Sunday School 8/9/20

Can I tell you, my head hurts?

Seriously, watching these classroom sessions today was painful, for a host of reasons, not the least of which is that House Speaker Nancy Pelosi, Treasury Secretary Steve Mnuchin and Senate Minority Leader Chuck Schumer are not the best interviews on the planet. But I did it, I did, and I'm going to share just a little bit from each of them.

First up? Pelosi and Dana Bash on CNN's State of the Union. First off, Pelosi said she agrees with Sen. Ben Sasse (R-NE) who apparently suggested that the president's executive orders, announced from his golf course in New Jersey, are "constitutional slop" - but even though her "constitutional advisors tell (her) they're absurdly unconstitutional," she's more interested in addressing the needs of the American people than in suing over the EOs. And she's hopeful they can resume negotiations.

And that's why we said we will come down a trillion, not that we cut out any of our priorities, but we shorten the length of time in which they would be in effect. And next year, we can extend them again... But we will come down a trillion, you go up a trillion, we will find our common ground here. Let's go to the table.

Bash wondered why Pelosi and the rest of them weren't working all weekend, but Pelosi said the offer is on the table to come back when the other guys want to put up some more money. And specifically on the $600 extra unemployment, Pelosi agreed that she didn't want to back off the $600, but that wasn't the reason for the stalemate.

We're at a stalemate because the Republicans have, from the start, never understood the gravity of the situation that we are in. They have called it a hoax. They have called it -- their -- delay, denial, extortion of this pandemic. And we cannot open our economy or open until -- our schools safely unless we address the pandemic. So, the basic thing is, they have ignored that. The problem has grown. And it has become an enormous economic problem.

Moving on to Mnuchin and Chris Wallace on Fox News Sunday. Mnuchin said that the president's first choice was that a deal be negotiated with the Dems but when that didn't happen, Mnuchin and Mark Meadows told Trump he had to move forward with executive action so that he could "help American workers and American people."

As to any additional negotiations, Mnuchin said he told both the Speaker and Minority Leader that "any time they have a new proposal" he's willing to listen.

But let me just say, you're right, we agreed with the Democrats. We both want to send more checks to the American workers. We want to send more PPP to those hardest hit businesses. We've said, let's pass legislation on the things that we agree on and knock these off one at a time. And they've refused to do that until they get their trillion dollars for the states.

And, he said, he "spoke to many governors" recently and that

We offered more money for the states. They still have 150 billion from last time. Most of them haven't even used half the money. The governors are saying, we need more money for education. We need help. And the president said, we'll give it to you, but not a trillion dollars.

On the payroll tax cut and Trump saying he'd like to cut the payroll tax if he's re-elected, which led the Dems to say he's going to cut Social Security and Medicare, since that's what the payroll tax funds.  Mnuchin says that's not the case.

There would be an automatic contribution from the general fund to those trust funds. The president, in no way, wants to harm those trust funds. So they'd be reimbursed just as they've always been in the past when we've done these types of things... And you just have a transfer from the general fund. 

And he reiterated that the Dems want to "bail out some states that were poorly managed" with their giant aid to state and local governments. But, he said,

We can deal with in January, if there's ongoing issues, we can pass more legislation. This will be the fifth bill. We don't have to get everything done at once. What we should do is get things done for the American public now, come back for another bill afterwards.

Confident, isn't he?

Finally, Schumer and George Stephanopoulos on This Week. Schumer said the Executive Orders "described in one word, could be paltry; in three words, unworkable, weak, and far too narrow." Using the unemployment benefit EO as an example, he said

...this is an unworkable plan. Most states will take months to implement it, because it's brand-new. It's sort of put together with spit and paste... And, to boot, it depletes the hurricane trust fund to defer this money -- to pay for this money, at a time when we're at the height of hurricane season. So, it makes no sense.

He was equally fond of the payroll tax deferral, it seems. He said that some companies will continue withholding the money because "they don't want their employees to be stuck with a huge bill in December." So - no money pumped into the economy, and he also said that money won't be put into the Social Security and Medicare trust funds, so you better watch out if Trump is re-elected.

Finally, on election interference and new warnings from the Intelligence Community (China's rooting for Biden, Russia's rooting for Trump, and Iran is "also looking for opportunities), Schumer focused on Russia.

...  it is absolutely true that Russia is trying to interfere from public information and public statements. And we are trying, we Democrats are trying to stop it in the defense bill. We want to put tough sanctions on Russia, both before they do something and even more so, Chris Van Hollen, has a bill, bipartisan, I believe this with Marco Rubio to stop it. Trump is resisting. Why does Donald Trump not want to stop Russia from interfering in this election? You have to ask that question. It’s the wellspring of our democracy.

He said he believes that the information should be declassified and shared with the American public, as Sen. Richard Blumenthal (D-CT) has suggested.  And, before the interview ended, he tossed this out to us, the American people.

And they should know one other thing, that these hearings that Johnson and Graham are doing are -- some of it is now, now it’s public, is based on false Russian intelligence about Joe Biden. In other words, false Russian reports about Joe Biden. They should be ashamed of themselves for what they’re doing, letting the Russians manipulate them and us, the American people, or tried to manipulate us.

Consider yourself warned.

Stay safe - continue following the rules - and look for some extra credit tomorrow, if you can take it.

See you around the virtual campus. 

Sunday School Extra Credit 4/26/20

As I noted in yesterday's Sunday School, the classrooms were full of folks ready, willing and able to talk. Today, for extra credit, I want to hear from some folks not on the 'usual suspects' list. 

We've got Kevin Hassett, a senior economic advisor in the Trump administration talking with George Stephanopoulos This Week, and Bank of America CEO Brian Moynihan and San Francisco Mayor London Breed talking with Margaret Brennan on Face the Nation,  We'll take them in that order. 

They started out talking about a 'v-shaped' recovery, which happens when there's a strong, fast, consumer-driven recovery after a sharp decline. Some folks, including Apple CEO Tim Cook, have predicted this is what we might see, while others disagree. Hassett says that folks will be aiming for that kind of recovery, and will need to work out how to get there, given that Dems and Reps have their own thoughts on that. And I guess whether the recovery is v-shaped or not, 

But make no mistake: it's a really grave situation, George. This is the biggest negative shock that our economy, I think, has ever seen. We're going to be looking at an unemployment rate that approaches rates that we saw during the Great Depression.

We're losing as many jobs every ten days or so as were lost during the Great Recession, so there's a lot of work to be done. But, it's not impossible; Hassett pointed to sharp differences between what happened in the past vs. what's happening now.

...When President Obama was elected, it was middle of December when they started to have the stimulus bill discussions with Congress and it was the middle of February when they passed it. We just did a major, major bill in a week, and that's because basically people care more about their country than the sort of nastiness in Washington that's covered on the news every day.

Given that it's basically the same people in Congress, including the leaders, are we to believe they only learned to care for their country when Trump got in office? They only care when it's an election year? They only care that it's small businesses, actual people, instead of big banks and large corporations? The possible explanations are endless, I think - including that without the Ds, the Rs can't get it done, but only the Rs get invited to the signing ceremonies. Sorry - riding a huge cynical wave today.

When George pointed out that things might be starting to fray, particularly noting Mitch McConnell's comments about letting states file bankruptcy, Hassett said that a lot of money has gone to the states already, but that since "it feels like the Constitution doesn't allow" for state bankruptcies, everyone's going to have to work things out, and the feds are going to have to help out.

George moved to talking about the debt, noting that while Trump has said he's "open to more aid" for the states and local governments, and he wants infrastructure spending, the Rs are starting to worry about the debt, and he asked Hassett if he was also concerned about that.

Oh, for sure...I think the debt level in the U.S. has climbed up to the point where in the economics literature, we see that it can be a sort of long run negative for growth. And so, for me, I think that as we go into the next phase of legislation, we need to think about long run things that we can do to try to get ahead of the curve on debt. So, for sure we need to do still some short run things but I think looking at long run changes that we can make to things to improve the debt situation, you know, that should be something that should be on the table.

There are lots of problems out there  still,  so the bipartisan action we've seen so far is good but it's going to get ugly. And he says we've managed to dodge a bullet or two so far, given the general stability of the markets and other indicators. And, finally, on whether we're "anywhere close to a new normal anytime soon?" In a nutshell, if people reopen while following the guidelines from Drs. Birx and Fauci, "we can maybe start to get back to normal."

Sticking with the economy, here are highlights of Brennan's conversation with BoA's Moynihan, which started with a question on the sustainability of deferring payments for customers, now that we're only days away from a new month and new payments due. Moynihan said

We have a million and a quarter customers, 1.25 million customers are asked-- asked for a deferral of payments and that will continue to go on for the-- for the near future and into the fall.

He also pointed to other things they're doing, including participating in the PPP, fee-free cashing of stimulus checks for non-customers, $100M in charitable giving, and $350M in community development financial assistance.

Brennan wondered about the next round of PPP, specifically whether mom-and-pops would have a better chance at getting help. Moynihan said that the first round they spend "largely went to small businesses" and that the next round, as long as there's funding for the program, everyone will get assistance. He also said 25% of the small businesses they help are in low- and moderate-income neighborhoods,and that they don't have more applications already than they can support with the new funding, around $50B worth. He also said

...I think it's clear that between Congress and the administration and the American people, we need to get all these funded and not make this a footrace. Just get the work done and get it through. And the work has to be done in a way that is-- supports American taxpayers who will ultimately pay for this and also gets the small business the money and gets the-- and has them pay their employees, which is a goal of the program.

On what things look like going forward, he sees "a deep recession environment in the second quarter, a less deep in the third quarter and then growth in the fourth quarter." And, he said, "our experts think it's late next year when the economy gets back to the same size it was prior to this." He does see some growth in consumer spending in certain areas, which is helpful - and he points to the stimulus payments, the PPP, unemployment insurance (which was bumped up by an extra $600 for four months) and the $1200 checks helping in that regard.

I was very interested in Brennan's next conversation; after all, the real battle against COVID-19 takes place at the local level, and everything is more personal there. San Francisco's Mayor Breed was the first to issue a shelter in place order, and he's added a mask order on top of that. Brennan wondered what he's seeing that others might not be.

It seems there are still many challenges, the biggest of which is making sure they look at the data and the facts from the public health experts, so they can make good decisions. But, he added

The challenges that we face still around PPE, around testing kits is just absolutely insane. We have known that this crisis was coming to our country for a long time now, and the fact that as of April, we're still having the same conversations about the challenges. I know that most cities are seeing the same data I'm seeing that if we do absolutely nothing, it gets worse. And so that's really why we have been really a lot more aggressive maybe than-- than other areas because we wanted to make sure that it doesn't.

His city could be overwhelmed - not enough beds, ICU rooms, or ventilators - if they do nothing or if they had done nothing, and that's the kind of thing "which should alarm any mayor in any city."

Brennan asked about the difficulty getting PPE, about some of it being diverted, and why he has such a hard time getting it. He said he had a shipment, things they had purchased from China, that were diverted to France, and that FEMA has confiscated some things as well. Customs is an issue - some stuff needs to come in via ship not plane, for example - and they've had to be really resourceful to get what they need.

But the fact is, this should be a federal coordinated effort. We should not still be having these conversations, which is a big reason why we have to put these shelter-in-place orders because we don't have the resources that we need to keep people safe, especially around testing.

They also talked about the news that the first COVID-19 death was someone from the Bay area, back on February 6th. Breed said it gives an indication that they really didn't have good facts when they first started announcing numbers. He mentioned his state's desire to do more testing of people who passed away earlier to determine if they were positive for the virus, citing a case originally not classified as a COVID-19 death until they found out that another person in the household was positive, and then testing confirmed that what they thought was a death due to heart attack was a positive case.

Brennan asked about the China travel ban, and how that might have impacted his city. Interestingly, he said they had been monitoring things since December, trying to prepare for what might happen there. Off the top of my head, I'm not sure I've seen that other cities had done so - and we know from reporting that there was less than optimal attention being paid nationally that early.

We set in place a declaration of emergency back in February. We operated our emergency operations center because of those relationships between people who live in San Francisco and their relatives and their friends in various parts of China. And we had experienced, sadly, a lot of xenophobia against our Chinese community early on. I mean, basically, Chinatown was a ghost town in the month of January. And so, we had been keeping an eye on this--and making adjustments in order to prepare our city for what we knew was actually coming here.

Breed said it's likely that the shelter-in-place order, set to expire on Sunday, will be continued. The most recent data from the San Francisco Chronicle shows that the Bay Area has had 7,499 cases and 260 deaths. For the city of San Francisco, the counts are 1,424 cases and 23 deaths.

So - three perspectives: an administration guy, a big banker, and a city mayor. The one thing that's clear in this Extra Credit? No one thinks we're done yet.

We're not done fighting the virus, we're not done fighting the bureaucracy, we're not done with efforts to keep small businesses alive, and we're not really anywhere near done with the economic impact.

And, of course, we're not done washing our hands, wearing our masks, and keeping our distance.

See you around the virtual campus.

Quick Takes (v51): So Bright I've Gotta Wear Shades

"Let... the sun shine in, let... the sun shine in, the sun shine in!"

You know, transparency and stuff like that. Like, the government  after messing with the IGs appointed to give us transparency on the trillions of our dollars being spent on coronavirus stimulus packages.

The move follows several steps Trump has taken to combat oversight of the bailout fund. After signing the relief package into law last month, the president issued a signing statement saying he would not allow the special inspector general for the relief program to report to Congress without his supervision.

So, with that as background, let's look at an exchange from the White House coronavirus update (you may know them by their other name, Trump campaign rallies) the other day, on the subject of transparency. Treasury Secretary Steve Mnuchin was asked

Mr. Secretary, given the size of the taxpayer dollars that are going out the door, have you fellas come to a different way of thinking about the need for oversight — independent oversight on behalf of the taxpayer?

Mnuchin's response? Here's the first part.

We have independent oversight. We supported it in the last legislation. Let me be very clear: We have a new inspector general. The President has already picked someone for that position. We look forward to the person being confirmed. We have an oversight committee of Congress that many of them have already been appointed.

 Yes, we look forward to the confirmation of someone who worked on the president's impeachment defense - much of which was based on not being transparent and not letting others be transparent, either - to be the IG of something about which the White House doesn't want transparency.

Now, the White House pointed out that Brian Miller, the White House lawyer tapped for the role, has previously been confirmed for an IG role in the General Services Administration. Dems, however, including Senate Minority Leader Chuck Schumer, are not impressed.

This oversight position, which will be responsible for overseeing hundreds of billions of taxpayer dollars, requires complete independence from the president and any other interested party to assure the American people that all decisions are made without fear or favor, To nominate a member of the president’s own staff is exactly the wrong type of person to choose for this position.

It's good that Mnuchin understand the importance of being open with us, though, and he even provided an example of his understanding for us to, you know, understand.

And let me just say, we put up last week, for full transparency — we had no obligation to do this.  We put up — you can go to Treasury.gov — full transparency on the money that had been sent out on the PPP across states, showing all the big lenders, how it was distributed.  No one lender did more than 4 percent.  Showed the businesses.

Well, if you tell me I can go to Treasury.gov and get a dose of full transparency, you can be sure I'm going to do that. Here's a link to the slide deck that Mnuchin referred to as an example of unobligated full transparency. Note that I had previously shared the slide on the distribution of loans by dollar amount in my Sidebar on Small Business Funding.

First, the slide that "showed the businesses." This slide showed the breakdown in number of loans, dollars, and percentage of total PPP dollars by NAIC subcategory. The top five?

1. Construction: 177,905 loans, over $44.9B, 13.12%
2. Prof/Scientific/Technical Svcs: 208,360 loans, over $43.2B, 12.65%
3. Manufacturing: 108,863 loans, over $40.9B, 11.96%
4. Health Care and Social Assistance: 183,542 loans, over $39.8B, 11.65%
5. Accommodation/Food Services: 183,542 loans, over $39.8B, 8.91%

I get that it would have been extremely difficult, in a slide deck, to provide more of a breakdown on the businesses, so the categories was reasonable as a first step - but there should be a sortable database made available providing much more data than that.

But the slide "showing all the big lenders" was anything but reasonable and anything but transparent. 

I'd guess that JPMorgan Chase and Wells Fargo are up there on the list, probably in the first two or three, but who are the rest of them? And who did they primarily lend to, by NAIC subcategory, or by size of the company, and who lended to the publicly traded companies? And what's the reason for withholding the names in the first place? Is that to prevent us from seeing which banks are collecting all the fees, and in effect, getting their own little bailout?

I know, I'm asking too much, aren't I? I mean, shouldn't I be satisfied by Mnuchin's final comments on this?

So, again, the President and I very much believe in full transparency.  We’re spending a lot of money, and we want to make sure that it’s done effectively and fairly.

No. I shouldn't be, and you shouldn't be either.