News: Congress still a wreck on stimulus — Recipe for a new recession?

Thursday, December 3, 2020

Congress still a wreck on stimulus — Recipe for a new recession? — Banks face tough calls in 2021

Dec 03, 2020

Presented by The Great Courses Plus

Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our subscribers each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro.

Quick Fix

Congress still a total wreck on stimulus — Who would possibly think that Congress would be stumbling around at the close of the year trying to figure out how to fund the government past Dec. 11 and deliver at least some desperately needed Covid-19 relief funds?

Well everyone would think that. Because it happens all the time. Fiscal cliffs; shutdowns; near debt defaults. We've lived through all these nightmares the last decade or so.

And we are right back in the ditch again with enormous stakes, per our Caitlin Emma and Heather Caygle. It does not appear that Congress will pass the $1.4 trillion fiscal 2021 spending bill in time, meaning a stop-gap may be needed.

And the Hill got no closer on Wednesday to figuring out if the bi-partisan, $904 billion Covid bill has any hope (probably not) or whether pieces could get shoved into the giant spending bill.

House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer's gambit to offer Senate Majority Leader Mitch McConnell a secret stimulus deal went nowhere. So they pivoted back to supporting the bipartisan agreement, which is going nowhere with McConnell.

Never mind that Congress hasn't approved any new Covid relief money since April. And the virus is spiking across the country. And millions face joblessness and food insecurity. And that the jobs report coming out Friday is likely to show another slowdown in the pace of jobs coming back. And state and local governments are on the cusp of having to do significant layoffs.

Want to have a double-dip recession when there is really no reason we should have one? Well, this is pretty much exactly the way to do it. What a mess.

Speaking of the jobs number — Consensus is for 555K, down from 638K in October and way down from the nearly 5 million that returned in June. We remain around 10 million short of the number of jobs from before Covid hit. And much of easy lifting is done. Millions of small and midsize business jobs are gone for good, especially in the travel and leisure industries.

And the Friday number may wind up well below 555K. But perhaps not far enough below to light a fire under members of Congress. Part of the problem is these numbers LOOK good on the surface but are not actually close to what we need to get back to normal.

GOOD THURSDAY MORNING — 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.

A message from The Great Courses Plus:

Don't be stagnant, keep your mind active with The Great Courses Plus . Learn at your own pace with the ability to stream lectures like the Art of Investing anytime, anywhere. Tap into an expansive selection of over 13,000 video streaming lectures from some of the world's greatest minds. Learning should be enjoyable, so start learning today with The Great Courses Plus!

Driving the Day

Initial jobless claims at 8:30 a.m. expected to stay highly elevated at 775K, down only slightly from 778K … ISM Services Survey at 10:00 a.m. expected to dip to 56.0 from 56.6 …

THE RISKS AHEAD — S&P's Beth Ann Bovino and Satyam Panday: "The U.S. economy, which has recouped two-thirds of the economic losses from the COVID-19 recession, is now showing signs of weakness this holiday season in the midst of climbing COVID-19 infection rates. - S&P Global Economics expects real GDP to contract 3.9% this year and not get back to precrisis levels until the third quarter of 2021

"The U.S. unemployment rate won't reach its precrisis low until after 2023. - We have said, since June, that it's not a far-fetched possibility the U.S. economy could see a scenario of no more fiscal stimulus and a COVID-19 resurgence that cripples growth in the fourth quarter, which we are seeing now."

NEW ON THE PODS — Listen to the newest episode of POLITICO's Global Translations podcast, where hosts Luiza Savage and Ryan Heath look at cobalt and how supply challenges could impact tech and the green energy transition. The show airs this Wednesday, check it out here."

ALSO NEW: The Becker Friedman Institute (BFI) at UChicago will launch a new economics podcast, The Pie "which will draw from the expertise of the full Chicago Economics community to address economic issues of the day." Check it out here.

HAPPY/SAD NEWS: NANCY COOK TO BLOOMBERG — Very sorry to see our wonderful colleague Nancy Cook moving on but she's landed a sweet gig at Bloomberg, per an internal memo: "We are so excited to announce that Nancy Cook … will be joining our White House team to cover the Biden administration.

"Nancy is someone whose work we've admired for years. Her deep sourcing inside the Trump White House was matched only by a keen eye and deft writing that combined to bring the inner workings of the administration to life"

FIRST LOOK: BANKS FACE TOUGH 2021 — Per Deloitte's 2021 Banking and Capital Markets Outlook out today: "[B]ank leaders will likely need to make some hard decisions on optimal talent models." … 35% of respondents indicated their firms plan to rationalize compensation and headcount over the next six to 12 months.

In addition, 33% plan to "rationalize their real estate footprint," while 42% plan to implement technology that "enhances efficiency." In an update from our forecasts in July, we're now estimating that the US banking industry may have to provision for a total of $318 billion in net loan losses from 2020 to 2022, representing 3.2% of loans"

SENATE NARROWLY VOTES TO ADVANCE FED NOMINEE WALLER — Our Victoria Guida: "The Senate … voted 50-45 to advance President Donald Trump's nomination of Christopher Waller to be a board member at the Federal Reserve …

"Waller, who serves as research director at the St. Louis Fed, saw his candidacy held up for over a year after being tapped for the central bank alongside Judy Shelton, whose unorthodox views in favor of the gold standard and shifting policy stances have stalled her nomination. His confirmation and her rejection would leave … Biden only one empty seat on the Fed's seven-member board to fill immediately"

More from Victoria on Waller : No Democrats voted to advance Waller's nomination, despite the fact that some did in committee back in February. But we've had a pandemic since then, and according to a Senate Dem aide, it's partially because they're worried that Waller might not support strong and creative actions to support the economy"

A message from The Great Courses Plus:

Markets

STOCKS SHAKE OFF A WEAK START — AP's Damian J. Troise and Alex Veiga: "Stocks shook off early losses and managed to end mostly higher on Wall Street, even as weakness in technology companies weighed on major U.S. indexes. The S&P 500 edged up 0.2 percent Wednesday after trading lower for much of the day.

"The Nasdaq fell slightly and the Dow Jones Industrial Average ticked up 0.2 percent. Salesforce.com sank after announcing a deal late Tuesday to buy messaging platform Slack for $27.7 billion. The mixed trading came as investors become more optimistic that coronavirus vaccines could start driving a stronger economic recovery."

2,596 TRADES IN ONE TERM: INSIDE SEN. PERDUE'S STOCK PORTFOLIO — NYT's Stephanie Saul, Kate Kelly and Michael Laforgia: "As a member of the Senate's cybersecurity subcommittee, David Perdue has raised alarms that hackers from overseas pose a threat to U.S. computer networks. Citing a frightening report by a California-based company called FireEye, Mr. Perdue was among the senators who asked this spring that the National Guard prepare to protect against such data breaches.

"Not only was the issue important to Mr. Perdue, so was FireEye, a federal contractor that provides malware detection and threat-intelligence services. Beginning in 2016, the senator bought and sold FireEye stock 61 times, at one point owning as much as $250,000 worth of shares in the company."

A message from The Great Courses Plus:

Are you an inquisitively curious individual that loves learning? Join a community of life-long learners, and learn more about any topic with The Great Courses Plus. Stream thousands of videos by some of this world's brightest minds. From the Art of Investing to the Theory of Everything, quench your thirst for knowledge with courses designed for the endlessly curious cat. With The Great Courses Plus, you'll enjoy being able to learn anytime, anywhere at your own pace. Now there's nothing keeping you from starting your educational journey. Learn now with The Great Courses Plus!

Fly Around

MNUCHIN DEFENDS DECISION TO END FED LENDING PROGRAMS — WSJ's Nick Timiraos and Paul Kiernan: "Treasury Secretary Steven Mnuchin defended his decision to allow a suite of emergency lending programs to expire at the end of the year against criticism from Democrats who said he had misinterpreted the law that enabled them.

"At a House oversight hearing on Wednesday, Mr. Mnuchin said the $2 trillion Cares Act pandemic relief bill that Congress approved on a bipartisan basis in March didn't allow him to extend five emergency loan programs. The Fed and Treasury had established those programs with some of the $454 billion Congress had made available in the law."

But Mnuchin, Powell are urging Congress to approve more relief — AP's Martin Crutsinger: "Federal Reserve Chairman Jerome Powell and … Mnuchin urged Congress to approve COVID-19 relief funds without further delay, though Democrats continued to attack a decision by Mnuchin to allow five Fed lending programs to expire during the pandemic. In his most direct comments so far, Powell told the House Financial Services Committee on Wednesday that it's 'very important' for Congress to provide economic support."

TUNE IN TO OUR GLOBAL TRANSLATIONS PODCAST: The world has long been beset by big problems that defy political boundaries, and these issues have exploded in 2020 amid a global pandemic. Global Translations podcast, presented by Citi, unpacks the roadblocks to smart policy decisions and examines the long-term costs of the short-term thinking that drives many political and business decisions. Subscribe for Season Two, available now.

And Mnuchin has already backed $20B for airlines payroll — Reuters' David Shepardson: "Mnuchin said … he backs another $20 billion in additional government payroll support for U.S. airlines.

FED SEES LITTLE TO NO GROWTH IN MUCH OF U.S. — Reuters' Howard Schneider and Ann Saphir: "Federal Reserve officials saw 'little or no growth' in four of their 12 regional districts and only modest growth in the others in recent weeks as a rapidly spready health crisis and ongoing recession continued to devastate some U.S. businesses and families even as many others thrive."

PPP DATA SHOWS HOW A SLIVER OF BORROWERS GOT MUCH OF THE HELP — NYT's Stacy Cowley and Ella Koeze: "More than five million companies received loans under the federal government's signature relief program for small businesses reeling from the pandemic, but a tiny fraction of those companies gobbled up vast sums of money, newly released data shows.

"Detailed loan information released by the Small Business Administration late on Tuesday showed that about 600 businesses received loans of $10 million, the largest available under the $525 billion Paycheck Protection Program. And a mere 1 percent of borrowers received more than a quarter of the total amount of money disbursed — or around $143 billion in loans of $1.4 million and above."

BOUSHEY FACES ALLEGATIONS — Our Alex Thompson and Theodoric Meyer: "A former colleague of Heather Boushey, a top economic adviser to President-elect Joe Biden, is publicly airing prior accusations that Boushey mismanaged the think tank she runs and verbally abused her and other subordinates, saying she wants to prevent future White House employees from enduring a similar experience."

NEXT WEEK - DON'T MISS THE MILKEN INSTITUTE FUTURE OF HEALTH SUMMIT 2020: POLITICO will feature a special edition Future Pulse newsletter at the Milken Institute Future of Health Summit. The newsletter takes readers inside one of the most influential gatherings of global health industry leaders and innovators determined to confront and conquer the most significant health challenges. Covid-19 has exposed weaknesses across our health systems, particularly in the treatment of our most vulnerable communities, driving the focus of the 2020 conference on the converging crises of public health, economic insecurity, and social justice. Sign up today to receive exclusive coverage from December 7–9.