The Fed’s municipal bond plan could leave out cities with large black populations.

The Federal Reserve is about to jump into the market for municipal bonds in a bid to keep credit flowing to states, large counties and huge cities — but researchers at the Brookings Institution warn that the new program’s design could skip cities with large black populations.

Under the new initiative, announced April 9, the Fed will buy short-term bonds issued by states or counties with more than 2 million people, or cities with more than one million. A number of cities with large black populations fall below this size threshold.

“None of the thirty-five most African American cities in America meets the Fed’s criteria for direct assistance,” researchers Aaron Klein and Camille Busette wrote in a March 14 analysis. “For every ten percent more Black the city’s population, it is ten percent less likely to qualify for the Fed’s program.”

That seems unintentional, the researchers note: The central bank has been moving at breakneck speed to roll out economic solutions as coronavirus chokes off sales tax revenue and tanks local economies. But black Americans are disproportionately impacted by coronavirus, and the way the lines are drawn could impact whether their communities benefit from funding. While states can shuttle money to local governments, politics might get in the way.

Buying local debt was bound to be fraught territory for the central bank, which has long avoided doing so partly because it entails picking winners and losers, but policymakers have been pulled into the market as needs quickly mount. They have also signaled a willingness to add to the program.

The Fed “will evaluate whether additional measures are needed to support the flow of credit and liquidity to state and local governments,” according to last week’s announcement. A start date for the program, which will buy up to $500 billion in securities, has yet to be announced. The Brookings researchers suggest that the central bank make tweaks, such as expanding to the 50 largest cities.

“It’s an easy fix, and if they don’t fix it, it’s going to have unintended consequences,” Mr. Klein said in an interview.

Stocks tumbled on Wednesday as investors faced a stream of bad news about the economic damage caused by efforts to contain the coronavirus pandemic, including data that showed a historic plunge in retail sales and a slump in factory output.

The S&P 500 dropped more than 2 percent in early trading. Stocks in Europe were also lower, and Asia had a downbeat day.

The retreat Wednesday came the day after the S&P 500 hit a one-month high. Though they’re still far from their Feb. 19 record, stocks in the United States have been steadily climbing in recent weeks as investors have begun to focus on the prospect of an eventual rebound from the economic collapse triggered by the pandemic.

But on Wednesday they were confronted by a number of reports that highlight just how badly the economy is faring. The Commerce Department said that retail sales in March dropped 8.7 percent as consumers were forced to stay home, and the Federal Reserve said industrial production and manufacturing output in the United States fell by the most since 1946.

The German Economy Ministry said economic output in Europe’s largest economy is likely to plunge almost 10 percent from April through June.

As they reported earnings, the nation’s banks also raised more warnings about the potential for a wave of defaults on loans, saying that they are stockpiling cash in anticipation of losses. Shares of Citigroup and Bank of America tumbled after those reports.

Oil producers were also sharply lower on Wednesday, following another slump in crude oil prices, but airlines climbed after they and the Trump administration reached an agreement in principle over the terms of a $25 billion bailout for the industry.

U.S. retailers suffered a record decline in sales last month.

U.S. banks reporting quarterly earnings on Wednesday said they’re socking away money to prepare for a wave of loan defaults by consumers and businesses over the coming months.

  • Goldman Sachs reported a big surge in its trading revenue, accompanied by gains in investment-banking and in its nascent consumer-banking units, even as it set aside $937 million in additional provisions for potential virus-related losses, bringing its total allowance for future credit losses to $3.2 billion. Profits fell 46 percent for the quarter to $1.2 billion, down from $2.3 billion for the same period last year.

  • Citigroup, another of the country’s four largest banks, said it added to its reserves and that the move had cut into its quarterly profit. Citi earned $2.5 billion, a 46 percent drop from the same period a year ago. It added $7 billion to its reserves, bringing the total size of its pool to nearly $21 billion.

  • Bank of America’s quarterly profit fell to $4 billion in the first three months of 2020 from $7.3 billion during the same period a year earlier. The difference came mostly from a $3.6 billion increase in the amount of money the bank decided to set aside for bad loans this year. The total reserved by the bank during this quarter reached $4.8 billion.

  • PNC Financial Services Group made a similar disclosure. The regional bank said it was increasing its quarterly contribution to a reserve for loan losses by $693 million. In all, it moved $914 million to its reserves during the quarter, while earning $915 million.

German government expects a deep recession.

The German government on Wednesday issued a bleak assessment of the effects of the coronavirus, saying that the economy was headed for a steep recession and a surge in joblessness.

Economic output will plunge almost 10 percent from April through June, the German Economy Ministry said. The country is expected to rebound later in the year, but gross domestic product at the end of 2020 will still be 4 percent lower than in 2019, the government said.

The effect of the virus on manufacturing, shopping and service businesses like hair salons will end a job boom that has lasted a decade, the government said. In March, the German unemployment rate was 3.2 percent, among the lowest in Europe. But more than one million people are working reduced hours under a government “short work” program that compensates employees for some lost wages.

“The collapse in global demand, the interruption of supply chains, behavior changes by consumers and uncertainty among investors are having a massive effect on Germany,” the ministry said.

More trouble is predicted for oil markets as price slumps.

Despite last weekend’s historic deal between the OPEC members and Russia to cut production, the world oil market remains massively oversupplied, with further falls in price possible, the International Energy Agency said on Wednesday.

The report came as oil prices slumped further, with West Texas Intermediate, the U.S. benchmark, falling 2 percent to below $20 a barrel. Brent crude was down 4 percent, to about $28.30 a barrel. Prices are down about 60 percent this year.

The agency forecast that global demand for oil would fall about one-third this month, or 29 million barrels a day, because of the effects of the coronavirus pandemic, while supplies will remain high because of production increases during the now-ended price war between Saudi Arabia and Russia.

Fatih Birol, the agency’s executive director, said that this month was likely to be remembered as “Black April” in the oil industry. Mr. Birol praised the deal to cut production as a good start, but added: “We lost two very important months in the oil industry, and we may still see prices getting some downward pressures in the next days or weeks to come.”

The Paris-based agency warned that a glut of 12 million barrels a day would swell during the first half of the year. This flood of oil, analysts from the agency wrote, “still threatens to overwhelm the logistics of the oil industry — ships, pipelines, and storage tanks — in the coming weeks.”

Shutdowns have gutted state tax revenue, endangering public services.

States provide most of America’s public health, education and policing services, and a lot of its highways, mass transit systems and waterworks. Now, sales taxes — the biggest source of revenue for most states — have plunged as business activity grinds to a halt and consumers stay home.

Personal income taxes, usually states’ second-biggest revenue source, started falling in March, when millions lost their paychecks and tax withholdings stopped. April usually brings a big slug of income-tax money, but the filing deadlines have been postponed until July.

Even if states are able to stretch their finances temporarily — by trimming budgets, appropriating funds earmarked for other purposes or passing emergency legislation, as many have done — the economic recovery is expected to be slow.

“We welcome the news that a number of major airlines intend to participate in the Payroll Support Program,” Treasury Secretary Steven Mnuchin said in a statement, saying the agreement would “support American workers and help preserve the strategic importance of the airline industry while allowing for appropriate compensation to the taxpayers.”

American Airlines said it would receive $5.8 billion as part of the deal, with more than $4 billion in grants and the remaining $1.7 billion as a low-interest loan. The funds are intended to be used to pay employees, and the airlines that take them are prohibited from major staffing or pay cuts through September.

Southwest Airlines said it expected to receive $3.2 billion, about $1 billion of which would come in the form of a low-interest loan with a 10-year term. That loan is expected to include about 2.6 million warrants issued to the agency.

The administration has been haggling with the airlines over the terms of the bailout, with Mr. Mnuchin pushing the airlines to agree to repay 30 percent of the money over five years. The Treasury Department also has been seeking warrants to purchase stock in the companies that take money. Airlines have complained that the Treasury was effectively turning the grants into loans by requiring repayment.

Catch up: Here’s what else is happening.

Reporting was contributed by Sapna Maheshwari, Ben Casselman, Mary Williams Walsh, Stanley Reed, Joe Gose, Erin Griffith, Vindu Goel, Alan Rappeport, Niraj Chokshi, Carlos Tejada and Mike Ives.

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