. Mnuchin said that he was disappointed by the sudden collapse of the negotiations on Tuesday, but that he remained ready to re-engage if given the go-ahead by the president.

Mark Meadows, the White House chief of staff, said that he and Mr. Trump spoke to Mr. Mnuchin on Wednesday morning about the possibility of individual bills that could be passed.

“The secretary and I have been talking about what we could do with stand-alone bills to help airlines, small businesses and the American people with stimulus checks, so hopefully we can convince Speaker Pelosi to do something on a stand-alone basis,” Mr. Meadows said on Fox News.

It remains unclear whether the House Democrats’ airline bill would secure enough Republican support to pass the Senate. Senator Roger Wicker of Mississippi, the chairman of the Senate Commerce committee, put forward a separate bill for airlines that would have lowered the amount of new money being spent by repurposing some funds from the previous $2.2 trillion stimulus law to help revive the program and keep airline workers employed.

Credit…Mike Segar/Reuters

Two months after one of its bankers accidentally sent nearly $1 billion to the wrong people, Citigroup agreed to pay $400 million to federal regulators over long-running problems keeping its daily operations under control.

The regulators — the Federal Reserve and the Office of the Comptroller of the Currency — said Wednesday that Citi had been engaging in “unsafe and unsound banking practices,” including in its programs to catch money launderers.

Citi had failed to fix problems that had been identified over a period of years, the regulators said. The O.C.C. called the bank’s deficiencies a “longstanding failure to establish effective risk management.”

Citibank is in the midst of a major transition — its chief executive, Michael Corbat, will step down early next year and be replaced by Jane Fraser, Citigroup’s president — and must now make improvements to satisfy both regulators. Among the necessary steps: making its executives’ roles clearer and creating a stronger link between their pay and their effective stewardship of the bank.

“We are disappointed that we have fallen short of our regulators’ expectations, and we are fully committed to thoroughly addressing the issues identified,” the bank said in a statement.

The regulators’ actions come amid an embarrassing scandal in which a Citi banker accidentally wired $900 million to a group of lenders to the beauty products maker Revlon. The bank is struggling to recoup the money; it sued the hedge fund Brigade Capital Management in federal court in Manhattan to force it to return $175 million, but Brigade is claiming it is entitled to keep the money.

The Revlon mishap is not Citi’s only recent error. The O.C.C. cited the bank’s violations of the Fair Housing Act in 2019 and the Flood Disaster Protection Act earlier this year, and attributed both to Citi’s inadequate risk management procedures.

The bank has also had trouble keeping track of the flow of illicit funds through its accounts. Over the past few years, it has grappled with problems in its Banamex USA unit, where prosecutors in 2017 said drug smugglers were using the bank to sneak dirty money into the United States from Mexico. Citi paid more than $97 million to settle a criminal inquiry into Banamex.

The $400 million penalty is being paid to the O.C.C., which is also requiring Citi to quickly create a new committee, comprised mostly of nonexecutive board members, to preside over a risk management revamp inside the bank.

  • Stocks on Wall Street rallied on Wednesday, the latest in a series of head-spinning turns for the market as investors gauged the prospect for more economic stimulus from Washington.

  • Stocks had tumbled on Tuesday afternoon in a sudden reversal after Mr. Trump unexpectedly announced the end of negotiations with Democrats over a new economic aid package. But Mr. Trump later appeared to backtrack, saying on Twitter that he would be willing to approve more stimulus checks and spending on programs for airlines and small businesses.

  • The S&P 500 rose 1.74 percent Wednesday, after Tuesday’s 1.4 percent drop. Stocks in Europe and Asia were little changed.

  • After tumbling on Tuesday, airline shares, including American Airlines, Delta Air Lines and United Airlines, were sharply higher on Wednesday. Speaker Nancy Pelosi and Steven Mnuchin, the Treasury secretary, spoke multiple times on Wednesday about the prospects of a stand-alone bill for airline relief and planned to talk again on Thursday.

  • But even before Mr. Trump called off talks, many analysts had been cautioning that the prospects of another stimulus deal were slim. Democrats and Republicans remained far apart in their intentions for a new spending plan, and Ms. Pelosi and Mr. Mnuchin had shown little progress in their efforts to bridge that gap.

  • “We are back in familiar gridlock territory,” said Susannah Streeter, an analyst at Hargreaves Lansdown. “There is little doubt a stimulus plan will eventually get through the Senate, but given we are inching ever closer to the vote, it is looking more unlikely to be signed off before the election. It is going to be very touch and go for airlines in particular.”

  • It may also have helped that minutes of the Federal Reserve’s most recent meeting showed that policymakers had been expecting another stimulus plan as they made policy decisions last month. Stocks jumped in the wake of that release.

  • It could mean that the Fed may have to take stronger actions to bolster the economy, in the absence of fiscal support, some analysts said.

  • Some analysts on Wall Street have looked on increasingly favorable polling for former Vice President Joseph R. Biden Jr., and prospects for a resounding victory for Democrats on Nov. 3, as a precursor for a large stimulus package next year.

  • Such a “blue wave” would “sharply raise the probability of a fiscal stimulus package of at least $2 trillion shortly after the presidential inauguration on January 20, followed by longer term spending increases on infrastructure, climate, health care and education that would at least match the likely longer-term tax increases on corporations and upper-income earners,” analysts at Goldman Sachs wrote this week.

  • A number of polls released Wednesday reaffirmed Mr. Biden’s lead in critical states, including Pennsylvania, Florida and Wisconsin.

Credit…Lexey Swall for The New York Times

Federal Reserve officials were counting on Congress and the White House to pass additional aid for households and businesses hit by the pandemic when they released their latest economic forecasts, minutes from their Sept. 15-16 meeting showed.

Many “noted that their economic outlook assumed additional fiscal support and that if future fiscal support was significantly smaller or arrived significantly later than they expected, the pace of the recovery could be slower than anticipated,” according to notes from the meeting, which were released on Wednesday.

Chances for imminent fiscal help have taken a turn for the worse since Fed officials met. President Trump seemingly tanked prospects of a stimulus package arriving before the election in a series of Twitter posts on Tuesday before suggesting a slimmed-down package later in the evening. In any case, the chances of a deal before November look slim — making a deal before the end of 2020 much less likely.

The Fed’s September meeting was important when it came to the central bank’s own policies. In its policy statement, the Federal Open Market Committee said it expected to hold rates steady near zero — where they have been since March — until the job market reached what it saw as full employment “and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”

That significant update reinforced a pledge the Fed made in August to tolerate higher price gains to offset periods of weak inflation, and it underscored that officials will be extraordinarily patient as they try to help the economy. Economic projections released alongside the statement showed that officials anticipate leaving rates near zero through at least 2023.

But the minutes show that officials left wiggle room around their promise, which drew two dissents and spurred much discussion. The committee said the guidance could change “if risks emerged that could impede the attainment of its economic objectives.”

The minutes show that Fed officials were very concerned about what the immediate future held as it updated its statement.

“Participants continued to see the uncertainty surrounding the economic outlook as very elevated, with the path of the economy highly dependent on the course of the virus; on how individuals, businesses, and public officials responded to it; and on the effectiveness of public health measures to address it,” the minutes showed.

In the weeks since, coronavirus cases have begun to rise again. Over the past week, there have been an average of about 44,000 cases per day, an increase of 6 percent from the average two weeks earlier, according to The New York Times tracker.

Credit…Doug Mills/The New York Times

Here is the situation the U.S. economy faces, with a month to go before Election Day: Job growth is stalling. Layoffs are mounting. And it is highly unlikely that more help is coming.

American households and businesses have gone two months without the enhanced unemployment benefits, low-interest loans and other programs that helped prop up the economy in the spring. And now, after President Trump’s announcement Tuesday that he was cutting off stimulus negotiations until after the election, the wait will go on at least another month — and very likely until the next presidential term starts in 2021.

It could be a dangerous delay.

Already, many furloughs are turning into permanent job losses, and major companies like Disney and Allstate are embarking on new rounds of layoffs. The hotel industry is warning of thousands of closures, and tens of thousands of small businesses are weighing whether to close up shop for good. An estimated one of every seven small businesses in the United States had shut down permanently by the end of August — 850,000 in all — according to data from Womply, a marketing platform. The deeper those wounds, the longer the economy will take to heal.

“The risk to waiting is that we may find ourselves in a place where we’re unable to turn back, we’ll hit a tipping point,” said Karen Dynan, a Harvard economist and Treasury Department official during the Obama administration.

Jerome H. Powell, the Federal Reserve chair, echoed those concerns in a speech on Tuesday, arguing that failing to provide enough support carried risks for the economy.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth.”

The failure to provide that assistance will ripple through the economy.

“The economy needs another round of fiscal support with aid to households, small and midsized firms and states,” said R. Glenn Hubbard, a Columbia University economist who was chairman of the White House Council of Economic Advisers under President George W. Bush. “Failing to act will have real economic consequences.”

Stock indexes, which had risen in recent days on signs that negotiations might be making progress, dropped sharply after Mr. Trump’s announcement. Several major Wall Street banks had said in recent days that they would downgrade their growth forecasts if talks stalled.

Mr. Trump may have been listening. In a series of tweets late Tuesday, he urged both houses of Congress to “IMMEDIATELY” revive a lapsed loan program for small businesses and to approve funds for airlines and another round of stimulus checks. It remained unclear if his tweets reflected a willingness to restart negotiations.

The gridlock in Washington is a reversal from the spring, when fear of an imminent economic collapse led Congress to vote overwhelmingly to approve trillions of dollars in aid to households and businesses. The effort was largely successful: Households began spending again, companies began bringing back workers, and a predicted tidal wave of evictions and foreclosures mostly failed to materialize. The unemployment rate, which reached nearly 15 percent in April, fell to 7.9 percent in September.

But most of the aid programs expired over the summer, and in recent weeks economic gains have faltered. Economists across the ideological spectrum agree that the loss of momentum is likely to get worse if more aid doesn’t arrive soon.

“We had a bridge which took us till about September, and now the question is do we complete the bridge or don’t we?” said Raghuram G. Rajan, a former chief economist of the International Monetary Fund who is now a professor at the University of Chicago. Without more help, he said, “basically anybody who was on that bridge falls off a cliff.”

Credit…John Wilson/Universal Pictures and Amblin Entertainment

“Jurassic World: Dominion,” the $200 million movie that has been a guinea pig as Hollywood resumes filming, will stop production for two weeks after a handful of people working on the film tested positive for Covid-19.

“Woke up to the news we had a few positive Coronavirus tests on ‘Jurassic World: Dominion,’” the film’s director, Colin Trevorrow, posted on Twitter. “All tested negative shortly after, but due to our safety protocols we’re going to pause for two weeks.”

“Those who initially tested positive are currently self-isolating, as are those who they have come into contact with,” a spokesperson for Universal Pictures, the studio producing the film, said in a statement. “As a result, filming has been temporarily paused and will resume in accordance with established safety guidelines.”

“Jurassic World: Dominion” was one of the first large-scale films to resume production in the midst of the pandemic. Shooting outside London at Pinewood Studios, the production enacted a slew of costly protocols to keep the cast and crew safe. Prior to the positive covid results, the studio had shifted the film’s release date an entire year from summer 2021 to June 10, 2022. The movie started shooting in June and has three weeks left on its schedule.

Credit…Themba Hadebe/Associated Press

The World Bank warned on Wednesday that the coronavirus pandemic could push more than 100 million people into extreme poverty this year, elevating the global poverty rate for the first time in more than two decades.

In a new report, the bank said that 88 million to 115 million people will be living on less than $1.90 a day, lifting the poverty rate — which had been projected to decline this year before the pandemic hit — as high as 9.4 percent. The health and economic crisis has taken a severe toll on middle-income countries, creating a class of “new poor” that includes educated people in cities.

The bank expects as many as 729 million people to be living on about $700 a year in 2020.

David Malpass, the president of the World Bank, said that countries would need to reimagine their economies to cope with the lingering long-term reality of the pandemic.

“In order to reverse this serious setback to development progress and poverty reduction, countries will need to prepare for a different economy post Covid, by allowing capital, labor, skills and innovation to move into new businesses and sectors,” Mr. Malpass said.

The report noted that the pandemic was exacerbating income inequality in countries around the world, with those who were already low on the income scales faring the worst with lockdowns and supply chain disruptions.

Regionally, South Asia and sub-Saharan Africa have been the hardest hit.

The pandemic is also expected to take a toll on the World Bank’s longer term poverty reduction goals, setting the poverty rate to 2017 levels. The bank hoped to help bring the global poverty rate to 3 percent by 2030, but now its baseline projection is that 6.7 percent of the global population will live under the international poverty line in 10 years.

Credit…Mark J. Terrill/Associated Press

The home-improvement retailer Lowe’s will pay an additional $100 million in discretionary bonuses to frontline hourly workers in its U.S. stores, distribution centers and store support centers, the company said on Wednesday.

Employees will receive the bonus on Oct. 16, with full-time workers receiving $300 and part-time and seasonal hires getting $150.

“Throughout the spring, summer and now into fall, our frontline associates have shown remarkable resilience and dedication to our communities in the most trying times we have faced together,” said Marvin R. Ellison, Lowe’s president and chief executive.

Lowe’s has given more than $675 million in incremental financial support to workers this year, the company said. In August, the company said its profits for the second quarter surged by more than $1 billion, as the coronavirus pandemic spurred people across the country to take on home improvement projects while cooped up at home.

When the pandemic first hit, many companies bumped workers’ pay. But since then, many companies, including Amazon, Kroger and Albertsons, have quietly ended this so-called hero pay, though some of them continue to give out bonuses. Lowe’s gave its employees a $2 per hour raise for the month of April.

  • The World Economic Forum will move its annual meeting to Lucerne-Bürgenstock, Switzerland, from Davos, the Swiss ski resort. The meeting, May 18 to 21, will be held as long as “conditions are in place to guarantee the health and safety of participants and the host community.” The theme will be “The Great Reset,” which will focus on bringing world leaders together to design a common path to recovery from the pandemic.

  • The pandemic has spurred strange bedfellows — or street fellows as the case may be. Slack, the messaging company, and Cole Haan, the apparel seller, said this week that they had collaborated to create a collection of $120 shoes that bear the Slack logo and its bright colors. “Nearly everything we at Cole Haan do happens on the world’s favorite channel-based messaging platform,” the apparel company said, referring to Slack.

  • Levi Strauss & Company reported a 27 percent sales decline to $1.1 billion in the quarter that ended Aug. 23, as the denim company struggled with lower foot traffic and store closures. Levi’s, which went public last year, said that online sales soared in the period and accounted for 24 percent of overall sales, double the share from a year earlier.

  • The Federal Aviation Administration proposed new training requirements for pilots of Boeing’s 737 Max in a draft report Tuesday, a milestone in the plane’s return to service after being grounded in March 2019. The report, which is open to public comment through Nov. 2, calls for pilots to receive simulator training, which was not required when the plane was first certified. The grounding is expected to be lifted this winter.

The pandemic has helped the rich get richer, according to a new study. But it has also led to greater philanthropy.

Total wealth held by billionaires reached $10.2 trillion in July 2020, a new high, according to a report by UBS Global Wealth Management and PwC Switzerland. The previous peak was $8.9 trillion, reached 2017.

The world has 2,189 billionaires, up from 2,158 in 2017. Entrepreneurs in tech, health care and industrial sectors gained the most during 2018, 2019 and the first seven months of 2020, trends accelerated by the coronavirus pandemic.

The virus has also spurred billionaires to give more of their money away than ever before, with some 209 billionaires committing $7.2 billion in financial donations, goods and equipment or other types of gifts over the past few months, the report stated.

The study also predicted that billionaires will play a crucial role in the recovery and rebuilding process after the health crisis is over.

“When the storm passes, a new generation of billionaire innovators looks set to play a critical role in repairing the damage,” the report stated. “Using the growing repertoire of emerging technologies, tomorrow’s innovators will digitize, refresh and revolutionize the economy.”

The report comes at a time when the virus is widening social and economic divisions. The pandemic has been a financial boon to some wealthy Americans, while research suggests that those in lower economic strata are likelier to catch — and die from — the virus.

Credit…Desiree Rios for The New York Times

Americans recognize that the coronavirus is a health problem — but they think that it poses more of a risk to the general public than to them personally, based on a new Federal Reserve Bank of New York analysis.

Asked about risks posed by the coronavirus over the next three months, people placed their own chance of exposure lower than that of the general public by about 17.5 percentage points on average, researchers at the New York Fed found in a survey of households. That gap — which the Fed researchers called “overconfidence” — faded over time, so that people perceived a similar private and public risk over a three-year period.

“These results hold promise in partly explaining why Covid-19 has been difficult to contain,” the authors wrote. In short, people might behave less cautiously because they perceive their chances of getting sick as lower.

Differences in personal characteristics could justify the lower perceived risk among some people, the researchers noted. For instance, high-income workers who are able to work from home might genuinely have a lower chance of exposure than the general public.

The data does seem to partly reflect that: People with a college education and a higher income were more likely to report a lower personal risk relative to their perceived public risk, the authors wrote.

But there was no major relationship between the severity of local outbreaks and overconfidence, the authors said. And higher-income people had a bigger public-private gap, but they also perceived a higher risk from the disease in general than lower-income people.

The results come from the New York Fed’s May Survey of Consumer Expectations.

Credit…Stephanie Keith for The New York Times

President Trump’s back and forth on supporting new stimulus measures may be a high-stakes negotiating tactic, according to today’s DealBook newsletter. Until a deal is reached, here are some of the groups left in limbo:

  • Airlines and hotels. An estimated 948,000 workers in the travel and tourism industry will lose their jobs without more stimulus, according to data from Tourism Economics for the U.S. Travel Association. That’s on top of the 3.5 million jobs the industry has already lost.

  • Restaurants. A poll last month found that 40 percent of restaurant owners expected to close their establishments within six months in the absence of government aid. Three million restaurant employees have already lost their jobs.

  • State and local governments. More than four million public-sector jobs could be lost as state houses and municipalities make cuts to compensate for drops in tax revenues, according to Moody’s.

  • Unemployed people. Temporary layoffs are becoming permanent job losses, the latest data shows, with more than seven million people out of work for at least 15 weeks. A large share have relied on stimulus and extra unemployment insurance to pay mortgages and rent, according to Deloitte, risking wider financial reverberations as savings dwindle.

  • The U.S. economy as a whole. “It’s simple: Less fiscal stimulus means more economic pain,” Gregory Daco of Oxford Economics wrote in a research note. The absence of additional fiscal aid could reduce economic output 1.5 percent over the next year, he estimated.

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