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Ready or not, here we come – The U.S. economy is re-opening for business no matter the extent to which Covid-19 might spread once again. Part of the reason is simply that people are tired of lockdown and want to go back to business as usual. But there remains significant risk with this approach.


Via the NYT: “States in the Northeast and on the West Coast, as well as Democratic-led states in the Midwest, have moved the slowest toward reopening, with several governors taking a county-by-county approach. (In Washington, D.C., a stay-at-home order remains in effect until June.)

Powell pleads with Congress – Fed Chair Jerome Powell might be staying at home like the rest of us but he wants Congress to push through more fiscal stimulus. It just isn’t at all clear that this will happen, meaning the U.S. might wind up right where it was in 2009 and perhaps worse: a slowing economy with state and local governments unable to keep up payrolls. And the political divide over what happens next is just getting worse.

What’s happening – Thanks to all who tuned in for MM’s chat with Rep. Andy Kim (D-N.J.). You can hear the chat as podcast here. Andy talked about what everyone is thinking about: Whether life will just return to normal as states re-open this summer and fall.

And like everyone else, he doesn’t have an answer. We are flying blind now and just hoping for the best. It’s as risky a bet as you can make on the world’s largest economy, but that’s exactly what’s happening. Under the best case scenario the U.S. is ramping back by later Summer. But the potential for total failure and a return lockdowns remains high. It’s as flip-a-coin as it gets and the stakes are massive.

Here’s a bit of what Rep. Kim told me: “I think, for me, what frustrates me is I share that sentiment of wanting to reopen, to get Americans back to work as soon as possible … And I wish that that energy that the administration is pushing towards that is the same energy that they would bring towards testing and widespread contact tracing and other tools”

GOOD WEDNESAY MORNING — Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on @AubreeEWeaver.

PROGRAMMING NOTE: Due to Memorial Day weekend, Morning Money will not publish on Monday, May 25. It will return Tuesday, May 26.

HOUSE WANTS TO FIX PPP — Via our Zachary Warmbrodt and Heather Caygle: “The House next week is planning to overhaul the government’s flagship small business aid program, amid growing concern that it’s become unworkable for many employers.

“House leaders have agreed to hold a vote on bipartisan legislation to ease restrictions on how businesses use [PPP loans], which can be forgiven if employers agree to maintain their payroll and avert layoffs during the coronavirus pandemic … It’s a notable shift in strategy for Speaker Nancy Pelosi (D-Calif.), who has until now focused her efforts on more comprehensive coronavirus legislation.”

BACK TO SCHOOL? — Our Juan Perez Jr.: A plurality of voters oppose … Trump’s push for U.S. elementary and high schools to get back to business this fall, according to a POLITICO/Morning Consult poll that asked whether students should return to day care, schools and college campuses.

“Voters instead offer a bit of praise for online instruction, with a majority saying it’s been at least somewhat effective at making up for months of class time lost to the coronavirus pandemic. That approval comes after many schools struggled in their first weeks of closure to set up remote learning and get computers into the hands of low-income students.”

ANTI-CHINA SENTIMENT ON THE RISE — Our Marc Caputo: “Anti-China sentiment is rising in the United States, according to a new poll that reflects the foreign country’s role as the point of origin of the coronavirus and the millions of dollars in negative ads spent by President Donald Trump, former Vice President Joe Biden and their al

WARREN PRESSES POWELL — Via our Victoria Guida and Zachary Warmbrodt: “Sen. Elizabeth Warren is calling on the Federal Reserve to put in place ‘comprehensive and robust’ requirements for company executives to certify their eligibility for its emergency lending programs before receiving any funding.

“Warren (D-Mass.) wrote in letters to Boston Fed President Eric Rosengren and New York Fed President John Williams, who are running the Fed’s midsize and large business lending programs, respectively, that she is disappointed the programs don’t contain stronger restrictions on receiving funds.”

LATE SLUMP LEAVES STOCK MARKET LOWER — AP’s Alex Veiga and Damian Troise: “Stocks ended broadly lower on Wall Street Tuesday as trading turned wobbly a day after the market notched its biggest jump in more than five weeks. The S&P 500 fell 1% after having been up by 0.4% in the early going. Losses in banks, health care stocks and household goods companies accounted for a big portion of the selling. A late-day slide erased early strength in technology stocks and companies that rely on consumer spending.”

MNUCHIN, POWELL PUSH DIFFERING PRIORITIES — AP’s Christopher Rugaber and Martin Crutsinger: “Facing the gravest U.S. economic crisis in decades, Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell offered Congress contrasting views Tuesday of what the government’s most urgent priority should be. Striking a theme frequently pushed by President Donald Trump, Mnuchin warned that prolonged business shutdowns would pose long-term threats to the economy, from widespread bankruptcies for small businesses to long-term unemployment for millions of Americans. …

“Powell, by contrast, stressed, as he has in recent weeks, that the nation is gripped by an economic shock ‘without modern precedent’ and that Congress must consider providing further financial aid soon to support states, localities, businesses and individuals to prevent an even deeper recession.”

CBO: ECONOMIC RECOVERY WILL DRAG ON THROUGH THE NEXT YEAR — WSJ’s Paul Kiernan: “The Congressional Budget Office said the U.S. economy’s recovery from the downturn related to coronavirus responses will drag on through the end of next year, as investment collapses and the labor market experiences its sharpest deterioration since the 1930s. Gross domestic product will likely be 5.6 percent smaller in the fourth quarter of 2020 than a year earlier, the CBO said Tuesday, despite an expected pickup in economic activity in the coming months.”

NEXT WAVE OF STIMULUS PAYMENTS HINGES ON DEBATE OVER REOPENING — WSJ’s Richard Rubin: “Americans have gotten $239 billion — and counting — from the IRS to help them ride out the coronavirus pandemic. Whether households get another round of $1,200 stimulus payments is tied to the increasingly partisan debate over how quickly the economy should reopen.

“Many House Democrats, seeing a slow return to normal and a protracted economic downturn, contend it is crucial to get money out again. They see fresh cash injections as a bridge to help families weather an uncertain economic future amid more waves of infections and deaths.”

FINANCIAL CONDITIONS EASING AT FASTEST PACE IN HISTORY — Bloomberg’s Todd White: “American financial conditions have loosened at the fastest pace since at least 1990, belying mounting investor skepticism that a V-shaped economic recovery will follow the pandemic-induced crash. A Bloomberg measure of market health across bond, stock and liquidity indexes has staged a revival like never before — bouncing back to early March levels, when recorded coronavirus cases globally were around 90,000 versus more than 4.8 million today.”

FED’S ROSENGREN WARNS OF PREMATURE OPENING — WSJ’s Michael S. Derby: “Federal Reserve Bank of Boston President Eric Rosengren cast a cautious eye at attempts to restart the economy amid the unresolved coronavirus crisis, while also reaffirming the central bank’s desire to do what it takes to offset the pandemic’s impact. ‘We will do whatever we can to support a return to full employment and stable prices’ and will pursue financial stability, Mr. Rosengren said in the text of a speech to be given by video Tuesday.”

TOO BIG TO FAIL: THE ENTIRE PRIVATE SECTOR — NYT’s Matt Phillips: “During the 2008 financial crisis, Wall Street banks and other big financial institutions were deemed “too big to fail.” The crisis unleashed by the pandemic has broadened that elite status to a significant swath of the American private sector.

“In a bid to soften the coronavirus’s economic blow, the government has stretched its financial safety net wide — from strategically sensitive companies, to entire industries such as energy and airlines, to the market for corporate bonds. ‘The ‘too big to fail’ that existed for banks has now extended to a lot of other firms,’ said Luigi Zingales, a University of Chicago professor of finance who has long studied the interplay of government, regulation and the private sector.”

CITI ADDS I-BANKING DIVISION FOCUSED ON SUSTAINABILITY — Bloomberg’s Jennifer Surane: “Citigroup Inc. said it will create a division within its investment-banking unit after the coronavirus pandemic increased the importance of sustainability plans for corporations around the world. The division, known as the sustainability and corporate transitions group, will be led by Keith Tuffley and Bridget Fawcett, according to an internal memo to employees Tuesday. The bank is also creating an advisory group made up of outside experts on topics including climate and earth sciences.”

FIRST LOOK — Via the ABA: “Using pictures and customer testimonials from banks across the country, it tells the backstory behind the 4.3 million PPP loans now approved and the dedicated bank employees who helped make it happen”

TRANSITIONS — Katie Donnell is now a director for international economic policy at the National Economic Council. She previously was special assistant to the secretary at the State Department and is also a Paul Ryan alum.



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