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Mnuchin faces fight over transparency

06/15/2020
Politico

Mnuchin faces fight over transparency — A growing number of lawmakers are blasting Treasury Secretary Steven Mnuchin’s surprising decision to withhold the identities of businesses that took more than $500 billion in government-guaranteed Paycheck Protection Program loans. In the first big battle over coronavirus bailout oversight, House Speaker Nancy Pelosi says the “administration must immediately reverse this decision and uphold its obligation to release this data.” Senate Small Business Chairman Marco Rubio is among the lawmakers who have asked for the release of the information, and 38 House Republicans voted in favor of a PPP disclosure bill last month.

Powell in the spotlight — Federal Reserve Chair Jerome Powell will testify before lawmakers twice this week to talk about the state of the economy. In a report to Congress before his testimony, the Fed said the economic outlook is "extraordinarily uncertain.” The report warned that small businesses face “alarming” conditions and may require a new round of federal aid. Powell’s appearance comes as Congress nears negotiations on new economic relief legislation.

Rising cases threaten economic rebound — Coronavirus cases are surging in states that have begun to reopen, forcing leaders to contemplate whether safety restrictions should be lifted more slowly. Trump administration economic officials are dismissing the prospect of a second wave of cases and warn that another shutdown would be too costly to the economy.

DRIVING THE DAY — San Francisco Fed President Mary Daly delivers an address and takes questions as part of the National Press Club’s Virtual Newsmaker series at 12:30 p.m. …

ALSO THIS WEEK — Powell testifies before Senate Banking Tuesday at 10 a.m. and before House Financial Services Wednesday at 10 a.m. … The FDIC releases its quarterly banking profile Tuesday at 11 a.m. … House Financial Services holds a hearing on “How Bad Actors Are Exploiting the Financial System During the COVID-19 Pandemic” Tuesday at noon … Fed Vice Chair Richard Clarida gives a speech on the U.S. economic outlook Tuesday at 6 p.m. … Fed Vice Chair Randal Quarles talks about stress testing at a Women in Housing and Finance event Friday at noon … Powell discusses workforce resilience at a Cleveland Fed event Friday at 1 p.m.

Millions of jobs might be lost for good — Bloomberg’s Olivia Rockeman and Jill Ward: “[N]ew research by Bloomberg Economics reckons 30% of U.S. job losses from February to May are the result of a reallocation shock. The analysis -- based on the relationship between hiring, firing, openings and unemployment -- suggests the labor market will initially recover swiftly, but then level off with millions still unemployed. …

“Jobs in the hospitality industry … are among the most at risk, alongside retail, leisure, education and health. In many cases, the pandemic will increase the challenge for bricks and mortar companies facing off against e-commerce platforms such as Amazon.com. Inc, accelerating the pre-crisis trend.”

Early signs of a ‘V’ — WSJ’s Greg Ip: “The first stage of the recovery looks V-shaped. … [A]n L-shaped recovery, in which activity stays depressed, now looks remote. And while the overall recovery may not end up a V, it may also be less feeble than many had feared. … The labor market remains the biggest wild card."

Navarro: Trump wants $2 trillion bill — POLITICO’s Evan Semones: “White House trade adviser Peter Navarro signaled that President Donald Trump is looking for at least $2 trillion in the next relief package being considered to help buoy an economy devastated by the coronavirus pandemic. …

“Navarro said the White House would also like to see a ‘critical’ payroll tax cut and a focus on bringing manufacturing jobs back to the U.S. in any further relief bill.”

But stop the $600 unemployment bump, Kudlow says — WSJ’s Ryan Tracy: “[White House economic adviser Larry Kudlow] said Sunday the U.S. needs to stop providing a $600-a-week boost in unemployment benefits instituted in response to the coronavirus pandemic and replace it with a smaller bonus for workers who return to their jobs. …

“As an alternative to the $600-a-week stipend, Mr. Kudlow said the White House was weighing ‘a reform measure that will still provide some kind of bonus for returning to work.’ He didn’t provide details on that proposal but said it ‘won’t be quite as substantial’ as the current unemployment benefit.”

Major PPP change for owners with criminal records — The SBA and Treasury Department announced a big revision to the rules for the Paycheck Protection Program to make it easier for business owners with past legal troubles to apply for aid. Under the new rule, restrictions will be placed on borrowers with non-financial felonies going back just one year instead of five. A bipartisan group of lawmakers pressed the Trump administration to relax the original requirements

Rep. French Hill (R-Ark.), a member of the Congressional Oversight Commission, weighs in on Mnuchin’s decision to withhold PPP loan data: “Unless borrowers were promised something different in the PPP interim final rule, generally, my view is that PPP loans should follow whatever the public disclosure policy is of the SBA related to the 7(a) program.”

MM notes that the SBA warned PPP borrowers in the program's loan application that their names and loan values would be released. The SBA discloses the names and loan details of borrowers under its existing, flagship 7(a) program.

Goldman boosts PPP support — From a release going out later this morning: “The Goldman Sachs Group, Inc. today announced it will commit an additional $250 million to fund the Small Business Administration’s Paycheck Protection Program … loans through Community Development Financial Institutions … and other mission-driven lenders. The firm is also launching partnerships with the National Urban League and the U.S. Hispanic Chamber of Commerce ... to ensure that both capital and information reach minority-owned businesses.

“‘We have seen the SBA’s program make a real difference to small business owners, but it is not reaching them equally,” said David M. Solomon, Chairman and Chief Executive Officer.’”

Kyle Bass under investigation — WSJ’s Dave Michaels and Aruna Viswanatha: “After earning some $34 million by selling short shares of real-estate investment trust UDF IV, Mr. Bass’s Dallas-based company is under investigation by U.S. securities regulators, according to people familiar with the matter. They are looking at whether Mr. Bass’s relentless criticism of UDF—including his allegations of widespread undisclosed problems in its loan portfolio—conveyed false or misleading statements that amounted to market manipulation, the people said.”

Riggleman loses reelection — Our Ally Mutnick on the House Financial Services Committee freshman Republican, who was denied a second term this weekend: “Rep. Denver Riggleman (R-Va.), who became a target of conservatives after officiating a same-sex wedding last year, was ousted Saturday by GOP voters in a drive-thru district convention.”

Study: Private equity titans get rich on fees — FT’s Chris Flood: “The number of private equity barons with personal fortunes of more than $2bn has risen from three in 2005 to 22, according to a new analysis which estimates investors paid $230bn in performance fees over a 10-year period for returns that could have been matched by an inexpensive tracker fund costing just a few basis points. …

“The biggest winners have been the founders of Blackstone, Apollo, KKR and Carlyle — the four largest private equity managers.”

Dallas Fed’s Kaplan: Systemic racism slows economic growth — Reuters’ Doina Chiacu: “Systemic racism and high unemployment levels among black and Hispanic Americans create a drag on the U.S. economy, Dallas Federal Reserve President Robert Kaplan said on Sunday.

‘“A more inclusive economy where everyone has an opportunity will mean faster workforce growth, faster productivity growth and will grow faster,’ Kaplan said on CBS’ ‘Face the Nation.’”

Most Americans say wealth hasn’t improved under Trump — Bloomberg’s Virginia Van Natta: “The ‘Trump Bump’ hasn’t benefited most Americans, with fewer than one in six saying their personal finances have improved since Donald Trump became president, according to a survey commissioned by Bankrate.com. …

“Almost twice as many respondents said they’re worse off since Trump moved into the White House in January 2017, while about half of the U.S. adults polled, 45%, said their financial situation has stayed about the same.

“Groups likely to report doing better under Trump included men, those identifying as white, and those earning $80,000 or more annually.”

People moves — The Bank Policy Institute hired Erik Rust as vice president of government affairs. He was previously a director at the U.S. Chamber of Commerce.