“More than four months into fighting the coronavirus in the United States,” TheNew York Timessays, “the shared sacrifice of millions of Americans suspending their lives—with jobs lost, businesses shuttered, daily routines upended—has not been enough to beat back a virus whose staying power around the world is only still being grasped.” Most Americans, regardless of their views about the lockdowns most states imposed in response to the epidemic, probably would concur with that conclusion. But did the lockdowns fail because they were imposed too late and lifted too soon, or did they fail because they were fundamentally misconceived? On that question there is much disagreement.
Prior to last spring, the idea that the mass quarantine of overwhelmingly healthy, noninfectious people was an appropriate response to a viral epidemic would have struck most of us as highly implausible. During the “Spanish flu” epidemic of 1918, which was far more deadly than COVID-19 has proven to be, many American cities banned large public gatherings, closed schools, and shut down businesses, such as movie theaters and pool halls, where people gathered indoors in close proximity to each other. But the restrictions of that era were not nearly as pervasive or as broad as the measures implemented in response to COVID-19, which closed all but a select few businesses and confined hundreds of millions of people to their homes except for government-approved purposes.
Those orders, which entailed enormous economic and social costs, were never sustainable over the long term. And once they were lifted, we were bound to face the challenge that confronts us now: how to deal with a virus that poses a negligible risk to most of the population but a serious risk to many people with preexisting medical conditions, a virus that people often carry without realizing it because it can be transmitted before symptoms appear, when symptoms are so mild that they cause little concern, or when symptoms never show up at all.
Lockdown advocates understood that the virus would still be with us after the sweeping restrictions on movement and economic activity were removed. But they argued that lockdowns would prevent local health systems from being overwhelmed by COVID-19 patients, which would endanger not only their lives but the lives of people with other illnesses. That was a scary prospect, although it was probably exaggerated even in places that were hit especially hard by the epidemic. New York City, for example, ended up with more ventilators and hospital capacity than it actually needed.
Even if lockdowns merely delayed COVID-19 cases rather than actually preventing them, supporters of the policy also said, the restrictions would buy time for treatments that could make the disease less deadly. If you knew that you were going to catch the virus at some point, Johns Hopkins surgeon Marty Makary asked during a recent Soho Forum debate, wouldn’t you rather get it later in the epidemic, after doctors had a chance to figure out which treatments worked best? That strikes me as a pretty good argument, although the benefit Makary imagines has to be balanced against the medical cost of restrictions that delayed potentially lifesaving diagnosis and treatment of other diseases.
Lockdown supporters also emphasized that slowing transmission of the virus would buy time to develop the testing capacity required to identify carriers, trace their contacts, and quarantine them. We missed that opportunity early in the epidemic, thanks largely to a government-engineered testing fiasco. Having learned from that mistake, it was thought, states could use the breathing space provided by lockdowns to expand their testing and tracing capabilities. But as the Times notes, even states that were relatively well-prepared on that score are doing a pretty pitiful job of testing and tracing, a mission that seems daunting given the enormous gap between total infections and confirmed cases.
All of these arguments assumed that lockdowns would have enough of an impact on virus transmission to justify the huge burdens they imposed. But it is by no means clear that they did.
Cellphone data show that Americans were already moving around less before they were legally required to do so. Nationwide, driving, walking, and use of mass transit fell precipitously in early March, before any of the lockdowns. That downward trend continued until late March, when Americans started moving around more, even as they were still subject to lockdowns. The same basic pattern was apparent even in states, such as Arkansas, Iowa, Nebraska, North Dakota, South Dakota, and Wyoming, that never issued stay-at-home orders. Foot traffic data show similar trends: a sharp decline beginning in early March, followed by an increase beginning in late March and early April.
It is possible that lockdowns accelerated the downward trends in mobility and delayed or attenuated the upward trends. But the data suggest that the trends were driven mostly by voluntary changes in behavior. It is also possible that foreclosing certain options when people ventured outside their homes reduced virus transmission even when they started doing that more. In states with broad business closure orders, many people were not going to work, and no one was allowed to go inside bars or restaurants for drinks or food. It seems reasonable to expect that such restrictions would reduce virus transmission to at least some extent.
Yet in Texas, where a statewide lockdown was imposed on April 1, that order had no obvious impact on the number of new COVID-19 cases reported each day, which continued to trend upward through April. And after the stay-at-home order expired on April 30 and businesses began to reopen, more than a month went by before there was an explosion in cases, even though the median incubation period for COVID-19 is four or five days.
Houston writer Mimi Swartz, in a New York Times op-ed piece published yesterday, blames Phase 3 of Gov. Greg Abbott’s reopening plan, which “allowed many businesses to reopen at 75 percent capacity on June 12.” The timing seems right, since daily new cases began to rise precipitously four or five days later. The number jumped more than threefold between June 16 and June 25, from 2,622 to nearly 6,000, before falling slightly to 5,357 yesterday.
A longer view shows that newly identified cases had already risen dramatically since late May, from 589 on May 26 to more than 2,500 on June 10—a fourfold increase. That increase may have had something to do with gatherings on Memorial Day weekend and the mass protests against police brutality that followed soon after.
But let’s say Swartz is right that increasing the number of people businesses are allowed to serve—a decision that Abbott reversed for restaurants on Friday, when he also ordered bars closed—transformed what might have been a one-time jump into a persistent upward trend. Doesn’t that imply that letting restaurants operate at 50 percent of capacity (the limit to which Abbott reverted) rather than 75 percent is consistent with keeping the epidemic under control? And doesn’t that imply that the original order, which prohibited all restaurant dining, went farther than necessary?
I honestly don’t know the answer. But this is the sort of question that politicians conspicuously failed to ask when they shut down the economy in the name of flattening the curve.
Texas, according to lockdown supporters, did pretty much everything wrong: It closed businesses too late, allowed them to reopen too soon, and failed to develop testing and tracing capacity enough to make a real difference. But what about California, which led the nation in ordering businesses to close and telling people to stay home and has been only gradually lifting those restrictions? Newly confirmed cases are also rising dramatically there, from 2,108 on June 15 to 7,149 on June 23—a more-than-threefold increase similar to what Texas saw during the same period, although that number had dropped to 4,810 as of June 27.
California began allowing dine-in restaurants to reopen on May 8. The state has not imposed a hard cap on occupancy, focusing instead on physical distancing requirements. Some local governments are being more cautious. In San Francisco, for example, restaurants were allowed to reopen on June 15, but only for outdoor dining. The state allowed bars, wineries, breweries, hotels, bowling alleys, and miniature golf courses to start reopening on June 12 in counties that met specified epidemiological targets.
Can that last decision be blamed for the recent surge in cases? It seems unlikely, given how gradually these businesses are actually reopening. In any case, it is hard to put much stock in the argument that Texas has been exceptionally reckless when even a super-cautious state like California is seeing similar increases in newly identified infections.
As in Texas, the number of new daily cases in California rose steadily during the lockdown, although supporters of that policy presumably would argue that the number would have risen more otherwise. According to Youyang Gu’s estimates, California’s reproduction number—the number of people infected by the average carrier—was 1.71 in early February. It began falling significantly before the statewide lockdown was imposed on March 18 and continued falling until mid-April, when it settled around one—the threshold for a growing epidemic. The number started rising in mid-May, about a week after California began to reopen, and now stands at 1.09. Those estimates are consistent with the idea that the lockdown helped reduce virus transmission, if only by reinforcing a preexisting trend.
In Texas, by contrast, the decline in the reproduction number happened almost entirely before the statewide lockdown, and the number began rising before the lockdown was lifted. Gu’s estimate puts it at 1.08 today, slightly lower than California’s number. If California was more successful at reducing virus transmission because it imposed a lockdown earlier and began to lift it later and more carefully, that success is not reflected in these estimates.
It is certainly plausible that lockdowns helped slow the spread of COVID-19 by limiting the choices of people who were not inclined to follow social distancing guidelines. But the size of the policy’s marginal contribution is uncertain, and it is clear that government action is only part of this story, which is largely about how people voluntarily responded to the threat posed by the epidemic.
The evidence suggests that Americans initially changed their behavior in striking ways, then recalibrated their reaction as it became clear that we would be living with this virus for a long time. Many people—especially those whose own risk of dying from COVID-19 is very low—probably would have become increasingly impatient with pandemic-inspired limits on their lives even if politicians had never deprived them of their livelihoods and ordered them to stay home. But the bitter experience with sweeping and frequently arbitrary government-imposed restrictions seems to have left many Americans less willing to take even relatively modest precautions.
“There was ‘real hubris’ on the part of public health officials at the very start,” the Times says, quoting Vanderbilt University infectious disease specialist William Schaffner. Those officials, according to the Times, believed “the United States could lock down and contain the virus as China had,” and “that futile hope helped create an unrealistic expectation that the shutdown, while intense, would not be for long, and that when it was lifted life would return to normal.”
Now that we have emerged from lockdowns with no real confidence that they actually reduced the ultimate death toll, many people are understandably asking what the point was. “Many Americans started in the pandemic with a strong feeling of solidarity, not unlike the days after Sept. 11, 2001,” the Times observes. “They closed their businesses, stayed inside, made masks and wiped down their groceries. In a country often riven by politics, polls showed broad agreement that shutting down was the right thing to do. But months of mixed messages have left many exhausted and wondering how much of what they did was worth it.”
They are right to wonder.
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Five years ago, police officers in Greenwood Village, Colorado, destroyed a private residence while pursuing a suspected shoplifter who had broken in and barricaded himself inside. Last year a federal court denied the homeowners any compensation for those damages, even though they had no connection to the theft and did not willingly allow the fugitive into their house. This morning the Supreme Court announced that it will not hear the case.
Over the course of June 3 and 4, 2015, a SWAT team deployed a series of flash bang grenades, tear gas, 40 mm rounds, two Bearcat armored vehicles, and breaching rams against the home of Leo, Alfonsina, and John Lech. The Lechs had to demolish the house, which was worth $580,000. The city gave them $5,000.
This despite the fact that the Takings Clause of the 5th Amendment is supposed to protect citizens from having their property taken or destroyed by the government without being justly compensated for that loss.
“The simple rule of the Constitution is that the government cannot arbitrarily single out private citizens to bear the costs of something that should rightly be the burden of society as a whole,” said attorney Jeffrey Redfern of the Institute for Justice, the public interest law firm that represented the Lechs, in a statement. “If the government requires a piece of property to be destroyed, then the government should pay for it—and that’s just as true regardless of whether the people doing the destroying are the local school board or the local police.”
The U.S. Court of Appeals for the 10th Circuit disagreed, ruling in October that the cops acted within their “police power” when they ravaged the home in an attempt to coax the suspect, who was armed with a handgun, to surrender.
As Jay Stooksbury wrote in the December 2017 issue of Reason, the ordeal financially upended the Lech family’s life. Leo Lech had to take out a $390,000 loan after having to tear down what remained of the home. As of October of last year, he had incurred an additional $28,000 in attorney’s fees.
The death of George Floyd, an unarmed man killed by a Minneapolis cop, has driven new life into the conversation around police reform—not just as it relates to excessive force, but as it pertains to ensuring the public has recourse against officers who infringe on their rights. The Supreme Court recently refused to hear several cases on qualified immunity, the legal doctrine that allows public officials to violate your rights without fear of federal civil rights lawsuits, so long as the way those rights were trampled has not been outlined almost identically in a previous court precedent.
The Lech case is a microcosm for several discussions around what needs to change. There was the intensely-militarized presence: Why does apprehending a petty thief necessitate grenades and armored vehicles? There was a rather plain violation of the homeowners’ constitutional rights. And there was—and is—the lack of accountability, which Lech no longer has hope of seeing rectified.
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Journalist Andy Ngo, known for his work on exposing Antifa and American political violence, testified in front of the U.S. House Committee on Oversight and Government Reform Monday morning.
Ngo briefed the representatives on the violence he’s observed and fallen victim to as a result of the demonization of police and the resulting consequences of less police intervention in conflicts and riots.
“You could hear the distant sirens of the police, but no one would show up”
“George Floyd deserves justice but so do countless Americans, journalists, and others victimized by militant extremists who use us as human shields.”
— Oversight Committee Republicans (@GOPoversight) June 29, 2020
“America is experiencing the consequences of police in retreat because of biased media narratives and poor leadership,” Ngo said.
“This has allowed violent extremists to cloak themselves under the banner of ‘peaceful protest’ to carry-out widespread arson, shootings, looting and property destruction.”
He specifically cited Portland and Seattle where city councils have stripped the use of tear gas from police, while officers are assaulted with bricks, lasers, and projectiles in the two cities. He also pointed to several other cities across the nation where police have been severely injured.
“In New York, nearly 400 officers were injured in a two-week period.
150 local and federal officers were injured in Washington D.C. in a week.
130 officers in Chicago were injured in a 48-hour period,” Ngo testified.
Ngo reports mainly on the West Coast and has covered the violence shaking Portland for years.
“Like in many cities, law enforcement here [in Portland] is routinely demonized by the public and elected officials,” Ngo testified.
“The mainstreaming of police hatred in Portland has created a culture of passive policing and a tolerance of criminal mob behavior. Who suffers the most? Law-abiding citizens and yes, journalists too.”
“Do you agree with the president’s designation of ANTIFA as a terrorist organization?” @Jim_Jordan asks.
“Yes,” @MrAndyNgo unequivocally replies, “based on the activities I see them doing on the ground.”
— Oversight Committee Republicans (@GOPoversight) June 29, 2020
Ranking Member Jim Jordan, R-OH, asked Ngo about his position on President Donald Trump designating Antifa as a terrorist organization.
Ngo said he agrees with the classification based on the actions he’s witnessed — especially a severe assault he suffered at the hands of Antifa in Portland last summer.
“Antifa organized an assault on me within view of the police—who did not intervene. They beat me repeatedly and so severely I had to be hospitalized. I was diagnosed with a brain hemorrhage, among other injuries,” Ngo said.
“Since then, I have been harassed and stalked further by people connected to the same criminal organization.”
Ngo continues to report on the crimes and brutality of Antifa — including a video he shared today of Portland protesters once again calling for violence against him.
“I’m gonna beat his ass”
At the antifa black bloc gathering outside the Justice Center in Portland before the nightly riot, a person announces on a bullhorn that they will beat me. The crowd cheers.
Fed Chair Powell Says “Full Recovery Unlikely Until People Feel Safe” Tyler Durden
Mon, 06/29/2020 – 16:08
Fed Chair Jay Powell has released his prepared remarks for his testimony before the House Financial Services Committee tomorrow (with U.S. Treasury Secretary Steven Mnuchin).
”We have entered an important new phase and have done so sooner than expected,” Powell noted.
“While this bounceback in economic activity is welcome, it also presents new challenges—notably, the need to keep the virus in check.”
While noting the push to lift restrictions on commercial activity, Powell critically expressed the need to contain the virus, noting that “a full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.”
Nothing jumps out from the prepared remarks that should be market-moving
Chairwoman Waters, Ranking Member McHenry, and other members of the Committee, thank you for the opportunity to testify today to discuss the extraordinary challenges our nation is facing and the steps we are taking to address them.
We meet as the pandemic continues to cause tremendous hardship, taking lives and livelihoods both at home and around the world. This is a global public health crisis, and we remain grateful to our health-care professionals for delivering the most important response, and to our essential workers who help us meet our daily needs. These dedicated people put themselves at risk day after day in service to others and to our country.
Beginning in March, the virus and the forceful measures taken to control its spread induced a sharp decline in economic activity and a surge in job losses. Indicators of spending and production plummeted in April, and the decline in real gross domestic product, or GDP, in the second quarter is likely to be the largest on record. The arrival of the pandemic gave rise to tremendous strains in some essential financial markets, impairing the flow of credit in the economy and threatening an even greater weakening of economic activity and loss of jobs.
The crisis was met by swift and forceful policy action across the government, including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This direct support is making a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy.
As the economy reopens, incoming data are beginning to reflect a resumption of economic activity: Many businesses are opening their doors, hiring is picking up, and spending is increasing. Employment moved higher, and consumer spending rebounded strongly in May. We have entered an important new phase and have done so sooner than expected. While this bounceback in economic activity is welcome, it also presents new challenges—notably, the need to keep the virus in check.
While recent economic data offer some positive signs, we are keeping in mind that more than 20 million Americans have lost their jobs, and that the pain has not been evenly spread. The rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics. This reversal of economic fortune has caused a level of pain that is hard to capture in words as lives are upended amid great uncertainty about the future.
Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus.A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.
The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.
The Federal Reserve’s response to these extraordinary developments has been guided by our mandate to promote maximum employment and stable prices for the American people as well as our role in fostering the stability of the financial system. Our actions and programs directly support the flow of credit to households, to businesses of all sizes, and to state and local governments. These programs benefit Main Street by providing financing where it is not otherwise available, helping employers to keep their workers, and allowing consumers to continue spending. In many cases, by serving as a backstop to key financial markets, the programs help increase the willingness of private lenders to extend credit and ease financial conditions for families and businesses across the country. The passage of the CARES Act by Congress was critical in enabling the Federal Reserve and the Treasury Department to establish many of these lending programs. We are strongly committed to using these programs, as well as our other tools, to do what we can to provide stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.
In discussing the actions we have taken, I will begin with monetary policy. In March, we lowered our policy interest rate to near zero, and we expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals.
In addition to these steps, we took forceful measures in four areas: open market operations to restore market functioning; actions to improve liquidity conditions in short-term funding markets; programs, in coordination with the Treasury Department, to facilitate more directly the flow of credit to households, businesses, and state and local governments; and measures to encourage banks to use their substantial capital and liquidity buffers built up over the past decade to support the economy during this difficult time.
Let me now turn to our open market operations. As tensions and uncertainty rose in mid-March, investors moved rapidly toward cash and shorter-term government securities, and the markets for Treasury securities and agency mortgage-backed securities, or MBS, started to experience strains. These markets are critical to the overall functioning of the financial system and to the transmission of monetary policy to the broader economy. In response, the Federal Open Market Committee purchased Treasury securities and agency MBS in the amounts needed to support smooth market functioning. With these purchases, market conditions improved substantially, and in early April we began to gradually reduce our pace of purchases. To sustain smooth market functioning and thereby foster the effective transmission of monetary policy to broader financial conditions, we will increase our holdings of Treasury securities and agency MBS over the coming months at least at the current pace. We will closely monitor developments and are prepared to adjust our plans as appropriate to support our goals.
Amid the tensions and uncertainties of mid-March and as a more adverse outlook for the economy took hold, investors exhibited greater risk aversion and pulled away from longer-term and riskier assets as well as from some money market mutual funds. To help stabilize short-term funding markets, we lengthened the term and lowered the rate on discount window loans to depository institutions. The Board also established, with the approval of the Treasury Department, the Primary Dealer Credit Facility (PDCF) under our emergency lending authority in section 13(3) of the Federal Reserve Act. Under the PDCF, the Federal Reserve provides loans against good collateral to primary dealers that are critical intermediaries in short-term funding markets. Similar to the large-scale purchases of Treasury securities and agency MBS that I mentioned earlier, this facility helps restore normal market functioning.
In addition, under section 13(3) and together with the Treasury Department, we set up the Commercial Paper Funding Facility, or CPFF, and the Money Market Mutual Fund Liquidity Facility, or MMLF. Millions of Americans put their savings into these markets, and employers use them to secure short-term funding to meet payroll and support their operations. Both of these facilities have equity provided by the Treasury Department to protect the Federal Reserve from losses. After the announcement and implementation of these facilities, indicators of market functioning in commercial paper and other short-term funding markets improved substantially, and rapid outflows from prime and tax-exempt money market funds stopped.
In mid-March, offshore U.S. dollar funding markets also came under stress. In response, the Federal Reserve and several other central banks announced the expansion and enhancement of dollar liquidity swap lines. In addition, the Federal Reserve introduced a new temporary Treasury repurchase agreement facility for foreign monetary authorities. These actions helped stabilize global U.S. dollar funding markets, and they continue to support the smooth functioning of U.S. Treasury and other financial markets as well as U.S. economic conditions.
As it became clear the pandemic would significantly disrupt economies around the world, markets for longer-term debt also faced strains. The cost of borrowing rose sharply for those issuing corporate bonds, municipal debt, and asset-backed securities (ABS) backed by consumer and small business loans. In effect, creditworthy households, businesses, and state and local governments were unable to borrow at reasonable rates and other terms, which would have further reduced economic activity. In addition, small and medium-sized businesses that traditionally rely on bank lending faced large increases in their funding needs as measures taken to contain the spread of the virus forced them to temporarily close or limit operations, substantially curtailing revenues.
To support the longer-term financing that is critical to economic activity, the Federal Reserve, in cooperation with the Department of the Treasury and using equity provided for that purpose under the CARES Act, announced a number of emergency lending facilities under section 13(3) of the Federal Reserve Act. These facilities are designed to ensure that credit would flow to borrowers and thus support economic activity.
On March 23, the Board announced that it would support consumer and business lending by establishing the Term Asset-Backed Securities Loan Facility (TALF). The TALF is authorized to extend up to $100 billion in loans and is backed by $10 billion in CARES Act equity. This facility lends against top-rated securities backed by auto loans, credit card loans, other consumer and business loans, commercial mortgage-backed securities, and other assets. The TALF supports credit access by consumers and businesses and provides liquidity to the broader ABS market. The facility made its first loans on June 25, and, to date, has extended $252 million in loans to eligible borrowers. Since the TALF was announced, ABS spreads have contracted significantly. Thus, the facility might be used relatively little and mainly serve as a backstop, assuring lenders that they will have access to funding and giving them the confidence to make loans to households and businesses.
To support the credit needs of large employers, the Federal Reserve also established the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF). These facilities primarily purchase bonds issued by U.S. companies that were investment grade on March 22, 2020. The two facilities have a combined purchase capacity of up to $750 billion and are backed by $75 billion in CARES Act equity. Final terms and operational details on the PMCCF were announced on June 29, and it stands ready to purchase newly issued corporate bonds and syndicated loans, serving as a backstop for businesses seeking to refinance their existing credit or obtain new funding. The SMCCF buys outstanding corporate bonds and shares in corporate bond exchange-traded funds (ETFs) to facilitate smooth functioning of the secondary market. The SMCCF complements the PMCCF, because improvements in secondary-market functioning associated with the SMCCF facilitate access by companies to bond and loan markets on reasonable terms. The SMCCF launched with ETF purchases on May 12. Earlier this month, the facility began gradually reducing purchases of ETFs as it started buying a broad and diversified portfolio of individual corporate bonds to more directly support smooth functioning and market liquidity in the secondary market. Purchase volumes are tied to market functioning and are currently at very low levels. The facility currently holds a total of about $10 billion in bonds and ETF shares.
Following the announcement of the two corporate credit facilities in late March, conditions in the corporate bond market improved significantly. Credit spreads on investment-grade bonds retraced much of the widening experienced in February and March, and issuance in the primary market rebounded strongly. In the secondary market, liquidity also improved, and by mid-April, flows out of mutual funds and ETFs specializing in corporate bonds reversed.
The Federal Reserve also launched the Main Street Lending Program, which is designed to provide loans to small and medium-sized businesses that were in good financial standing before the pandemic; such firms generally are dependent on bank lending for credit because they are too small to tap bond markets directly. Under the Main Street program, banks originate new loans or increase the size of existing loans to eligible businesses and sell loan participations to the Federal Reserve. The facility is backed by $75 billion in CARES Act equity and can purchase up to $600 billion in loan participations. The Federal Reserve has published all of the legal documents that borrowers and lenders will need to sign under the program and lender registration began on June 15. Loan participations will be purchased soon. Additionally, the Federal Reserve recently sought feedback on a proposal to expand the Main Street program to include loans made to small and medium-sized nonprofit organizations, such as hospitals and universities. Nonprofits provide vital services around the country, and the program would likewise offer them support.
While businesses in certain sectors that were particularly hard hit by the pandemic have reported continued difficulty in accessing credit, the Small Business Administration’s Paycheck Protection Program (PPP), which draws from existing bank lines, has apparently met the immediate credit needs of many small businesses. In the months ahead, Main Street loans may prove a valuable resource for firms that were in sound financial condition prior to the pandemic.
To bolster the effectiveness of the Small Business Administration’s PPP, on April 16, the Federal Reserve launched the Paycheck Protection Program Liquidity Facility. The facility supplies liquidity to lenders backed by their PPP loans to small businesses and has the capacity to lend up to the full amount of the PPP. As of last week, the facility held over $65 billion in outstanding term loans to participating financial institutions. The most recent monthly survey from the National Federation of Independent Business released in May indicates that small businesses have been able to meet their funding needs in recent months largely due to the PPP.
To help state and local governments better manage cash flow pressures in order to continue to serve households and businesses in their communities, the Federal Reserve, together with the Treasury Department, established the Municipal Liquidity Facility (MLF). The MLF is backed by $35 billion of CARES Act equity and has the capacity to purchase up to $500 billion of short-term debt directly from U.S. states, counties, cities, and certain multistate entities. The facility became operational on May 26, and, to date, the MLF has purchased $1.2 billion worth of short-term municipal debt. With the MLF and other facilities in place as a backstop to the private market, many parts of the municipal bond market have significantly recovered from the unprecedented stress experienced earlier this year. Municipal bond yields have declined considerably, issuance has been robust over the past two months, and market conditions have improved
The tools that the Federal Reserve is using under its 13(3) authority are for times of emergency, such as the ones we have been living through. When economic and financial conditions improve, we will put these tools back in the toolbox.
The final area where we took steps was in bank regulation. The Board made several adjustments, many temporary, to encourage banks to use their positions of strength to support households and businesses. Unlike the 2008 financial crisis, banks entered this period with substantial capital and liquidity buffers and improved risk-management and operational resiliency. As a result, they have been well positioned to cushion the financial shocks we are seeing. In contrast to the 2008 crisis when banks pulled back from lending and amplified the economic shock, in this crisis they have greatly expanded loans to customers and have helped support the economy.
The Federal Reserve has been entrusted with an important mission, and we have taken unprecedented steps in very rapid fashion over the past few months. In doing so, we embrace our responsibility to the American people to be as transparent as possible. With regard to the facilities backed by equity from the CARES Act, we have conducted broad outreach and sought public input that has been crucial in their development. For example, in response to comments received, the Treasury and the Federal Reserve have made a number of changes to expand the scope of the Main Street Lending Program to cover a broader range of borrowers and to increase the flexibility of loan terms. And we are now disclosing and will continue to disclose, on a monthly basis, names and details of participants in each facility; amounts borrowed and interest rate charged; and overall costs, revenues, and fees for each of these facilities.
We recognize that our actions are only part of a broader public-sector response. Congress’s passage of the CARES Act was critical in enabling the Federal Reserve and the Treasury Department to establish many of the lending programs. The CARES Act and other legislation provide direct help to people, businesses, and communities. This direct support can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy. We understand that the work of the Federal Reserve touches communities, families, and businesses across the country. Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.
Thank you. I’d be happy to take your questions.
via ZeroHedge News https://ift.tt/2VvvXDR Tyler Durden
Increasingly fear-stoking headlines over the weekend on the virus (and more and more cost-cutting corporates quitting Facebook ads) prompted a weak open on Sunday night for US futures and while Nasdaq trod water around unch until the open, Small Caps were mysteriously bid. The open sparked selling which was immediately bid with Small Caps again massively outperforming… (nasdaq lagged the rest on the day). Kudlow excited everyone at the close with “v-shaped recovery” comments but the Dow did well thanks to BA and AAPL (+200 points between them)…
Small Caps were ramped above Friday highs to the edge of the cliff on Thursday before fading…
But the entire stock market move was ignored by bonds…
Source: Bloomberg
FANG stocks opened down notably (FB under pressure), but dip-buyers stepped in quickly…
Source: Bloomberg
TSLA traded back above $1000 on the heels of a Musk tweet
Despite the yield curve steepening, financials underperformed the market today…
Source: Bloomberg
Treasuries were mixed today with the long-end underperforming and the belly best…
Source: Bloomberg
The dollar managed another modest gain erasing almost all the losses for June…
Source: Bloomberg
Bitcoin chopped around over the weekend, testing down below $9000 before bouncing back…
Source: Bloomberg
Commodities were all higher with oil best despite the dollar gains…
Source: Bloomberg
WTI failed to get back to $40..
Silver bounced off $18 three times today…
And ETFs backed by gold haven’t seen a surge in demand like this quarter’s since the world was reeling from the financial crisis.
Source: Bloomberg
Finally, we note Nomura’s Charlie McElligott’s warnings over the ‘excitement’ at recent “positive” revisions in earnings sentiment.
Recall that perversely, “NEGATIVE revisions” in earnings are a bullish signal for forward returns (+2.3% in SPX with 72% hit-rate over 6w of earnings season), while “POSITIVE revisions” are actually a local “negative” signal for Equities over the same “6w of earnings” window (-0.1% SPX with just a 47% “higher” hit-rate).
via ZeroHedge News https://ift.tt/31t54V9 Tyler Durden
For months, the Washington Post and the rest of the mainstream media kept a morbid Covid-19 “death count” on their front pages and at the top of their news broadcasts. The coronavirus outbreak was all about the number of dead. The narrative was intended to boost governors like Cuomo in New York and Whitmer in Michigan, who turned their states authoritarian under the false notion that destroying people’s jobs, freedom, and lives would somehow keep a virus from doing what viruses always do: spread through a population until eventually losing strength and dying out.
The “death count” was always the headline.
But then all of a sudden early in June the mainstream media did a George Orwell and lectured us that it is all about “cases” and has always been all about “cases.” Death, and especially infection fatality rate, were irrelevant. Why? Because from the peak in April, deaths had decreased by 90 percent and were continuing to crash. That was not terrifying enough so the media pretended this good news did not exist.
With massive increases in testing, the “case” numbers climbed. This is not rocket science: the more people you test the more “cases” you discover.
[ZH: ignore the odd spike in deaths, this was due to a reclassification of nursing home deaths in NJ – the trend is clear otherwise]
Unfortunately our mainstream media is only interested in pushing the “party line.” So the good news that millions more have been exposed while the fatality rate continues to decline – meaning the virus is getting weaker – is buried under hysterical false reporting of “new cases.”
Unfortunately many governors, including our own here in Texas, are incapable of resisting the endless lies of the mainstream media. They are putting Americans again through the nightmare of forced business closures, mandated face masks, and restrictions of Constitutional liberties based on false propaganda.
In Texas the “second wave” propaganda has gotten so bad that the leaders of the four major hospitals in Houston took the extraordinary step late last week of holding a joint press conference to clarify that the scare stories of Houston hospitals being overwhelmed with Covid cases are simply untrue. Dr. Marc Boom of Houston Methodist said the reporting on hospital capacity is misleading. He said, “quite frankly, we’re concerned that there is a level of alarm in the community that is unwarranted right now.”
In fact, there has been much reporting that the “spike” in Texas cases is not due to a resurgence of the virus but to hospital practices of Covid-testing every patient coming in for any procedure at all.
If it’s a positive, well that counts as a “Covid hospitalization.”
Why would hospitals be so dishonest in their diagnoses? Billions of appropriated Federal dollars are being funneled to facilities based on the number of “Covid cases” they can produce. As I’ve always said, if you subsidize something you get more of it. And that’s why we are getting more Covid cases.
Let’s go back to the original measurements used to scare Americans into giving up their Constitutional liberties: the daily death numbers. Even though we know hospitals have falsely attributed countless deaths to “Covid-19” that were deaths WITH instead of FROM the virus, we are seeing actual deaths steadily declining over the past month and a half. Declining deaths are not a great way to push the “second wave” propaganda, so the media and politicians have moved the goal posts and decided that only “cases” are important. It’s another big lie.
Resist propaganda and defend your liberty. That is the only way we’ll get through this.
via ZeroHedge News https://ift.tt/31t2zlJ Tyler Durden
Five years ago, police officers in Greenwood Village, Colorado, destroyed a private residence while pursuing a suspected shoplifter who had broken in and barricaded himself inside. Last year a federal court denied the homeowners any compensation for those damages, even though they had no connection to the theft and did not willingly allow the fugitive into their house. This morning the Supreme Court announced that it will not hear the case.
Over the course of June 3 and 4, 2015, a SWAT team deployed a series of flash bang grenades, tear gas, 40 mm rounds, two Bearcat armored vehicles, and breaching rams against the home of Leo, Alfonsina, and John Lech. The Lechs had to demolish the house, which was worth $580,000. The city gave them $5,000.
This despite the fact that the Takings Clause of the 5th Amendment is supposed to protect citizens from having their property taken or destroyed by the government without being justly compensated for that loss.
“The simple rule of the Constitution is that the government cannot arbitrarily single out private citizens to bear the costs of something that should rightly be the burden of society as a whole,” said attorney Jeffrey Redfern of the Institute for Justice, the public interest law firm that represented the Lechs, in a statement. “If the government requires a piece of property to be destroyed, then the government should pay for it—and that’s just as true regardless of whether the people doing the destroying are the local school board or the local police.”
The U.S. Court of Appeals for the 10th Circuit disagreed, ruling in October that the cops acted within their “police power” when they ravaged the home in an attempt to coax the suspect, who was armed with a handgun, to surrender.
As Jay Stooksbury wrote in the December 2017 issue of Reason, the ordeal financially upended the Lech family’s life. Leo Lech had to take out a $390,000 loan after having to tear down what remained of the home. As of October of last year, he had incurred an additional $28,000 in attorney’s fees.
The death of George Floyd, an unarmed man killed by a Minneapolis cop, has driven new life into the conversation around police reform—not just as it relates to excessive force, but as it pertains to ensuring the public has recourse against officers who infringe on their rights. The Supreme Court recently refused to hear several cases on qualified immunity, the legal doctrine that allows public officials to violate your rights without fear of federal civil rights lawsuits, so long as the way those rights were trampled has not been outlined almost identically in a previous court precedent.
The Lech case is a microcosm for several discussions around what needs to change. There was the intensely-militarized presence: Why does apprehending a petty thief necessitate grenades and armored vehicles? There was a rather plain violation of the homeowners’ constitutional rights. And there was—and is—the lack of accountability, which Lech no longer has hope of seeing rectified.
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America’s capacity to test for COVID-19 infections has greatly improved, rising from less than 1,000 per day at the beginning of March to around 600,000 per day now, according to the COVID Tracking Project. But the current level of testing is far from enough. Different researchers estimate that we need anywhere from 2 million to 30 million tests a day to fully reopen the economy safely. The idea is that frequent, widespread testing would stop the spread of the disease by quickly identifying infected people, who would then voluntarily self-isolate; physicians and public health authorities could then monitor and test people who had come in contact with them.
TheWashington Postreported in May that few laboratories were testing at their full expanded technical capacities. This was probably because many Americans had become somewhat complacent about the pandemic, as the early exponential rate of growth in both cases and deaths was flattened through the broad adoption of social distancing.
What a difference a month makes. Laboratories are now warning that the escalating number of diagnosed COVID-19 cases in such places as Texas, Arizona, and Florida will soon strain even their now-expanded testing capacities. To address this looming shortfall, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, toldThe Washington Post last week that Trump administration officials are looking into the possibility of pool testing.
Under this approach, samples from 10 to 20 people are combined and the pool is tested using just one coronavirus assay. Only if the test comes back positive is each individual in the pool tested for the infection.
“If you look around the globe, the way people are doing a million tests or 10 million tests is they’re doing pooling,” Deborah Birx, the coordinator of the Trump administration’s coronavirus response team, told an online conference of the American Society for Microbiology last week. “Pooling would give us the capacity to go from a half a million tests a day to potentially 5 million individuals tested per day.”
An even better bet would be to let cheap at-home diagnostic tests be made widely available. But in the meantime, pooling is a reasonable stopgap measure.
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America’s capacity to test for COVID-19 infections has greatly improved, rising from less than 1,000 per day at the beginning of March to around 600,000 per day now, according to the COVID Tracking Project. But the current level of testing is far from enough. Different researchers estimate that we need anywhere from 2 million to 30 million tests a day to fully reopen the economy safely. The idea is that frequent, widespread testing would stop the spread of the disease by quickly identifying infected people, who would then voluntarily self-isolate; physicians and public health authorities could then monitor and test people who had come in contact with them.
TheWashington Postreported in May that few laboratories were testing at their full expanded technical capacities. This was probably because many Americans had become somewhat complacent about the pandemic, as the early exponential rate of growth in both cases and deaths was flattened through the broad adoption of social distancing.
What a difference a month makes. Laboratories are now warning that the escalating number of diagnosed COVID-19 cases in such places as Texas, Arizona, and Florida will soon strain even their now-expanded testing capacities. To address this looming shortfall, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, toldThe Washington Post last week that Trump administration officials are looking into the possibility of pool testing.
Under this approach, samples from 10 to 20 people are combined and the pool is tested using just one coronavirus assay. Only if the test comes back positive is each individual in the pool tested for the infection.
“If you look around the globe, the way people are doing a million tests or 10 million tests is they’re doing pooling,” Deborah Birx, the coordinator of the Trump administration’s coronavirus response team, told an online conference of the American Society for Microbiology last week. “Pooling would give us the capacity to go from a half a million tests a day to potentially 5 million individuals tested per day.”
An even better bet would be to let cheap at-home diagnostic tests be made widely available. But in the meantime, pooling is a reasonable stopgap measure.
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