The Treasury secretary and the Federal Reserve chair differ on recovery time.
Treasury Secretary Steven Mnuchin and the Federal Reserve chair, Jerome H. Powell, offered differing views of how quickly the U.S. economy will recover in testimony before Congress on Tuesday.
They also took different approaches to wearing masks, which Representative Maxine Waters, the chair of the House Financial Services Committee, said were required at the hearing.
Mr. Mnuchin removed his mask while testifying. Mr. Powell kept his mask in place.
The Treasury secretary also offered a more upbeat view of the economic trajectory than Mr. Powell, saying he expects a rebound in the second half of the year.
“We are in a strong position to recover because the Trump administration worked with Congress on a bipartisan basis to pass legislation and provide liquidity to workers and markets in record time,” Mr. Mnuchin told members of the House Financial Services Committee.
Mr. Powell said that the economy was recovering more quickly than expected, but big risks remained as the virus persisted, subduing economic activity.
A second wave of the virus, Mr. Powell said, “could force people to withdraw” and “undermine public confidence which is what we need to get back to lots of kinds of economic activity that involve crowds.”
“A full recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities,” Mr. Powell said, adding that “the path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.”
Their testimony came as Dr. Anthony S. Fauci, the nation’s top infectious disease expert, warned lawmakers in a separate congressional hearing on Tuesday that the number of new infections in the United States could more than double to 100,000 a day if the country failed to contain the surge that underway in many states.
“We are now having 40-plus thousand new cases a day,” Dr. Fauci said. “I would not be surprised if we go up to 100,000 a day if this does not turn around. And so I am very concerned.” — Alan Rappeport
Mnuchin says he won’t provide additional bailout information to inspectors general.
Treasury Secretary Steven Mnuchin defended his record of transparency in managing the $2.2 trillion government bailout during a congressional hearing on Tuesday but said he would not commit to providing additional information to a panel of inspectors general that have accused him of stonewalling their requests.
Earlier this month, Michael E. Horowitz, the acting chairman of the new Pandemic Response Accountability Committee, and Robert A. Westbrooks, the committee’s executive director, warned in a letter that the Treasury lawyers’ interpretation would “present potentially significant transparency and oversight issues.”
Because of that determination, approximately $1 trillion of the stimulus funds are shielded from the committee’s oversight efforts.
Rep. Carolyn Maloney, a New York Democrat, pressed Mr. Mnuchin in his interpretation of the law and told him that Congress intended for the new committee to have access to information about how those funds are being deployed. The funds include money for tribal governments already embroiled in a series of lawsuits, aid for states, nearly $500 billion for corporations, funds for aviation companies and the Paycheck Protection Program.
Mr. Mnuchin argued that Ms. Maloney’s interpretation is different than that of lawmakers in the Senate and that there are multiple layers of oversight that he is trying to accommodate. He said that he would ask his inspector general to work with the committee to address its concerns.
“We have full transparency,” Mr. Mnuchin said.
Airbus, the European aerospace giant, will cut 15,000 jobs.
The coronavirus pandemic continued to wreak havoc on global aviation as the aerospace giant Airbus announced Tuesday it would cut 15,000 jobs across its global work force, the largest downsizing in the history of the company.
Citing a 40 percent slump in commercial aircraft business activity and an “unprecedented crisis” facing the airline industry, the company said it would slash around 10 percent of its 135,000 employees worldwide, with layoffs hitting plants in France, Germany, Spain and Britain.
Airbus’s chief executive, Guillaume Faury, had been preparing employees for hard times in a series of recent memos warning it would be necessary to adapt to a “lasting decline” in the demand for airliners. The company said it doesn’t expect air travel to return to pre-pandemic levels before 2023 at the earliest and potentially not until 2025. — Liz Alderman
C.D.C. director criticizes American Airlines for fully booking flights.
The director of the Centers for Disease Control and Prevention on Tuesday expressed “substantial disappointment” with a decision by American Airlines to start booking its flights to their capacity.
“I can say this is under critical review right now by us at C.D.C.,” the director, Robert Redfield, said at a Senate hearing in response to a question from Senator Bernie Sanders of Vermont. “We don’t think it’s the right message, as you have pointed out.”
It was not immediately clear what such a review would entail and whether it includes other airlines with similar policies. It was also not clear what the C.D.C. might do in response and whether it even had the power to compel airlines to leave some seats empty.
Dr. Redfield’s comments come amid a surge in coronavirus cases in states like Arizona, California, Florida and Texas that had been allowing more businesses to reopen and relaxing restrictions on gatherings. Some of those states have paused or reversed their reopening plans in recent days.
American said its decision would not put passengers at greater risk. “We are unwavering in our commitment to the safety and well-being of our customers and team members,” Ross Feinstein, an American spokesman, said in a statement. “We have multiple layers of protection in place for those who fly with us, including required face coverings, enhanced cleaning procedures, and a preflight Covid-19 symptom checklist.”
American had been limiting flights to about 85 percent capacity, enough to leave half the middle seats empty, but said last week that it would let customers buy up all the available seats on its flights starting Wednesday.
Other airlines have taken a similar approach. United Airlines had never limited the number of passengers on its flights. United and American have said that they will warn customers when they are on a fully booked flights and let them switch to a less-packed flight.
By comparison, Southwest Airlines and Delta Air Lines have said that they will continue to cap the number of passengers on their flights through September. Southwest, which does not assign seats, is limiting flights at a level that would allow each middle seat to remain empty, though it will allow passengers to sit where they want. Delta is capping main cabins at 60 percent and first class cabins at 50 percent, while also blocking middle seats. —Niraj Chokshi
Markets are failing to grasp the threats to global growth.
Markets have become too complacent as risks from the coronavirus pandemic threaten global prosperity, the Bank for International Settlements, which supports the world’s central banks, warned in its annual report.
In a nod toward the recent disconnect between financial markets and the economy, the group said high stock prices and the lower premium on corporate debt suggested a divergence from the reality of economic weakness.
“Financial markets may have become too complacent — given that we are still at an early stage of the crisis and its fallout,” Agustín Carstens, the group’s general manager, warned in a speech tied to the release. He pointed out that the path of the virus and its effects on businesses still posed risks.
“Importantly, the shock to solvency is still to be fully felt,” Mr. Carstens said, warning that banks, which have extended loans to companies and consumers, will find themselves on the hook as businesses crash, taking workers down with them. That situation, the group warned, could be “triggered by cliff effects as initial fiscal support runs out and payment moratoriums expire.”
Central banks responded rapidly as businesses and individuals scrambled to sell assets and raise cash, and the real-world crisis began to infect financial markets — making it hard for corporations to issue debt and difficult to trade even U.S. Treasury securities, which are usually highly liquid. Monetary policymakers bought huge sums of bonds and stepped into new markets as lenders of last resort, intent on staving off a full-fledged meltdown.
Investors were soothed, and they began buying stocks and debt again as they became confident that the Federal Reserve and its global counterparts stood ready to provide a backstop. Global stock indexes have rallied, and corporations have been issuing debt at a breakneck pace.
But now they might be overdoing it, the Bank for International Settlements and its leaders warned. — Jeanna Smialek
The Paycheck Protection Program is ending with money to spare.
After a stumbling start three months ago, the U.S. government’s centerpiece relief program for small businesses is ending with money left over.
The Paycheck Protection Program is scheduled to wrap up on Tuesday after handing out $520 billion in loans meant to preserve workers’ jobs during the pandemic. But as new outbreaks spike across the country and force many states to rethink their plans to reopen businesses, the program is closing down with more than $130 billion still in its coffers.
“The fact that it was able to reach so far into the small-business sector is a major achievement, and those things are worth acknowledging, and celebrating,” said John Lettieri, the chief executive of the Economic Innovation Group, a think tank focused on entrepreneurship. “But we’re still in a public health crisis.”
The hastily constructed and frequently chaotic aid program, run by the Small Business Administration but carried out through banks, handed out money to nearly 5 million businesses nationwide, giving them low-interest loans to cover roughly two and a half months of their typical payroll costs. Those that use most of the money to pay employees can have their debt forgiven.
The program appears to have helped prevent the nation’s staggering job losses from growing worse. Hiring rebounded more than expected in May as companies in some of the hardest-hit industries, especially restaurants, restored millions of jobs by recalling laid-off workers and hiring new ones.
Lenders cited two main reasons there was money left over. First, most eligible companies that wanted a loan were ultimately able to obtain one. (The program limited each applicant to only one loan.) Also, the program’s complicated and shifting requirements dissuaded some qualified borrowers, who feared they would be unable to get their loan forgiven. — Stacey Cowley
Stocks fluctuate as worries persist over the outbreak.
Stocks on Wall Street inched higher, while shares in Europe were mixed on Tuesday as the coronavirus outbreak has continued to spread in the United States and has proved stubbornly persistent elsewhere.
The S&P 500 was up nearly 1 percent in early trading, after a 1.5 percent rally on Monday.
One standout on Tuesday was Britain’s FTSE 100 stock index. It was sharply lower after the country reported worse-than-expected revised economic data for the first three months of this year. Investors were awaiting more details from Boris Johnson, the British prime minister, on his plan to spend on public works and other projects to get the economy back on track.
Other major European markets were modestly higher. The muted opening occurred despite a strong day in the Asia-Pacific region, where markets in Japan, mainland China and Australia ended more than 1 percent higher.
Investors awaited developments as states like Florida and Arizona extended their outbreak containment steps and other efforts, signaling that the coronavirus could continue to hold back the United States, home of the world’s largest economy.
They were also watching tense relations between the United States and China, after Beijing imposed a new national security law on the Asian financial capital of Hong Kong without releasing the text or details. U.S. officials on Monday outlined new restrictions on selling technology to Hong Kong, citing Beijing’s growing meddling in the affairs of the semiautonomous territory.
Green energy companies are powering through the pandemic.
The fallout from the coronavirus pandemic has many businesses reeling, and the oil and gas industry in particular has been rocked by plummeting prices.
But producers of clean energy are pushing hard to get their projects up and running. They want to start making money on their investments as soon as possible, and while demand for electricity has been reduced by the impact of the virus, renewable power tends to win out over polluting sources in electricity systems because of low costs and favorable regulatory rules.
Among the projects are the 2.5 billion pound ($3.1 billion) East Anglia One wind farm being installed off England’s east coast, in the North Sea, by Iberdrola, the Spanish utility. After additional safety measures for employees were adopted, work on the project continued through Britain’s lockdown, now all 102 turbines are installed.
The work reflects growing financial strength for many green-energy companies that were rocked by the financial crisis of 2008 and 2009. Denmark-based Vestas Wind Systems, a major maker of offshore wind turbines, was forced into closing or selling a dozen factories.
Now the companies have more money in the bank, their equipment is more efficient, and demand reflects the rising interest to reduce carbon emissions. Over the past several months Vestas has striven to keep its factories open to meet a record first-quarter order book of 34.1 billion euros for its giant electric power-generating windmills and services.
“We started out differently, saying ‘Let’s not use the excuse of Covid-19,’” said Henrik Andersen, the Vestas chief executive. — Stanley Reed
Catch up: Here’s what else is happening.
Local union officials have asked General Motors to close its plant in Arlington, Texas, to protect workers until the surge in virus cases in the state subsidies. “The Centers for Disease Control has repeatedly said that the only true way to stop the spread of this virus is to stay home,” Local 276 of the United Automobile Workers unioin said in a statement. National union officials and G.M. said they were discussing the concerns raised by the local.
Royal Dutch Shell said on Tuesday that it planned to write off up to $22 billion from the value of its oil and gas assets, another sign that energy companies are reducing the value of their main businesses as a result of the coronavirus pandemic. The write-downs come because Shell, Europe’s largest oil company, is lowering its forecasts for oil and gas prices.
Reporting was contributed by Jeanna Smialek, Liz Alderman, Mike Issac, Erin Griffith, Stacey Cowley, Emily Flitter, Niraj Chokshi, Stanley Reed, Carlos Tejada and Clifford Krauss.