Treasury Secretary Steven Mnuchin defended his decision not to extend critical emergency lending facilities beyond year-end, insisting on Friday that he was following the intent of Congress in calling for the Federal Reserve to return unused money to the Treasury.
“Congress trusted us with this money and we’re going to follow the law,” Mr. Mnuchin said on CNBC.
On Thursday, Mr. Mnuchin informed the Fed that he did not plan to extend several key emergency lending programs beyond the end of the year, prompting a rebuke from the central bank, which said it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”
Investors expected the programs, which expire at the end of the year, to be extended by Mr. Mnuchin, and the decision could hamper efforts by President-elect Joseph R. Biden Jr. to support the economy at a moment when it is continuing to struggle with the pandemic fallout.
Mr. Mnuchin denied politics was at play in his decision and, like other Trump administration officials, would not acknowledge that Mr. Biden would be taking office next year and appointing a new Treasury secretary.
“Whether it’s myself or somebody else, these can be reactivated,” Mr. Mnuchin said, referring to the Fed facilities.
“When this is certified and when the transition is certified, of course, we will work with whoever is the appropriate people to work with,” he said of the transition.
Legal experts say that Mr. Mnuchin’s rationale that he is legally required to end the programs is questionable. Although Mr. Mnuchin claims that it was the intent of lawmakers for the programs to end this year, Democrats in Congress have said publicly they want the programs to be extended.
“There can be no doubt, the Trump administration and their congressional toadies are actively trying to tank the U.S. economy,” Senator Sherrod Brown of Ohio said. “For months, they have refused to take the steps necessary to support workers, small businesses, and restaurants. As a result, the only tool at our disposal has been these facilities. With this action, there can now be no doubt: Steven Mnuchin will go down as the worst Treasury Secretary in our nation’s history.”
In spite of Mr. Mnuchin’s newfound insistence that Congress intended for the programs to sunset at the end of the year, he himself suggested before the election that it would be possible to extend them past Dec. 31. And as recently as earlier this month, a senior Treasury official said that the department was considering extending some of the programs.
Mr. Mnuchin said on Friday that the Treasury’s Exchange Stabilization Fund would give the Federal Reserve sufficient “firepower” to put lending programs in place if needed. He said that the expectation that vaccines would be available in the coming weeks suggested that the economy was in a better position than when the programs were created earlier this year, though health experts do not expect the vaccines to be widely available for several months.
Mr. Mnuchin’s move revealed a rift between the Treasury Department and the Fed, which have been working together to try to prop up the economy in the face of the pandemic. The Federal Reserve chair, Jerome H. Powell, said on Nov. 5 that the two agencies were just beginning to discuss whether the programs should be extended.
Mr. Mnuchin had little to say about any tension between the two men.
“I’ll let Chair Powell speak for himself,” Mr. Mnuchin said.
As the United States confronts an outbreak of the coronavirus that shows no sign of slowing and local governments move to reimpose restrictions on businesses in an attempt to get some control over the epidemic, millions of Americans face the prospect of losing federal funds that had been providing a lifeline.
More than 12 million unemployed workers will see their jobless benefits disappear by the end of the year as two federal programs created in March under the CARES Act are set to expire unless Congress extends them.
It is a development that also threatens the larger economy.
Congressional action is unlikely before Joseph R. Biden Jr. becomes president on Jan. 20 and there are no guarantees it will happen even then: If Republicans retain control of the Senate after two runoff elections in Georgia in early January, the odds of passing a major stimulus package will lengthen.
A new study by the progressive Century Foundation found that 7.3 million workers would lose their benefits with the end of Pandemic Unemployment Assistance, which provides coverage for gig workers, the self-employed and independent contractors. An additional 4.6 million would be cut off from Pandemic Emergency Unemployment Compensation, which kicks in when state employment benefits run out.
The programs represent “the last lifelines available to millions of Americans in desperate need,” said Andrew Stettner, a senior fellow with the Century Foundation and co-author of the study with Elizabeth Pancotti. “It will be a crippling end to one of our darkest years.”
At the same time, Treasury Secretary Steven Mnuchin said he does not plan to extend several key emergency lending programs beyond the end of the year and asked the Federal Reserve to return the money supporting them, a decision that could hinder Mr. Biden’s ability to use the central bank’s vast powers to cushion the economic fallout from the virus.
Mr. Mnuchin on Thursday said he would not continue the Fed programs, including ones that support the markets for corporate bonds and municipal debt and one that extends loans to midsize businesses. The emergency efforts expire at the end of 2020, but investors had expected some or all of them to be kept operational as the virus continues to pose economic risks.
The pandemic-era programs are run by the Fed but use Treasury money to insure against losses. They have provided an important backstop that has calmed critical markets since the coronavirus took hold in the country in March. Removing them could leave significant corners of the financial world vulnerable to the type of volatility that cascaded through the system as virus fears mounted in the spring.
By asking the Fed to return unused funds, Mr. Mnuchin could prevent Mr. Biden’s incoming Treasury secretary from quickly restarting the efforts at scale in 2021.
“The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy,” the central bank said in a statement.
The emergency programs were backed by $454 billion that Congress appropriated in March as part of a broader pandemic response package. Because of the way the Fed’s emergency lending powers work, Jerome H. Powell, the Fed chair, needs the Treasury secretary’s signoff to make major changes to the programs’ terms. Extending the end date counts as one of those changes that need approval.
After a week of oscillating between gains and losses, financial markets were relatively quiet on Friday.
The S&P 500 is little changed for the week, despite the fact that rising virus cases in the United States are leading to more lockdowns and other restrictions on economic activity in the United States. A disagreement between the Treasury Department and Federal Reserve about the future of several key emergency lending programs could also dampen the mood.
Counteracting these concerns, however, were fast moving developments in the search for a coronavirus vaccine. On Friday, Pfizer said it would apply for emergency authorization for its vaccine candidate.
The S&P 500 fell slightly in early trading Friday. The Stoxx Europe 600 and FTSE 100 in Britain rose 0.3 percent. The Nikkei 225 in Japan closed 0.4 percent lower, and the Hang Seng Index in Hong Kong was 0.4 percent higher.
Oil prices fell slightly with West Texas Intermediate futures down 0.5 percent to just under $42 a barrel.
In Europe, the picture is improving. Several large economies that instigated lockdowns and other restrictions in October are now seeing the number of new cases each day declining, including France and Spain.
“Volatility is still going to be with us for awhile,” said Caroline Simmons, the U.K. chief investment officer at UBS Global Wealth Management. “Markets responded very positively to the vaccine news, but some people now are taking stock and thinking, ‘What’s next? Is it all priced in?’” Ms. Simmons said she did not think future lockdowns would weigh on markets as much and the S&P 500 index could gain another 6 percent.
As corporate America commits to addressing racial inequality, two progressive unions will push six large banks to examine how their practices are affecting minority communities, reported first in today’s DealBook newsletter.
Union-led investment groups are calling for “racial equity audits” at Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo. In letters to the institutions, they denounce discriminatory practices, including reduced mortgage lending in minority communities and the treatment of employees of color.
The two groups, the CtW Investment Group and the SEIU’s Capital Stewardship Program, say they work with pension funds managing more than $1.2 trillion in assets.
The organizers demand that the banks prepare comprehensive reports in consultation with civil rights groups, employees and customers that would then be made public.
“It’s time for the banks to really step up,” Dieter Waizenegger, the executive director of CtW Investment Group, said. Though many of the banks have already announced racial justice initiatives — like JPMorgan pledging $30 billion to fight racial inequity — “we didn’t really hear a commitment to really take a look at themselves,” he said.
Supporters of the campaign said that banks had made good first steps — but those are just the beginning. “I don’t want to erase or diminish their statements that Black lives matter or that they’re supportive of racial justice,” said Aaron Ammons, an SEIU member who is a trustee on the Illinois State University Retirement System pension fund. But he added that the campaign “puts them on public record” about their commitments.
Campaign organizers are prepared to file shareholder proposals to put the issue to a vote by other investors, Mr. Waizenegger said.
That threat can yield results, said Tejal Patel, CtW Investment Group’s director of corporate governance: Amazon agreed to ensure women and people of color were included as candidates for board openings after initially opposing the group’s call for a shareholder vote on the matter.
Roblox, a gaming site and app that has been a huge hit with tweens, revealed in an offering prospectus on Thursday that its number of users and revenue surged during the coronavirus pandemic, but that its losses deepened.
Roblox said it averaged 31.1 million daily active users in the first nine months of 2020, up 82 percent from a year earlier, as people have flocked to video games while stuck inside because of the pandemic. That helped drive Roblox’s revenue, which reached $589 million in the first nine months of the year, up 68 percent from a year ago.
Even so, the company lost money. Its net loss totaled $203 million in the first nine months of 2020, more than four times the $46 million it lost in the same period a year ago. Roblox also warned that it was unlikely to experience the same growth when the pandemic subsides, warning that the surge was “almost certainly not indicative of our financial and operating results in future periods.”
In a letter in the prospectus, David Baszucki, a Roblox founder and now its chief executive, wrote, “Our original vision to make Roblox a platform for shared experiences is now leading the way for a new category we call human co-experience.” He added, “Our vision for the future of our platform has never been more real and attainable.”
The 14-year-old company joins a flood of other tech start-ups that are moving toward the public market while the stock market remains ebullient, defying the pandemic-induced recession. In just the past 10 days, the delivery company DoorDash, the home-rental site Airbnb and the online financial services company Affirm all disclosed their initial public offering filings. Many of these companies are also losing money.
In total, 41 tech companies have gone public in the United States so far this year, raising $17.7 billion, according to Renaissance Capital.
Roblox, based in San Mateo, Calif., was founded in 2006 by Erik Cassel and Mr. Baszucki. (Mr. Cassel died of cancer in 2013.) The company has raised $335 million in funding. In its most recent financing in February, it added $150 million to its coffers and was valued at $4 billion.
The platform, which is hugely popular among children, especially those 9 to 12 years old, was growing before the pandemic but saw its growth spike once shelter-in-place orders set in. Inside the Roblox online universe, players’ avatars can interact and play millions of unique games set in different worlds, from tropical islands to haunted castles. Players pay real money for premium memberships, as well as items and clothing for their avatars.
Developers who create games for Roblox are often teenagers or young adults themselves. Those who create the most popular Roblox games can earn six-figure salaries.
Thanksgiving week was shaping up to be one of the busiest periods for U.S. air travel since the pandemic brought it to a near-standstill in the spring.
But a renewed surge in virus cases and increasingly alarming warnings from public health officials are rattling travelers and threatening airlines’ hopes for the holiday weekend and the months ahead, The New York Times’s Niraj Chokshi and Ceylan Yeginsu report.
Airlines argue that flying is generally safe because of the various policies put in place to limit contagion, high-end air filtration aboard planes and the relatively few published cases of coronavirus spread in flight. But the science is far from settled, travelers are still at risk throughout their journey, and many would-be passengers have been discouraged by lockdowns and outbreaks in the places they hoped to visit.
Airlines are already noticing that prospects for passenger demand in the weeks ahead are dimming:
On Thursday, United said that bookings had slowed and cancellations had risen in recent days because of the surge in virus cases.
Southwest Airlines said last week that booking momentum seemed to be slowing for the rest of the year.
American Airlines, which has also seen demand dip because of the virus, has slashed December flights between the United States and Europe, leaving just two daily flights out of Dallas-Fort Worth International Airport, to London and Frankfurt.
To some extent, the unevenness of the travel recovery comes as little surprise, said Helane Becker, managing director and senior airline analyst at Cowen.
“We always knew that it would be choppy, but that said we think that people want to travel and they’re looking for ways to get out,” Ms. Becker said during a Thursday panel at the Skift Aviation Forum.
Anchored by Milan, Italy’s financial and fashion capital, Lombardy boasts sophisticated industry and world-class medical facilities. Yet it was overwhelmed by the first wave of the global pandemic, forcing doctors to ration ventilators and hospital beds, while having to decide who lived and who died.
The catastrophe in Italy’s most affluent region was in part a consequence of having entrusted much of the public health care system to private, profit-making companies while failing to coordinate their services, write The New York Times’s Peter S. Goodman and Gaia Pianigiani.
Over the previous quarter-century, substantial investment has flowed into lucrative specialties like cardiac surgery and oncology. Areas on the front lines of the pandemic, like family medicine and public health, have been neglected, leaving people excessively reliant on hospitals for care.
As Italy now contends with a brutal second wave, Lombardy is again near the breaking point, with three-fourths of its hospital beds occupied by Covid-19 patients — nearly double the level considered dangerous by the national Health Ministry.
“If you consider profit to be the endgame of health care instead of health, some people are going to be left out,” said Dr. Chiara Lepora, a physician for the international relief agency Doctors Without Borders who found herself pressed into service in Lombardy. “The pandemic exposes all of those weaknesses.”
Unlike the United States, where more than 30 million people lack health insurance, Europe remains a land of universally accessible, government-furnished medical care — Italy included. Yet in Lombardy, the hardest-hit region, the pandemic has revealed the pitfalls of a poorly executed push to open the system to private providers.
“Specializations such as hygiene and prevention, primary health care, outpatient clinics, infectious diseases and epidemiology have been considered not strategic assets, not sexy enough,” said Michele Usuelli, a neonatologist in Milan.
“That is why we have a health system very well prepared to treat the most complicated diseases but completely unprepared to fight something like a pandemic,” Dr. Usuelli added.
A surge of Covid-19 cases this fall has brought reports of new challenges in getting coronavirus tests. But for employers, the main obstacle appears to be the cost of testing, not availability and turnaround times.
That’s the finding of a study by Arizona State University and the World Economic Forum, The New York Times’s Noam Scheiber reports.
The survey is based on responses from 1,141 facilities at more than 1,100 companies worldwide from September through late October. Here’s what it showed:
Over all, 17 percent of the facilities surveyed worldwide said they were testing workers. At least half of those facilities were doing so even for workers without symptoms, and roughly half were testing workers at least once a week.
At facilities that were not testing, only 15 percent said availability was an issue, while 28 percent cited cost, 22 percent cited complexity and 16 percent said it would take too long to receive the results. (Those surveyed could select more than one reason.)
Companies with 25 workers or fewer were least likely to test, with only 8 percent doing so. About 40 percent of companies with 1,001 to 5,000 workers were testing, as were nearly 60 percent of companies with more than 5,000 workers.
Among the biggest companies that didn’t test, cost was not a commonly cited obstacle. Those companies were much more likely to be discouraged by the complexity of testing their large work forces, which one-third cited.
Biotechnology and technology companies were among the most likely to test workers, with 37 percent and 29 percent doing so, even as they were among the most likely to require employees to work remotely.
Manufacturing was also among the industries where testing was relatively common, with 20 percent of the facilities saying they did so.
By contrast, only 10 percent of professional services firms, like accounting and law practices, said they were testing. And sectors in which rank-and-file workers tend to be poorly paid and can’t work from home, such as restaurants and hotels and casinos, had even lower rates.