News: Biden rolls out changes to small biz loan program — WH sticks behind Tanden

Monday, February 22, 2021

Biden rolls out changes to small biz loan program — WH sticks behind Tanden — Powell hits the Hill

Feb 22, 2021

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Quick Fix

Biden to make changes to small business loans — The White House is announcing this morning that it will limit fresh loans under the Paycheck Protection Program to businesses with under 20 employees for two weeks.

The idea is to give a leg up to the smallest of businesses that have had the hardest time accessing PPP funds given lack of access to existing relationships with banks that serve as the conduit for PPP money.

The actions are also aimed at women and minority owned businesses that have had the hardest time getting federal help and remain the most at risk to fail as we continue to wait for herd immunity to arrive and the Covid-19 epidemic to become a horrible memory.

From the Biden fact sheet on the new order : "Institute a 14-day period, starting Wednesday, during which only businesses with fewer than 20 employees can apply for relief through the Program. … [T]hese businesses often struggle more than larger businesses to collect the necessary paperwork and secure relief from a lender."

Via our Zachary Warmbrodt : "Less than half of the PPP's more than $284 billion in current funding has been used since it relaunched Jan. 11, with little concern that it would be exhausted. But the program has been dogged by concerns since its creation last year that it was failing to reach the hardest-hit employers, particularly minority-owned businesses that lack relationships with banks responsible for processing PPP applications."

FTT making a comeback? — It's long been a top wish-list item for progressives and Wall Street reformers. But Wall Street has successfully beating back a financial transactions tax for years.

Now CNN reports: "The White House supports studying the merits of a financial transaction tax … in the wake of the GameStop trading frenzy. The GameStop situation highlights the serious issues of investor protection and market integrity, a White House spokesperson told CNN Business on Sunday.

"The potential impact of a financial transaction tax on GameStop-like trading deserves additional study and can be part of a greater evaluation of such a tax for revenue and market stability, the spokesperson said."

Don't hold your breath — CBO says a 0.1 percent tax on stock, bond and derivative transactions could raise $777 billion over ten years. But there is still a ton of moderate Democrat opposition to the idea and Wall Street still claims it would slam individual investors in the form of higher transaction costs.

So it remains a very long shot though if the White House gets deeply serious about pay-fors in further legislative efforts, like infrastructure, it could find its way back into the debate.

A Democratic financial services analyst who followed the GameStop hearings closely emails: "While it wasn't surprising that some of the more liberal members of the Committee brought up the FTT, it seems unlikely that such a proposal could survive on its own in the Senate, unless the filibuster rules were changed (which seems unlikely).

"That said, of all the policy issues raised during the hearing ... I think if structured correctly, an FTT is the one thing that could have real legs."

GOOOD MONDAY 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.

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Driving the Day

Biden will hold a moment of silence to mark the passage of half a million Americans dead from Covid-19 … He will also make an announcement and offer remarks on the PPP changes and small businesses …

On Tuesday Biden will virtually meet with Canadian PM Justin Trudeau. … He has another economy executive order planned for Wednesday … Index of leading indicators on Monday at 10:00 a.m. expected to rise 0.4 percent.

ALSO THIS WEEK: POWELL ON THE HILL — Fed Chair Jerome Powell testifies on Tuesday at 10 a.m. before Senate Banking and Wednesday at 10 a.m. before House Financial Services on the state of the economy and monetary policy. Powell is likely to stand firmly behind the Biden push for big new stimulus soon and reject any idea that the central bank can pump the brakes any time soon.

POWELL PREP — Compass Point's Isaac Boltansky: "These hearings are highly unlikely to provide a substantive shift to the policy conversation given that Chairman Powell is a skilled witness … We expect the bulk of Democratic lawmakers questions to focus on (1) framing the need for more fiscal support, (2) the economic implications of climate change, and (3) economic inequality.

"A number Republicans are likely to use their time with the Fed Chairman to express displeasure with the $1.9T stimulus … winding its way through Congress. We expect more than one Republican to quote Larry Summers' warnings regarding inflation"

TANDEN UPDATE — White House sources tell us they are by no means backing off at all on Neera Tanden's nomination to head OMB despite the fact that Sen. Joe Manchin (D-W.Va.) said he would oppose the nomination and Sen. Susan Collins (R-Maine) also appears to be a no vote. Administration officials note that Tanden has strong support from both business and labor groups and expect that they will eventually have the votes they need for confirmation.

HOUSE TO MOVE ON STIMULUS BILL — Our Caitlin Emma: "The House is on track to pass President Joe Biden's $1.9 trillion coronavirus relief package by the end of this week as Congress sprints to deliver aid to millions of Americans reeling from the pandemic and facing a jobless benefits cliff in mid-March.

"But House Democrats aren't expecting to get a single GOP vote for their aid package, which they're taking up with the procedural maneuver known as reconciliation in order to win Senate passage without the threat of a filibuster. The House Budget Committee will meet Monday afternoon to tee up the legislation for floor passage on Friday or Saturday, with Senate action as soon as the following week."

BIDEN GREEN AGENDA IN DANGER — Our Eric Wolff and Rebecca Rainey: "Biden's green energy agenda is in danger of being engulfed in a fight between organized labor and industry over unionization, wages and other workplace issues.

"As the renewable energy industry expands, unions and their allies in Congress are determined to unionize more of the jobs or, at the very least, require the payment of union-equivalent wages. But the industry says such moves would cripple some of their operations.

"While both sides are eager to push clean energy projects forward and make them a bigger part of the nation's electrical grid, their disagreements will test Biden's vow to be both the greenest and the most pro-union president in history."

Markets

INFLATION PROBLEMS DEPEND ON WHERE YOU LOOK FOR THEM — WSJ's Jon Hilsenrath: "The Federal Reserve predicates its easy money policies in part on the fact that its favorite measure of inflation has run more than a half percentage point below its goal for several years.

"With inflation so low for so long, the thinking goes, the Fed can hold interest rates very low for a while to help boost the economy as it recovers from the effects of the coronavirus pandemic. This raises an important question: Is the central bank thinking about inflation properly?"

And inflation angst is about to rewrite the stock market playbook — Bloomberg's Lu Wang: "For bond investors, inflation is pretty much all bad news, eating into the value of future returns. For equity traders, the tidings can be less categorically awful, given the ability of certain companies to wring profits from higher prices.

"While there will be plenty of stock-market casualties should price pressures perk up, history suggests the landscape isn't devoid of opportunity. Energy shares have been persistent winners during times of high inflation over the past five decades, a study from Ned Davis Research shows."

BUBBLE WARNINGS GO UNHEEDED AS EVERYONE IS A BUYER IN STOCKS — Bloomberg's Lu Wang: "The American love affair with stocks is deepening as everyone from frenetic day-traders to staid institutions dive further into the market. Equity funds are drawing fresh money at an unprecedented pace and hedge funds are boosting their stock exposure to a record. Companies themselves are re-emerging as big buyers, with share repurchases doubling from a year ago.

"The affection underscores growing confidence in an economic recovery, buttressed by government support and vaccines. While aspects of the craze — the growing obsession with penny stocks and options, primarily — are the basis for daily warnings about a bubble, bulled-up positioning is proving a sturdy backbone for the rally."

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Fly Around

IS THAT A BOOM ON THE POST-PANDEMIC HORIZON? — NYT's Ben Casselman: "The U.S. economy remains mired in a pandemic winter of shuttered storefronts, high unemployment and sluggish job growth. But on Wall Street and in Washington, attention is shifting to an intriguing if indistinct prospect: a post-Covid boom.

"Forecasters have always expected the pandemic to be followed by a period of strong growth as businesses reopen and Americans resume their normal activities. But in recent weeks, economists have begun to talk of something stronger: a supercharged rebound that brings down unemployment, drives up wages and may foster years of stronger growth."

MORTGAGE RATES JUMP ON HIGHER TREASURY YIELDS — FT's Robert Armstrong: "Mortgage rates for US homebuyers had their biggest jump in more than a year last week, as higher Treasury yields and a rise in inflation expectations begin to feed through to the real economy. The average 30-year US mortgage rate sat at 2.99 percent on Friday, according to Bankrate.com, having hit an all-time low of 2.8 percent as recently as February 10."

BLUE-COLLAR JOBS BOOM AS COVID BOOSTS HOUSING, E-COMMERCE DEMAND — WSJ's Sarah Chaney Cambon: "Nationally, employment in residential construction, package delivery and warehousing now exceeds pre-pandemic levels.

"Manufacturers have steadily added back jobs after slashing payrolls last spring, though employment remains down about 5 percent from February 2020, according to Labor Department data. Job openings in many blue-collar occupations broke above pre-virus levels last summer and remain significantly elevated, figures from the online job site Indeed show."

ICYMI: SCULPTOR OF WALL STREET BULL DIES AT 80 — AP's Frances D'Emilio: "The artist who sculpted Charging Bull, the bronze statue in New York which became an iconic symbol of Wall Street, has died in his hometown in Sicily at age 80. Arturo Di Modica died at his home in Vittoria on Friday evening, the town said in a statement on Saturday. Di Modica had been ill for some time, it said.

"The sculptor lived in New York for more than 40 years in New York. He arrived in 1973 and opened an art studio in the city's SoHo neighborhood. With the help of a truck and crane, Di Modica installed the bronze bull sculpture in New York's financial district without permission on the night of Dec. 16, 1989."

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