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Financial System Faces Biggest Test Since 2008 as Coronavirus Spreads Financial System Faces Biggest Test Since 2008 as Coronavirus Spreads
(3 days later)
WASHINGTON — The coronavirus outbreak is putting the resilience of the financial system to its biggest test since the 2008 financial crisis, a critical moment that comes as the Trump administration continues efforts to relax Wall Street regulation.WASHINGTON — The coronavirus outbreak is putting the resilience of the financial system to its biggest test since the 2008 financial crisis, a critical moment that comes as the Trump administration continues efforts to relax Wall Street regulation.
The virus has sent financial markets into a tailspin. Investors are worried about economic fallout from an epidemic that is threatening to slow growth and eat into corporate profits by shuttering factories, forcing quarantines, curtailing travel and scrapping big events.The virus has sent financial markets into a tailspin. Investors are worried about economic fallout from an epidemic that is threatening to slow growth and eat into corporate profits by shuttering factories, forcing quarantines, curtailing travel and scrapping big events.
Stocks are plummeting, along with Treasury yields, and many economists and investors are beginning to express concern that financial vulnerabilities could exacerbate what is already poised to become an economic mess.Stocks are plummeting, along with Treasury yields, and many economists and investors are beginning to express concern that financial vulnerabilities could exacerbate what is already poised to become an economic mess.
Banks are on more solid footing than they were ahead of the 2008 financial crisis, with higher capital and less ability to make risky bets with their own balance sheets than in the heady days of the mid-2000s housing bubble. But warning signs abound. Credit markets are beginning to show signs of strain, investors are fleeing indexes that track risky bonds, and some economists are questioning whether the coronavirus could spark a corporate debt crisis.Banks are on more solid footing than they were ahead of the 2008 financial crisis, with higher capital and less ability to make risky bets with their own balance sheets than in the heady days of the mid-2000s housing bubble. But warning signs abound. Credit markets are beginning to show signs of strain, investors are fleeing indexes that track risky bonds, and some economists are questioning whether the coronavirus could spark a corporate debt crisis.
“If the virus triggers a sharper drop in profits or a bigger rise in borrowing costs than we envisage, then these pockets of vulnerability could blow up,” analysts at Capital Economics wrote in a note last week. “Although the global banking system appears to be better placed to deal with such turbulence now than at the time of the global financial crisis, at the very least this could exacerbate any virus-related global downturn.”“If the virus triggers a sharper drop in profits or a bigger rise in borrowing costs than we envisage, then these pockets of vulnerability could blow up,” analysts at Capital Economics wrote in a note last week. “Although the global banking system appears to be better placed to deal with such turbulence now than at the time of the global financial crisis, at the very least this could exacerbate any virus-related global downturn.”
The White House has invited top Wall Street executives to a meeting on Wednesday to discuss the economic fallout, according to an official.The White House has invited top Wall Street executives to a meeting on Wednesday to discuss the economic fallout, according to an official.
As recently as January, Federal Reserve officials expressed worry that “financial imbalances — including overvaluation and excessive indebtedness — could amplify an adverse shock to the economy.”As recently as January, Federal Reserve officials expressed worry that “financial imbalances — including overvaluation and excessive indebtedness — could amplify an adverse shock to the economy.”
Corporate debt has skyrocketed over the past decade, and more than half of investment-grade company debt is just one notch above a “junk” rating, with BBB debt in the United States now totaling more than $3 trillion. Such bonds are vulnerable to status downgrades in tough times — Scott Minerd at Guggenheim Partners estimates that as much as $1 trillion of investment-grade debt could soon head to junk.Corporate debt has skyrocketed over the past decade, and more than half of investment-grade company debt is just one notch above a “junk” rating, with BBB debt in the United States now totaling more than $3 trillion. Such bonds are vulnerable to status downgrades in tough times — Scott Minerd at Guggenheim Partners estimates that as much as $1 trillion of investment-grade debt could soon head to junk.
That is of particular concern because mutual funds are holding big chunks of BBB debt. Funds could be forced to dump those holdings quickly in the face of downgrades because many are not allowed to invest in junk bonds.That is of particular concern because mutual funds are holding big chunks of BBB debt. Funds could be forced to dump those holdings quickly in the face of downgrades because many are not allowed to invest in junk bonds.
“We arrive at this moment with the overleveraged corporate sector about to face the prospect that new-issue bond markets may seize up, as they did last week, and that even seemingly sound companies will find credit expensive or difficult to obtain,” Mr. Minerd wrote in a note on Sunday.“We arrive at this moment with the overleveraged corporate sector about to face the prospect that new-issue bond markets may seize up, as they did last week, and that even seemingly sound companies will find credit expensive or difficult to obtain,” Mr. Minerd wrote in a note on Sunday.
Leveraged loans, which banks and other financial institutions extend to already indebted companies, have also ballooned. Outstanding leveraged loans now total about $1.2 trillion, roughly twice pre-crisis levels. The loans are often funded by investment vehicles that bundle, slice and sell them off to investors — and because banks do not end up holding many of them on their balance sheets, regulators have limited ability to oversee them.Leveraged loans, which banks and other financial institutions extend to already indebted companies, have also ballooned. Outstanding leveraged loans now total about $1.2 trillion, roughly twice pre-crisis levels. The loans are often funded by investment vehicles that bundle, slice and sell them off to investors — and because banks do not end up holding many of them on their balance sheets, regulators have limited ability to oversee them.
To put the size of those vulnerable debt and loan piles in perspective, Americans had $1.3 trillion in outstanding subprime mortgages headed into the 2008 crisis, based on Organization for Economic Cooperation and Development estimates. When those debts went bad, it helped knock the financial system to its knees.To put the size of those vulnerable debt and loan piles in perspective, Americans had $1.3 trillion in outstanding subprime mortgages headed into the 2008 crisis, based on Organization for Economic Cooperation and Development estimates. When those debts went bad, it helped knock the financial system to its knees.
Investors are already spooked about risky credit in a time of coronavirus. Indexes that track high-yield debt and leveraged loans have had record outflows over the past two weeks, as people take their money and run, seeking safer investments.Investors are already spooked about risky credit in a time of coronavirus. Indexes that track high-yield debt and leveraged loans have had record outflows over the past two weeks, as people take their money and run, seeking safer investments.
“We are concerned about potential cracks in the U.S. credit cycle in an environment of dwindling corporate cash flows, which could lead to a sharp tightening of financial conditions that feeds back into the real economy,” Joachim Fels, global economic adviser at Pimco, wrote in a research note Sunday.“We are concerned about potential cracks in the U.S. credit cycle in an environment of dwindling corporate cash flows, which could lead to a sharp tightening of financial conditions that feeds back into the real economy,” Joachim Fels, global economic adviser at Pimco, wrote in a research note Sunday.
While banks have limited direct exposures to the riskiest loans — which could keep any messiness in that sector from turning into a full-blown financial meltdown — they and the broader economy would still be affected if things soured quickly.While banks have limited direct exposures to the riskiest loans — which could keep any messiness in that sector from turning into a full-blown financial meltdown — they and the broader economy would still be affected if things soured quickly.
“In the event of corporate debt distress, firms may reduce investment and cut payrolls to continue servicing their debt,” according to one 2019 Federal Deposit Insurance Corporation report. That could make it harder for households and businesses — bank customers — to pay back their own debt, and “banks could incur losses.”“In the event of corporate debt distress, firms may reduce investment and cut payrolls to continue servicing their debt,” according to one 2019 Federal Deposit Insurance Corporation report. That could make it harder for households and businesses — bank customers — to pay back their own debt, and “banks could incur losses.”
And the financial crisis was painful, in part, because banks stopped lending, leaving consumers without access to cash. They could do that fairly abruptly in 2020 in part because of a new accounting standard, called current expected credit losses methodology.And the financial crisis was painful, in part, because banks stopped lending, leaving consumers without access to cash. They could do that fairly abruptly in 2020 in part because of a new accounting standard, called current expected credit losses methodology.
The rule took hold for big banks this year, and forces them to value loans over their lifetime — a measure meant to more accurately gauge risk, but one that could also make projected losses look more drastic when the economy is worsening. The change is expected to dissuade lenders from extending new mortgages and lines of credit during times of stress.The rule took hold for big banks this year, and forces them to value loans over their lifetime — a measure meant to more accurately gauge risk, but one that could also make projected losses look more drastic when the economy is worsening. The change is expected to dissuade lenders from extending new mortgages and lines of credit during times of stress.
“To avoid huge accounting losses, which cut into capital, the effect would be to not lend, or to lend less,” said Joshua Ronen, an accounting professor at New York University. That could “paradoxically” hit the most strapped borrowers, he said, since they are often the worst credit risk.“To avoid huge accounting losses, which cut into capital, the effect would be to not lend, or to lend less,” said Joshua Ronen, an accounting professor at New York University. That could “paradoxically” hit the most strapped borrowers, he said, since they are often the worst credit risk.
Strains to the financial system could come at a particularly bad time. Big financial firms outside the banking sector remain largely out of regulatory oversight, including asset managers, hedge funds, private equity firms and big insurers.Strains to the financial system could come at a particularly bad time. Big financial firms outside the banking sector remain largely out of regulatory oversight, including asset managers, hedge funds, private equity firms and big insurers.
And the rules governing regulated institutions have become gradually less stringent. The Fed made a regulatory change last week, which one official — the Fed governor Lael Brainard, an Obama administration pick — warned could significantly reduce capital at the biggest banks.And the rules governing regulated institutions have become gradually less stringent. The Fed made a regulatory change last week, which one official — the Fed governor Lael Brainard, an Obama administration pick — warned could significantly reduce capital at the biggest banks.
Fed officials had already expressed concern in January that banks might be returning too much of their profits to shareholders, leaving them exposed if there is another big downturn. “Planned increases in dividend payouts by large banks and the associated decline in capital buffers might leave those banks with less capacity to weather adverse shocks,” according to minutes of the meeting.Fed officials had already expressed concern in January that banks might be returning too much of their profits to shareholders, leaving them exposed if there is another big downturn. “Planned increases in dividend payouts by large banks and the associated decline in capital buffers might leave those banks with less capacity to weather adverse shocks,” according to minutes of the meeting.
Banking regulators have also been working to relax the Volcker Rule, which prohibited banks from making risky bets with their customers’ deposits. Banks took major losses on their derivatives holdings in the 2008 crisis, helping to exacerbate financial system strains. Proposed changes would allow banks to invest in some credit funds and sponsor or take ownership stakes in venture capital funds, which pool ultrarich investors’ money to bet on start-ups.Banking regulators have also been working to relax the Volcker Rule, which prohibited banks from making risky bets with their customers’ deposits. Banks took major losses on their derivatives holdings in the 2008 crisis, helping to exacerbate financial system strains. Proposed changes would allow banks to invest in some credit funds and sponsor or take ownership stakes in venture capital funds, which pool ultrarich investors’ money to bet on start-ups.
“We are in a much more fragile situation than we should be because the regulators haven’t been on the job,” said Marcus Stanley, policy director for Americans for Financial Reform. “This is a real economic crisis we’re facing.”“We are in a much more fragile situation than we should be because the regulators haven’t been on the job,” said Marcus Stanley, policy director for Americans for Financial Reform. “This is a real economic crisis we’re facing.”
Senator Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, warned in a letter to Treasury Secretary Steven Mnuchin last week that the country faced a potential “economic calamity.” He called on Mr. Mnuchin to work with the Financial Stability Oversight Council, which he chairs, to come up with a plan.Senator Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, warned in a letter to Treasury Secretary Steven Mnuchin last week that the country faced a potential “economic calamity.” He called on Mr. Mnuchin to work with the Financial Stability Oversight Council, which he chairs, to come up with a plan.
“I am concerned that you and your fellow regulators on the council have repeatedly failed to take action to make the financial system more resilient, putting our economy at risk as we experience the first period of financial stress under your watch,” Mr. Brown wrote.“I am concerned that you and your fellow regulators on the council have repeatedly failed to take action to make the financial system more resilient, putting our economy at risk as we experience the first period of financial stress under your watch,” Mr. Brown wrote.
Updated June 5, 2020 Updated June 12, 2020
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Mr. Mnuchin has been criticized for weakening safeguards put in place to prevent a repeat of 2008, when regulators were largely caught off guard by the severity of losses at financial firms, including those outside the banking sector.Mr. Mnuchin has been criticized for weakening safeguards put in place to prevent a repeat of 2008, when regulators were largely caught off guard by the severity of losses at financial firms, including those outside the banking sector.
Congress created the Financial Stability Oversight Council to identify risks to the financial system and respond to emerging threats. Under the Obama administration, the council determined that four large non-bank companies, including American International Group, were “systemically important,” meaning those firms would be subject to Fed oversight.Congress created the Financial Stability Oversight Council to identify risks to the financial system and respond to emerging threats. Under the Obama administration, the council determined that four large non-bank companies, including American International Group, were “systemically important,” meaning those firms would be subject to Fed oversight.
Under Mr. Mnuchin’s leadership, the council has released those firms from federal oversight and abandoned efforts to designate any other firm as “systemic.” It has opted instead to assess whether any financial “activities” pose risks to the system. None have been identified.Under Mr. Mnuchin’s leadership, the council has released those firms from federal oversight and abandoned efforts to designate any other firm as “systemic.” It has opted instead to assess whether any financial “activities” pose risks to the system. None have been identified.
And the Office of Financial Research, an independent agency created in 2010 to serve as an early warning system for emerging risks, has been gutted and marginalized over the past three years, with Mr. Mnuchin recommending that the agency become a “functional part of Treasury,” with its director chosen by the Treasury secretary rather than the president.And the Office of Financial Research, an independent agency created in 2010 to serve as an early warning system for emerging risks, has been gutted and marginalized over the past three years, with Mr. Mnuchin recommending that the agency become a “functional part of Treasury,” with its director chosen by the Treasury secretary rather than the president.
The agency’s staff has been slashed by more than 50 percent since 2017 to 96 employees, and its role has been relegated to largely assisting the Financial Stability Oversight Council, rather than collecting and analyzing data to identify emerging economic threats across financial sectors, according to current and former officials.The agency’s staff has been slashed by more than 50 percent since 2017 to 96 employees, and its role has been relegated to largely assisting the Financial Stability Oversight Council, rather than collecting and analyzing data to identify emerging economic threats across financial sectors, according to current and former officials.
“Once Trump took office, every day they have been finding ways to deregulate and weaken the financial regulatory structure,” Mr. Brown said in an interview. “They clearly are not prepared for a financial crisis, no matter what precipitates it.”“Once Trump took office, every day they have been finding ways to deregulate and weaken the financial regulatory structure,” Mr. Brown said in an interview. “They clearly are not prepared for a financial crisis, no matter what precipitates it.”
Mr. Mnuchin tried to calm markets at a congressional hearing last week by arguing that this would not be 2008 all over again and that any economic slowdown caused by the virus would quickly abate.Mr. Mnuchin tried to calm markets at a congressional hearing last week by arguing that this would not be 2008 all over again and that any economic slowdown caused by the virus would quickly abate.
“This is very different than the financial crisis,” Mr. Mnuchin said. “There will be an end in sight.”“This is very different than the financial crisis,” Mr. Mnuchin said. “There will be an end in sight.”
Bank lobbyists have seized on the coronavirus as a reason to usher in even more deregulation.Bank lobbyists have seized on the coronavirus as a reason to usher in even more deregulation.
The Bank Policy Institute published a memorandum this month suggesting several measures that regulators could take to help financial institutions expand lending during trying times — including carrying out the streamlined capital rules, which the Fed did just days later.The Bank Policy Institute published a memorandum this month suggesting several measures that regulators could take to help financial institutions expand lending during trying times — including carrying out the streamlined capital rules, which the Fed did just days later.
Gregg Gelzinis, senior policy analyst at the left-leaning Center for American Progress, said the ideas represented a longstanding wish list for big banks.Gregg Gelzinis, senior policy analyst at the left-leaning Center for American Progress, said the ideas represented a longstanding wish list for big banks.
“In their eyes, when the economy is booming it’s as good a time to deregulate as when the economy is experiencing some stress,” Mr. Gelzinis said. “It’s always a good time to roll back rules on Wall Street.”“In their eyes, when the economy is booming it’s as good a time to deregulate as when the economy is experiencing some stress,” Mr. Gelzinis said. “It’s always a good time to roll back rules on Wall Street.”