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Under U.S. Aid Plan, C.E.O.s Could Still Receive Millions: Live Business Updates Wall Street Shakes Off Unemployment Report as Aid Nears: Live Updates
(32 minutes later)
U.S. stocks rose on Thursday as lawmakers in Washington advanced a highly anticipated $2 trillion rescue package to bolster the American economy. Stocks rose for the third straight day on Thursday, as investors looked past a startling rise in applications for unemployment benefits and bid up the shares of companies set to receive support from the $2 trillion coronavirus aid bill recently approved by the Senate.
The climb came despite Labor Department figures released early Thursday that revealed a record number of unemployment claims, more evidence of the staggering economic toll of the coronavirus pandemic. The S&P 500 was up more than 4 percent, while the Dow Jones industrial average rose even further, lifted by a 15-percent surge in Boeing’s share price.
The number of people who sought jobless benefits last week was colossal — nearly 3.3 million — but had been widely anticipated by investors. Stocks have been rallying since Tuesday, when the S&P 500 had its best day since October 2008 with a 9.4 percent climb, as investors anticipated Washington’s support for a number of industries.
The S&P 500 was up more than 4 percent in early trading. The bill that passed the Senate on Wednesday night specifically sets aside $17 billion for “businesses critical to maintaining national security” — language that’s seen as intended at least partly for Boeing, the aircraft manufacturer and key Pentagon contractor. Other companies that were hit hard in the early days of the coronavirus outbreak continued to soar. Cruise lines Carnival Corporation and Norwegian Cruise Line, were up 20 percent and 15 percent. Airlines also rallied.
The gains added to a rally that began on Tuesday as the lawmakers negotiated a spending and support plan to help households and companies cope with the coronavirus outbreak. The Senate passed the plan late on Wednesday, and it was expected to be approved by the House and President Trump shortly after. The gains on Thursday also spread to Europe, with major benchmarks there reversing their losses to end the day sharply higher. The FTSE 100 in Britain climbed more than 2 percent.
But questions remain about the timing of the support plan and whether lawmakers should do even more, and that left investors nervous. Prices for longer-term U.S. Treasury bonds were up, sending yields lower and suggesting investors were looking for safe places to park their money. Oil prices, a proxy for the outlook for the world economy because they indicate demand for fuel, fell on futures markets. Since bottoming on March 23, the S&P 500 has soared by nearly 16 percent, amid growing hope that the large stimulus package would offer support to an economy crippled by the outbreak and efforts to curtail the spread of the virus.
But the economic crisis is perhaps the most daunting since World War II. On Thursday, a government report showed an unprecedented rise in weekly applications for unemployment benefits, which jumped from 282,000 to nearly 3.3 million in a week.
That report, however, had been widely anticipated by investors.
Still, there were signals that investors remain nervous about the economy. Prices for longer-term U.S. Treasury bonds were up, sending yields lower and suggesting investors were looking for safe places to park their money, and oil prices fell.
Early Thursday, Jerome H. Powell, the Federal Reserve chair, said during a rare television interview that the United States “may well” be in a recession already, but that it should get the coronavirus under control before getting back to work.
“The first order of business will be to get the spread of the virus under control, and then to resume economic activity,” Mr. Powell said, speaking on NBC’s “Today” show. “The virus is going to dictate the timetable here.”
Mr. Powell’s comments contrast those of President Trump, who has suggested that he wants many Americans to get back to work as soon as Easter, less than three weeks away, and that efforts to slow the spread of the virus by shuttering large parts of the economy should not be worse than the disease itself.
THE AID PLANTHE AID PLAN
Lawmakers put some restrictions on the compensation of executives whose companies receive government assistance under the bill, in an effort to address one of the criticisms about bailouts of banks and other companies during the 2008 financial crisis. But the limits will not do away with multimillion-dollar paydays for corporate bosses.Lawmakers put some restrictions on the compensation of executives whose companies receive government assistance under the bill, in an effort to address one of the criticisms about bailouts of banks and other companies during the 2008 financial crisis. But the limits will not do away with multimillion-dollar paydays for corporate bosses.
THE DETAILS Executives who made more than $3 million in 2019 could be awarded $3 million, plus half of any sum in excess of $3 million. As a result, a chief executive who earned $20 million in 2019 would be allowed compensation of $11.5 million, or $3 million plus half of $17 million per year. The restrictions would apply from the time the federal support begins until one year after it ends. Executives who made more than $3 million in 2019 could be awarded $3 million, plus half of any sum in excess of $3 million. As a result, a chief executive who earned $20 million in 2019 would be allowed compensation of $11.5 million, or $3 million plus half of $17 million per year.
In addition, companies receiving assistance will not be allowed to increase the compensation of executives who earned between $425,000 and $3 million in 2019 until a year after government support ends. Companies receiving assistance will not be allowed to increase the compensation of executives who earned between $425,000 and $3 million in 2019 until a year after government support ends.
THE CONTEXT Of course, senior executives and their boards of directors could decide on their own to pay themselves far less to show investors, employees and lawmakers that they, too, are making a sacrifice. But those who don’t would effectively have their compensation subsidized by taxpayers, said Sarah Anderson, a project director at the Institute for Policy Studies, a progressive research organization based in Washington. The package includes more than $370 billion in much-needed help for small businesses. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration.
It could take at least two weeks after the bill is signed into law for the money to begin flowing.
Small businesses would not have to repay portions of loans that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department.
The role of banks in the rescue bill is to provide much-needed capital to businesses and taxpayers. “This is all about preserving the incentives for banks to lend,” said Mike Mayo, who researches large banks for Wells Fargo.
To ensure access to cash is not hampered by a raft of new client demands or market developments, the Fed has encouraged banks to use the so-called “discount window,” its lending operation for big banks, and at least eight major financial institutions already have.
Banks can opt out of observing new federal accounting standards for estimating future credit losses during the period covered by the law, a rule known as Current Expected Credit Losses, or CECL.
The bill revives a crisis-era program to guarantee all bank debt, a move that once again puts taxpayers on the hook if a bank runs into trouble.
Though the coronavirus outbreak has walloped much of the energy industry by driving down oil prices and making it harder to finance new renewable energy projects, the Senate bill does not help much.
The bill did not include $3 billion the Trump administration had requested to buy crude oil for the Strategic Petroleum Reserve. Such a purchase could have helped lift demand for oil somewhat, and thus its price, which in the United States has tumbled to less than $25 a barrel in recent weeks.
Solar and wind businesses were upset that lawmakers did not make it easier for them to benefit from tax credits for renewable energy.
Nearly 3.3 million people filed for unemployment benefits last week, sending a collective shudder throughout the economy that is unlike anything Americans have experienced.Nearly 3.3 million people filed for unemployment benefits last week, sending a collective shudder throughout the economy that is unlike anything Americans have experienced.
The numbers, released by the Labor Department on Thursday, are some of the first hard data on the economic toll of the coronavirus pandemic, which has shut down whole sectors of American life faster than government statistics can keep track.The numbers, released by the Labor Department on Thursday, are some of the first hard data on the economic toll of the coronavirus pandemic, which has shut down whole sectors of American life faster than government statistics can keep track.
Just three weeks ago, barely 200,000 people applied for jobless benefits, a historically low number. In the half-century that the government has tracked applications, the most applications filed in a single week had been fewer than 700,000.Just three weeks ago, barely 200,000 people applied for jobless benefits, a historically low number. In the half-century that the government has tracked applications, the most applications filed in a single week had been fewer than 700,000.
“In the whole history of initial claims, there’s never been anything remotely close to that,” said Ben Herzon, executive director of IHS Markit, a business data and analytics firm.“In the whole history of initial claims, there’s never been anything remotely close to that,” said Ben Herzon, executive director of IHS Markit, a business data and analytics firm.
As staggering as the figures are, they almost certainly understate the problem. Some part-time and low-wage workers don’t qualify for unemployment benefits. Nor do gig workers, independent contractors and the self-employed, although the emergency aid package being considered by Congress would broaden eligibility. Others who do qualify may not know it. And the sudden rush of layoffs led to jammed phone lines and overwhelmed computer servers at unemployment offices across the country, leaving many people unable to file claims.As staggering as the figures are, they almost certainly understate the problem. Some part-time and low-wage workers don’t qualify for unemployment benefits. Nor do gig workers, independent contractors and the self-employed, although the emergency aid package being considered by Congress would broaden eligibility. Others who do qualify may not know it. And the sudden rush of layoffs led to jammed phone lines and overwhelmed computer servers at unemployment offices across the country, leaving many people unable to file claims.
The worst could be yet to come. Mr. Herzon said he expected a similarly large number next Thursday, when the Labor Department releases its report on new claims filed this week.The worst could be yet to come. Mr. Herzon said he expected a similarly large number next Thursday, when the Labor Department releases its report on new claims filed this week.
Treasury Secretary Steven Mnuchin said on Thursday that the surge in weekly unemployment claims was “not relevant” and that hopefully many of those workers would be rehired now that Congress is on the cusp of passing a $2 trillion economic relief package.
“To be honest with you, I just think these numbers right now are not relevant,” Mr. Mnuchin said on CNBC. “The good thing about this bill is the president is protecting people.”
The Treasury secretary said that he was optimistic that the House would quickly pass the bill that cleared the Senate late Wednesday night. He said that he is coordinating closely with the Federal Reserve, speaking with Chairman Jerome H. Powell as many as 30 times per day to roll out new emergency lending programs.
Mr. Mnuchin also vowed to be fully transparent about how the government is lending to distressed industries and noted that those receiving loans would face restrictions on executive pay and stock buybacks. However, he said that the Trump administration could not force companies across the country to halt layoffs.
“We don’t believe in mandating and regulating certain big businesses,” Mr. Mnuchin said.
the aid plan
The $2 trillion stimulus package includes more than $370 billion in much-needed help for small businesses. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration.
But it could take at least two weeks after the bill is signed into law for the money to begin flowing, and for small business owners — many of whom operate on thin margins — delays could mean the difference between surviving and shuttering their businesses permanently.
Regulators on Thursday released a statement encouraging banks and credit unions to start making small loans to individuals and small businesses immediately, independent of the stimulus.
The stimulus package is offering loans to pay for basic expenses. Small businesses would not have to repay portions that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department.
Jerome H. Powell, the Federal Reserve chair, said during a rare television interview on Thursday that the United States “may well” be in a recession already, but that it should get the coronavirus under control before getting back to work.
“The first order of business will be to get the spread of the virus under control, and then to resume economic activity,” Mr. Powell said, speaking on NBC’s “Today” show. “The virus is going to dictate the timetable here.”
Mr. Powell’s comments contrast those of President Trump, who has suggested that he wants many Americans to get back to work as soon as Easter, less than three weeks away, and that efforts to slow the spread of the virus by shuttering large parts of the economy should not be worse than the disease itself.
The Aid Plan
Unlike the federal stimulus packages enacted in 2008 and 2009, this legislation is not focused on the country’s biggest banks. Emergency relief measures enacted by the Federal Reserve have already given those companies access to short-term funding and added liquidity, or ease of trading, to the markets. So the role of banks in the rescue bill is to provide much-needed capital to businesses and taxpayers.
THE DETAILS To ensure that banks’ access to cash is not hampered by a raft of new client demands or market developments, the Fed has encouraged them to use the so-called “discount window,” its lending operation for big banks, and at least eight major financial institutions already have.
As part of the stimulus package, banks can opt out of observing new federal accounting standards for estimating future credit losses during the period covered by the law, a rule known as Current Expected Credit Losses, or CECL. In addition, banks who lend to companies and individuals during the period covered by the legislation will not see their obligations to maintain specified levels of cash or other capital rise as a result of what regulators would normally view as increased financial risks. And the bill revives a crisis-era program to guarantee all bank debt, a move that once again puts taxpayers on the hook if a bank runs into trouble.
THE CONTEXT Thanks to the Dodd-Frank act of 2010 and new regulatory requirements that have been placed on major market participants, the U.S. financial system is in a far better position than it was in 2008.
Because of their strengthened position, banks are now expected to step up and assist taxpayers and employers with credit and relaxed expectations toward debt repayment in the coming weeks and months. But the backstops the government is providing to troubled borrowers could benefit the banks too. And the resumption of a government backstop for bank debt suggests there is lingering concern about the stability of banks the longer the crisis persists, in part because some of the post-crisis rules have already been weakened over the past three years.
“Permitting the FDIC to once again guarantee all bank debt is not immediately necessary. For the time being, banks are stable,” Gregg Gelzinis of the Center for American Progress. “This authority, however, could be necessary in the weeks and months ahead, which is an indictment on the resiliency of the core banking system heading into this crisis.”
The Aid Plan
The coronavirus outbreak has walloped much of the energy industry by driving down oil prices and making it harder to finance new renewable energy projects, which is why some industry executives were hopeful lawmakers would led them a hand. But the Senate bill does not do much for the industry.
THE DETAILS The legislation did not include $3 billion the Trump administration had requested to buy crude oil for the Strategic Petroleum Reserve. Such a purchase could have helped lift demand for oil somewhat, and thus its price, which in the United States has tumbled to less than $25 a barrel in recent weeks. And solar and wind businesses were upset that lawmakers did not make it easier for them to benefit from tax credits for renewable energy.
THE RESPONSE Industry representatives held out hope that their needs would be addressed in a future stimulus package. Frank Macchiarola, a senior vice president at the American Petroleum Institute, said the group had not sought “industry-specific relief” from Congress in this bill. “The fact that members of both parties have come together to address this public health crisis, support workers in need and provide broader, economywide relief sends an important signal during these challenging times,” Mr. Macchiarola said.
THE AID PLANTHE AID PLAN
How much money will individuals get — and how will it be distributed? How are unemployment benefits changing? Are gig workers included?How much money will individuals get — and how will it be distributed? How are unemployment benefits changing? Are gig workers included?
The Senate unanimously passed a $2 trillion economic stimulus plan on Wednesday that will offer assistance to tens of millions of American households affected by the coronavirus. Its components include payments to individuals, expanded unemployment coverage that includes the self-employed, loans for small businesses and nonprofits, temporary changes to withdrawal rules from retirement accounts, and more.The Senate unanimously passed a $2 trillion economic stimulus plan on Wednesday that will offer assistance to tens of millions of American households affected by the coronavirus. Its components include payments to individuals, expanded unemployment coverage that includes the self-employed, loans for small businesses and nonprofits, temporary changes to withdrawal rules from retirement accounts, and more.
The House of Representatives was expected to quickly take up the bill and pass it, sending it to President Trump for his signature.The House of Representatives was expected to quickly take up the bill and pass it, sending it to President Trump for his signature.
We collected answers to common questions about what’s in the bill.We collected answers to common questions about what’s in the bill.
Fiat Chrysler said on Thursday that it was extending the closure of its North American factories to at least April 14, from March 30. The company said its plans were contingent on orders by local and state governments. Toyota Motor said Thursday its North American plants would stay shut until April 17, resuming production on April 20.
The Energy Department said Thursday that it was withdrawing a proposal to purchase 30,000 barrels of oil for the Strategic Petroleum Reserve because the $2 trillion stimulus package working its way through Congress did not include the Trump administration’s request for money to buy the crude.The Energy Department said Thursday that it was withdrawing a proposal to purchase 30,000 barrels of oil for the Strategic Petroleum Reserve because the $2 trillion stimulus package working its way through Congress did not include the Trump administration’s request for money to buy the crude.
The Transportation Security Administration screened just 240,000 travelers on Wednesday, about 11 percent of its typical volume. Alaska Airlines plans to cut its schedule for April and May by 70 percent, and Hawaiian Airlines said it would eliminate most long-haul flights next month, focusing instead on all-cargo flights.The Transportation Security Administration screened just 240,000 travelers on Wednesday, about 11 percent of its typical volume. Alaska Airlines plans to cut its schedule for April and May by 70 percent, and Hawaiian Airlines said it would eliminate most long-haul flights next month, focusing instead on all-cargo flights.
The chief executive of NBCUniversal, Jeff Shell, said that he had been infected by the coronavirus. “Although the virus has been tough to cope with, I have managed to work remotely in LA and am improving every day,” he wrote in a companywide email Thursday morning. In his note, Mr. Shell added that the company had committed over $150 million to continue paying staff across its various units, including the theme parks, film studios and television departments.The chief executive of NBCUniversal, Jeff Shell, said that he had been infected by the coronavirus. “Although the virus has been tough to cope with, I have managed to work remotely in LA and am improving every day,” he wrote in a companywide email Thursday morning. In his note, Mr. Shell added that the company had committed over $150 million to continue paying staff across its various units, including the theme parks, film studios and television departments.
Ford Motor said it was aiming to restart production at some North American plants in early to mid-April. It said it planned to resume one assembly shift in Hermosillo, Mexico, on April 6, and aimed to resume some production by April 14 at several plants in Michigan, Ohio, Kentucky and Missouri “while the company introduces additional safety measures to protect returning workers.”Ford Motor said it was aiming to restart production at some North American plants in early to mid-April. It said it planned to resume one assembly shift in Hermosillo, Mexico, on April 6, and aimed to resume some production by April 14 at several plants in Michigan, Ohio, Kentucky and Missouri “while the company introduces additional safety measures to protect returning workers.”
Reporting was contributed by Niraj Chokshi, Vindu Goel, Kate Kelly, Peter Eavis, Neil Irwin, Tara Siegel Bernard, Ron Lieber, Clifford Krauss, Ivan Penn, Matt Phillips, Peter S. Goodman, Patricia Cohen, Edmund Lee, Tiffany Hsu, Kevin McKenna, Ben Casselman, Geneva Abdul, Amie Tsang, Carlos Tejada, Alexandra Stevenson, Su-Hyun Lee and Heather Murphy.Reporting was contributed by Niraj Chokshi, Vindu Goel, Kate Kelly, Peter Eavis, Neil Irwin, Tara Siegel Bernard, Ron Lieber, Clifford Krauss, Ivan Penn, Matt Phillips, Peter S. Goodman, Patricia Cohen, Edmund Lee, Tiffany Hsu, Kevin McKenna, Ben Casselman, Geneva Abdul, Amie Tsang, Carlos Tejada, Alexandra Stevenson, Su-Hyun Lee and Heather Murphy.