News: Brainard stock rises for Treasury — PPP loans forgiven

Monday, November 23, 2020

Brainard stock rises for Treasury — PPP loans forgiven — Fed privately fumes at Treasury

Nov 23, 2020

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Quick Fix

Brainard stock rises a bit for Treasury — Incoming White House chief of staff Ron Klain said Sunday that President-elect Joe Biden will announce multiple Cabinet picks on Tuesday. Treasury is likely to be among them given Biden's comments last week that he'd made his choice for the critical slot in the new administration.

So who will it be? As MM reported last week, lots of folks inside and outside Biden world think it will be former Fed Chair Janet Yellen. But not so fast. Fed governor and former senior Treasury official Lael Brainard enjoyed a bit of a rally in expectations over the weekend. Much of it is deep Kremlinology. And the Biden camp is remarkably leak-proof.

The case for Brainard — Per a supporter: "I would hope that it would be Lael because she is a trade economist, not a monetary economist like Yellen. So her economics training and academic [prowess] are more applicable at Treasury. The monetary guru belongs at the Fed ...

"Brainard is a proven economic diplomat and that will be a crucial skill as the US repairs its relations globally and even domestically. She is 58 and Yellen is 74. Wouldn't it be better to balance an elderly President with a younger Cabinet?

And parsing Biden's words — Per a close Treasury observer: "Noteworthy that he says 'will be accepted by all,' not that he or she would be 'acceptable' to all, never mind all will be happy, thrilled, etc. He seems to be aiming for acceptance, not enthusiasm, and, if so, I personally think Lael would be 'accepted' by all."

GOOD MONDAY MORNING — Welcome to a blessedly shortened Thanksgiving Week. Many of us can no longer travel to friends and family but hopefully we can all find some peace and joy in this miserable plague year. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

Driving the Day

BIDEN WADES INTO STIMULUS FIGHT — Megan Cassella, Theodoric Meyer and me: "As the pandemic worsens and the U.S. economy teeters on the edge of another downturn, .. Biden is ramping up calls for Congress to pass another coronavirus relief bill before he's sworn in.

"At the same time, he's aligned himself with Democratic leaders in Congress, who have insisted on roughly $2 trillion in new relief spending — a price tag Senate Republicans so far have refused to accept. … People close to the Biden transition's economics team say they are acutely aware they will have to deal with a Republican Senate if Democrats don't win two runoffs races in Georgia and may not be able to pass as big a stimulus package as they would like.

BIDEN TEAM FOCUS — "Biden's transition team is heavily focused on making sure the next package includes language on small business relief funds through the Paycheck Protection Program that would ensure that Black-owned businesses and others that had trouble securing loans the first time around are prioritized. …

"They are also focused on securing funding for struggling state and local governments and extending enhanced unemployment benefits — although both remain deeply contentious issues between Democrats and the GOP Senate."

POWELL AGREES TO RETURN COVID RELIEF FUNDS — Our Victoria Guida: "Federal Reserve Chair Jerome Powell … agreed to return unused coronavirus relief funds to the Treasury Department when its emergency lending programs shut down at the end of the year, as requested by Secretary Steven Mnuchin.

"The emergency programs, which were set to expire Dec. 31 unless extended, will wind down after Mnuchin said Thursday evening that they were no longer needed, triggering a rare public statement from the central bank disagreeing with the move."

SO MORE QE AHEAD? — Pantheon's Ian Shepherdson: "The unilateral decision of Treasury … increases the chance that the FOMC will step-up its asset purchases. … The Fed's response to Mr. Mnuchin's baffling decision was appropriately diplomatic …

"Reading between the lines, our take is that Chair Powell and his colleagues are extremely unhappy. It's true that the take-up of the programs … has been modest. But that's in part because they have been victims of the Fed's success in persuading markets that it stands willing to do whatever necessary to support the system."

FIRST LOOK: $38 BILLION IN PPP LOANS FORGIVEN – Our Zachary Warmbrodt: "The Small Business Administration says it has forgiven $38.4 billion in Paycheck Protection Program loans, the first time the agency has publicly tallied the amount of loans converted into grants.

"The agency has received more than 595,000 loan forgiveness decisions from PPP lenders, totaling $83.2 billion, and has so far made more than 367,000 payments in response. The SBA began accepting forgiveness applications from banks on Aug. 10. It has up to 90 days to process them. Before PPP lending ended, agency approved more than 5.2 million loans totaling $525 billion."

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Markets

BANK STOCKS ALREADY HAD A WILD 2020, BUT NOVEMBER GOT EVEN CRAZIER — WSJ's David Benoit: "The year 2020 will go down as one of the most volatile — and likely one of the worst — for bank stocks on record. More broadly, the stock market is soaring even as the economy continues to stumble amid the pandemic.

"The Dow Jones Industrial Average is nearing the symbolic 30000 threshold, and the S&P 500 hit new records this month. Giant technology companies like Facebook Inc. and Amazon.com Inc., which have benefited from stay-at-home directives, have fueled the market's rise. The lesser performance by banks, viewed as closely tied to the fortunes of consumers and businesses, highlights the disparity between a rallying market and a troubled economy."

'BIG WAR' IN BONDS ESCALATES — Bloomberg's Liz McCormick: "The tide in the $20 trillion Treasury market appears to be turning in favor of the bulls for now, with expectations growing that the Federal Reserve will boost purchases of longer-maturity debt as soon as next month.

"U.S. government debt just logged its best week since August after the Treasury demanded the Fed return unused funds from emergency lending programs, a request the central bank said late Friday it would comply with."

Fly Around

BIDEN TEAM PREPARES FOR RENEWED RECESSION — NYT's Jim Tankersley and Emily Cochrane: "Advisers to President-elect Joseph R. Biden Jr. are planning for the increasing likelihood that the United States economy is headed for a 'double-dip' recession early next year.

"They are pushing for Democratic leaders in Congress to reach a quick stimulus deal with Senate Republicans, even if it falls short of the larger package Democrats have been seeking, according to people familiar with the discussions."

G-20 SAYS IT WILL STRIVE FOR FAIR GLOBAL ACCESS TO COVID VACCINE — Reuters' Davide Barbuscia, Marwa Rashad and Raya Jalabi: "Leaders of the 20 biggest economies vowed on Sunday to spare no effort to supply COVID-19 drugs, tests and vaccines affordably and fairly to 'all people', reflecting worries that the pandemic could deepen divisions between the world's rich and poor.

"The pandemic and prospects of an uneven and uncertain economic recovery were at the centre of a two-day online summit under the chairmanship of Saudi Arabia, which will hand the G20 presidency to Italy next month."

COVID SPURRED COMPANIES TO HOARD CASH. NOW THEY'RE DOLING IT OUT. — WSJ's Thomas Gryta: "After scrambling to hoard cash in the spring, some large U.S. companies that halted their dividend payments are reversing their decision, a sign that their leaders believe the worst of the crisis is behind them.

"Earlier this year, when much of the country's economy shut down in the first waves of the coronavirus pandemic, companies withdrew cash from credit lines, stopped repurchasing stock and halted dividend payments amid the uncertainty. The public health plight continues, but many businesses — from factories to law firms — have learned how to operate during the pandemic."

RETAILERS BRACE AS VIRUS BEARS DOWN ON CONSUMERS, ECONOMY — AP's Christopher Rugaber and Anne D'Innocenzio: "The acceleration of coronavirus cases is causing an existential crisis for America's retailers and spooking their customers just as the critically important holiday shopping season nears. It's also raising the risk that the economy could slide into a 'double-dip' recession this winter as states and cities re-impose restrictions on businesses and consumers stay at home to avoid contracting the disease.

"An anxious consumer is a frightening prospect for retailers as well as for the overall economy. Any sustained recovery from the pandemic recession hinges on consumers, whose spending fuels about 70 percent of economic growth. So as the virus rampages across the nation and with holiday sales expected to be weak and heavily dependent on online shopping, retailers are considering extraordinary steps to draw customers."

IMF CALLS FOR EXPANSION OF DEBT RELIEF — Reuters: "The head of the International Monetary Fund on Sunday called for prompt and effective implementation of a new G20 framework set up to help the world's poorest countries reach permanent debt relief, but said other countries needed help as well.

"'It is critical to operationalize this Framework promptly and effectively,' IMF Managing Director Kristalina Georgieva said in a statement after addressing the leaders of the Group of 20 major economies. 'Going forward, we must also help those countries not covered by the Framework to address debt vulnerabilities so that their economies can become more resilient.'"

BANKS GIVE BLACK-OWNED BUSINESSES ADVANTAGE ON SUPPLY-CHAIN FINANCE TERMS — WSJ's Julie Steinberg: "The biggest banks in the U.S. will give Black-owned businesses advantageous terms on a crucial type of financing that companies use to manage their cash flow, a novel effort to narrow the wealth gap between white and non-white communities.

"Banks made multibillion-dollar commitments to expand lending to Black consumers and businesses after the wave of protests throughout the U.S sparked by the killing of George Floyd. The targeted lending is meant to correct decades of discrimination in lending whereby banks denied loans to Black borrowers or steered them toward products with high interest rates and other terms many couldn't afford."

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