|
Washington Gives Fed More Power; $2 Trillion in Aid May Just Have Been the Start
|
|
|
|
|
|
Good day. The economic-rescue legislation President Trump signed on Friday asks the Fed to charge headlong into credit and fiscal policy, by financing businesses, states and cities—areas the central bank has normally regarded as matters best left to elected officials. And Friday's package, estimated at $2 trillion, may not be the end of the aid from Washington.
Now on to today’s news and analysis.
|
|
|
After Fed Unleashes Firepower, Washington Rearms Central Bank
|
|
|
Federal Reserve Chairman Jerome Powell says many places in capital markets have stopped working. The Fed intends to step in and replace that lending.
PHOTO: JACQUELYN MARTIN/ASSOCIATED PRESS
|
|
|
The Federal Reserve quickly deployed a half-dozen emergency lending programs over the past two weeks to ensure cash keeps coursing through the U.S. financial system. Now, Congress wants it to go much further, approving $454 billion to reload the Fed’s own ability to lend. Washington is relying on the Fed, to an unprecedented degree in peacetime, to preserve business balance sheets after elected officials and private industry have put the economy into the equivalent of a medically induced coma to stop the spread of the coronavirus pandemic.
|
|
-
Fed officials are reviewing new ways to support financing for state and local governments, many of which are on the front lines of the coronavirus pandemic and will face huge borrowing needs as revenues plunge, according to people familiar with the matter.
|
|
“This is an opportunity to leverage the unlimited balance sheet of the Fed...It’s totally unprecedented. We’re hoping that it’s a mechanism to keep business alive.”
|
— Sen. Pat Toomey (R., Pa.)
|
|
|
|
In Washington, $2 Trillion in Aid Was Just a Start
|
|
U.S. legislators, administration officials, economists, think tanks and lobbyists are already roughing out the contours of yet another emergency-spending package—perhaps larger than the last—to try to keep the coronavirus crisis from turning into a new Great Depression.
|
|
|
|
|
|
After Coronavirus, We Will Have to Reckon With the Debt
|
|
Moral hazard is dead. Central banks have printed record amounts of money to save financiers and allow indebted governments to keep spending. Inflation is inevitable. If all that sounds familiar, it’s because those were the views of buyers of gold and other inflation protection in 2009. They were wrong then, but they’re at it again—and this time they might be right, WSJ columnist James Mackintosh writes.
|
|
|
|
Key Developments Around the World
|
|
|
Bostic: Fed Can Do More; Kaplan Sees Big Second-Quarter Hit
|
|
Federal Reserve Bank of Atlanta President Raphael Bostic said on Friday more support from the U.S. central bank may be on tap should it see a need and a way to help the economy and financial system navigate the coronavirus crisis.
|
|
|
Also on Friday, Dallas Fed President Robert Kaplan said on Bloomberg TV that the U.S. recovery could take some time and will be surrounded by uncertainty, adding that U.S. gross domestic product could shrink by around 20% in the second quarter, on an annualized basis.
|
|
Bank of Canada Issues Half-Percentage Point Emergency Rate Cut
|
|
Friday's move lowered the benchmark overnight interest rate by half a percentage point to 0.25%, and the central bank will also venture explicitly into large-scale asset purchases by acquiring Government of Canada securities and commercial paper.
|
|
|
People's Bank of China Cuts Key Rate
|
|
The Chinese central bank on Monday lowered a key interest rate in the country's interbank market, the latest effort by Beijing to restart an economy struggling to recover due to the coronavirus. The People's Bank of China said it cut the seven-day reverse repurchase agreement to 2.2% from 2.4%. It previously cut the rate on Feb. 3. (Dow Jones Newswires)
|
|
Virus Measures Slashing Developed Countries' Economic Activity
|
|
Measures taken to curb the spread of the new coronavirus could lower economic activity by a quarter in the U.S. and other developed countries, the Organization for Economic Cooperation and Development said Friday.
|
|
|
|
Coronavirus Pushes Some Emerging Markets to Brink of Default
|
|
An unprecedented withdrawal of capital from emerging markets is threatening to create a wave of debt defaults as governments struggle with the double whammy of falling oil prices and the rapidly spreading coronavirus outbreak.
|
|
|
|
|
Financial Regulation Roundup
|
|
|
Ginnie Mae to Help Mortgage Firms Facing Coronavirus Cash Crunch
|
|
Ginnie Mae, a U.S. agency that guarantees more than $2 trillion of mortgage-backed securities, said it is working to help mortgage companies facing a severe cash crunch when borrowers fall behind in their payments because of measures.
|
|
|
|
Regulators Adjust U.S. Bank Capital Requirements to Spur Lending
|
|
U.S. regulators gave banks a reprieve from new accounting standards that require lenders to book losses on soured loans more quickly, the latest step to encourage banks to keep lending during the spread of the new coronavirus.
|
|
|
|
Fed Discloses BlackRock’s Fee Structure in Bond-Buying Program
|
|
The Federal Reserve Bank of New York on Friday disclosed new protections aimed at reducing BlackRock Inc.’s chances of profiting unfairly from its contract to buy bonds on behalf of the U.S. government.
|
|
|
As Coronavirus Spreads, Community Banks Watch for Fallout
|
|
The economic fallout of the novel coronavirus poses a new challenge for small banks across the U.S. Most of America’s banks are like Fisher National—woven into the local economy and a key source of credit for small businesses. As the downturn squeezes more industries, community banks must balance helping businesses with protecting their own bottom lines.
|
|
Goldman Sachs, Morgan Stanley to Control Securities Units in China
|
|
The China Securities Regulatory Commission will allow the banks to move to 51% ownership of their local joint ventures, Goldman Sachs Gao Hua Securities Co. and Morgan Stanley Huaxin Securities Co., a key step in opening up China's financial markets to Wall Street.
|
|
|
|
|
7:50 p.m.: Bank of Japan releases March tankan survey of business sentiment
|
|
|
Time N/A: Central Bank of Egypt releases policy statement
8:30 a.m.: U.S. Commerce Department releases February international trade data
|
|
|
The Coronavirus Debt Threat
|
|
Even a relatively quick exit from the economic standstill in China, parts of Europe and the U.S. wouldn’t avert crises in many middle- and low-income countries, Carmen M. Reinhart and Kenneth Rogoff of Harvard University write at The Wall Street Journal.
|
|
|
"Defaults won’t be limited to private personal and corporate debt," they add. "Argentina, Venezuela and Lebanon will soon have company."
|
|
|
-
The Fed plans to buy $345 billion in Treasury securities this week, compared with $375 billion last week. The Fed also plans to buy $200 billion in mortgage-backed securities, down from $250 billion last week. (Dow Jones Newswires)
-
The benchmark U.S. crude-oil price fell 4.3% to $20.59 a barrel on Monday, an 18-year low.
-
The Kansas Fed's measure of service activity in the central U.S. fell to a record low of minus 16 in March, and its expectations index saw its worst-ever monthly swing. (DJN)
-
Australian Prime Minister Scott Morrison on Friday indicated his government will announce a third economic stimulus package within days to further mitigate the impact of the coronavirus pandemic. (DJN)
-
Brazil's government announced a 40 billion real ($7.8 billion), two-month program to offer small- and medium-sized companies credits to help pay salaries while many businesses are shut down. (DJN)
-
The South African rand hit a record low versus the dollar after the country lost its last investment-credit grade rating Friday. (DJN)
-
South Korea's export growth likely slowed in March due to weaker demand caused by the coronavirus pandemic. The median forecast from seven economists polled by WSJ is for a 1.8% on-year rise in Korean outbound shipments, versus a revised 4.3% gain in February. (DJN)
|
|
|
Your special-edition evening newsletter rounding up coronavirus news and analysis is moving to a weekly schedule and will return Sunday. We will continue to include coronavirus coverage in the daily newsletter.
|
|
|
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
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @wsj_douglasj, @HarrietTorry, @KateDavidson, @d_harrison, @kimmackrael, @TomFairless, @megumifujikawa, @mikemaloneyny, @pkwsj, @JamesGlynnWSJ
|
|