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Fed Lending Lapse Sparks Political Fight; Vaccine Could Unleash Inflation
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Good day. Fed Chairman Jerome Powell said the central bank would work out how to return unused funds that had been sent to the central bank for its emergency-lending programs, as requested by Treasury Secretary Steven Mnuchin. The Treasury chief's decision not to extend those lending programs was criticized by President-elect Joe Biden's transition team, but Mr. Mnuchin denied the move was intended to impede the incoming administration. Meanwhile, inflation could be poised for a comeback, some analysts say.
Now on to today’s news and analysis.
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Biden Team Faults Mnuchin for Letting Fed Aid Programs Lapse
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Treasury Steven Mnuchin called on Congress to provide aid to small businesses and jobless people. PHOTO: CHRIS KLEPONIS/POOL/SHUTTERSTOCK
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President-elect Joe Biden’s transition team sharply criticized Treasury Secretary Steven Mnuchin’s decision to allow funding for several emergency Federal Reserve lending programs to expire, escalating a political fight. Mr. Mnuchin earlier Friday defended his decision not to renew five Fed lending programs to extend credit to businesses, cities and states beginning next year. He said the programs were no longer necessary and that he lacked the legal authority to extend them.
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A Covid-19 Vaccine Could Unleash Pent-Up Demand, Bringing Inflation
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Some economists are starting to embrace the idea that a prospective Covid-19 vaccine could allow people to once again spend money on travel, restaurants and other services—and drive up prices in the U.S. That would test the Fed's new framework, which calls for periods of inflation above that level after stretches, like the current one, when it has run below.
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Derby's Take: Treasury Move on Emergency Lending Unsettles Stimulus Debate
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The Treasury Department’s surprise move to end emergency-lending efforts done jointly with the Federal Reserve has rattled an already uncertain outlook for what the central bank might do to help the economy. Read More.
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George Says Pandemic Lessening Importance of Gasoline Prices
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Kansas City Fed President Esther George said the coronavirus pandemic might have one silver lining: Americans are now less likely to feel pain from bouts of gasoline price volatility.
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Student Loan Losses Seen Costing U.S. More Than $400 Billion
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The U.S. government stands to lose more than $400 billion from the federal student loan program, an internal analysis shows, approaching the size of losses incurred by banks during the subprime-mortgage crisis.
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PPP Borrowers Are Asked to Justify Need for Loans Over $2 Million
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The Small Business Administration has begun asking some Paycheck Protection Program borrowers to document why they needed the loans, drawing concern from advocacy and trade groups that say such disclosures weren’t required when the businesses applied for aid.
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Key Developments Around the World
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Europe’s Economy Set to Contract Again as Lockdowns Bite
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Europe's economy appears set for a fresh contraction in the final quarter of 2020, as business surveys indicate that lockdowns aimed at containing the coronavirus have led to a sharp decline in activity in the services sector.
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Some Countries Say They Can’t Afford to Fight as Pandemic Drags On
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As the sprint to try to reverse the spread of Covid-19 has turned into a marathon, some developing countries are dialing back spending on containing the pandemic.
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Newsmakers Live: Q&A With John Williams
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New York Fed President John Williams will answer questions on the economic situation, the post-pandemic outlook and the response U.S. government officials took this year to avoid a financial crisis, in an online interview at 12 p.m. EST Tuesday with Nick Timiraos, WSJ's chief economics correspondent. Sign up here to submit questions in advance.
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Financial Regulation Roundup
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Fannie, Freddie Overseer Pushing to End Federal Control Soon
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The federal regulator who oversees Fannie Mae and Freddie Mac is pushing to speed up the mortgage giants’ exit from 12 years of government control but has yet to reach an agreement he needs with Treasury Secretary Steven Mnuchin.
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Banks Can’t Deny Services to Entire Industries Under OCC Proposal
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Big U.S. banks can’t refuse to lend to entire categories of lawful businesses under a rule proposed Friday, following complaints that the oil-and-gas industry was unfairly denied financing by large lenders.
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China’s Detention of Entrepreneur Raises Fresh Concerns
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Chinese authorities have detained an outspoken entrepreneur and taken control of his businesses, reviving a debate about the state’s dominance over private industry and rule of law in the world’s second-largest economy.
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8:10 a.m.: European Central Bank’s Schnabel gives welcome address at online ECB conference on money markets
10:30 a.m.: Bank of England’s Bailey, Haldane, Saunders and Tenreyro speak at Treasury Select Committee hearing on November monetary policy report
12:30 p.m.: Richmond Fed’s Barkin speaks at Greater Winston-Salem virtual event
1 p.m.: San Francisco Fed’s Daly speaks at virtual event on the future of work
2 p.m.: Bank of Canada’s Gravelle gives speech on risks to stability of Canadian financial system
3 p.m.: Chicago Fed’s Evans speaks online on economy and monetary policy to Iowa Bankers Association
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6 a.m.: Bank of England’s Haskel speaks on panel at virtual symposium on shaping the post-Covid-19 world
7:05 a.m.: Bank of Japan’s Kuroda speaks at virtual conference co-hosted by International Monetary Fund and University of Tokyo
8:15 a.m.: European Central Bank’s Schnabel gives speech at Bank of Finland webinar on monetary policy strategies
9 a.m.: European Central Bank’s Lagarde joins virtual roundtable on global economy and sustainable development organized by United Nations
11 a.m.: St. Louis Fed’s Bullard speaks on economy and monetary policy at Bank of Finland webinar
12 p.m.: New York Fed’s Williams speaks at online Wall Street Journal event
12:45 p.m.: Fed’s Clarida, European Central Bank’s Lane and Bank of Canada’s Wilkins speak on virtual panel at International Monetary Fund event on new policy frameworks
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After Covid, ‘Normal’ Could Be Profoundly Different
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With this month’s announcements of two highly effective Covid-19 vaccines, enough Americans should be inoculated over next spring and summer for normal life to begin to resume. It won’t be quite the same as before, though: Our behavior will have changed, with profound effects on the economy, Justin Lahart writes in WSJ Heard on the Street column. Many American households and businesses have spent the past eight months scrambling to survive the pandemic, while for a minority it has been a windfall. With the end in sight, determining what comes after is their next challenge. Only one thing is certain: It will look different.
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GoFundMe is becoming a go-to place for people to get help with rent and groceries in the pandemic.
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Lumber prices are making an unusual late-season climb, thanks to builder-friendly autumn weather and suppliers stocking up for what they expect to be another big year for home construction.
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The Mexican government will keep its flexible credit line with the International Monetary Fund at about $61 billion, putting on hold plans to reduce and phase out access to the facility because of the coronavirus crisis. (DJN)
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Singapore's gross domestic product shrank 5.8% in the third quarter from a year earlier, according to revised Ministry of Trade and Industry data. (Dow Jones Newswires)
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Singapore's consumer-price index fell 0.2% in October from a year earlier, compared with 0% in September. (DJN)
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This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London.
Send us your tips, suggestions and feedback. Write to:
Jon Hilsenrath, Michael Derby, Nell Henderson, Nick Timiraos, Jason Douglas, Paul Hannon, Harriet Torry, Kate Davidson, David Harrison, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Michael Maloney, Paul Kiernan, James Glynn
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