Tag: WSJ

Federal Reserve to End Emergency Capital Relief for Big Banks

Mary Pat Campbell

Link: https://www.wsj.com/articles/federal-reserve-to-end-emergency-capital-relief-for-big-banks-11616158811

Excerpt:

The Federal Reserve said it was ending a yearlong reprieve that had eased capital requirements for big banks, disappointing Wall Street firms that had lobbied for an extension.

Friday’s decision means banks will lose the temporary ability to exclude Treasurys and deposits held at the central bank from lenders’ so-called supplementary leverage ratio. The ratio measures capital — funds that banks raise from investors, earn through profits and use to absorb losses — as a percentage of loans and other assets. Without the exclusion, Treasurys and deposits count as assets. That will likely force banks to hold more capital or reduce their holdings of those assets, both of which could ripple through markets.

Analysts have been keying on the issue, which is widely viewed on Wall Street as carrying potential implications for markets from bonds to stocks to commodities.

Author(s): Andrew Ackerman, David Benoit

Publication Date: 19 March 2021

Publication Site: Wall Street Journal

The Coming Demand Surge Brings Back Memories of 1970s Inflation

Mary Pat Campbell

Link: https://www.wsj.com/articles/the-coming-demand-surge-brings-back-memories-of-1970s-inflation-11616624489

Excerpt:

There are eerie parallels today. In 1973, the U.S. was coming off a two-year experiment in wage and price controls, which artificially depressed prices and muted signals that the economy was overheating. Then, too, the Fed pursued an easy-money policy, keeping interest rates low — though considerably higher than now, and without today’s purchases of bonds and mortgage securities.

By the end of 1972, before the inflationary jump, the U.S. economy seemed even stronger than it is now, growing at an annual rate of more than 8%. Unemployment was down to 3.4%, and inflation was a seemingly manageable 5.6%. The pre-pandemic 2020 U.S. economy was also very strong, growing at a 3% annual rate, with historically low unemployment of under 4% and inflation hovering around only 1%.

In 2021 we’re emerging from the pandemic shutdown, which cratered growth and slammed the economy — depressing price pressures, not unlike what the price-control program did 50 years ago. Today’s Fed policies are even more expansive. And Congress has just enacted a $1.9 trillion stimulus bill — on top of earlier relief bills costing another nearly $2 trillion, a lot of which remains unspent and will continue to fuel demand this year and beyond.

Author(s): William N. Walker

Publication Date: 24 March 2021

Publication Site: Wall Street Journal

AstraZeneca Releases Updated Covid-19 Vaccine Data Showing 76% Efficacy

Mary Pat Campbell

Link: https://www.wsj.com/articles/astrazeneca-releases-more-data-on-its-covid-19-vaccine-11616637984

Excerpt:

Aside from finding the vaccine 79% effective, the preliminary results indicated the vaccine was even more effective in study subjects ages 65 years and older, and the shot was safe.

The late-stage, or Phase 3, trial had 32,449 subjects in the U.S., Peru and Chile. About 20% of them were 65 years or older.

The fuller data showed the vaccine to be 85% effective in the older age group. Older adults are considered more vulnerable to serious Covid-19, making them a high-priority group in vaccinations globally.

Though AstraZeneca’s latest release involved more cases, the company’s analysis might still be incomplete. AstraZeneca said it was reviewing an additional 14 cases to see if they should be added to the final tally.

Author(s): Jenny Strasburg, Joseph Walker

Publication Date: 24 March 2021

Publication Site: Wall Street Journal

Moderna Is Testing Its Covid-19 Vaccine on Young Children

Mary Pat Campbell

Link: https://www.wsj.com/articles/moderna-is-testing-its-covid-19-vaccine-on-young-children-11615892416

Excerpt:

Moderna Inc. has begun studying its Covid-19 vaccine in children aged 6 months to 11 years in the U.S. and Canada, the latest effort to widen the mass-vaccination campaign beyond adults.

The Cambridge, Mass., company said Tuesday that the first children have received doses in the study, which Moderna is conducting in collaboration with the National Institute of Allergy and Infectious Diseases and a division of the Department of Health and Human Services.

“This pediatric study will help us assess the potential safety and immunogenicity of our COVID-19 vaccine candidate in this important younger age population,” Moderna Chief Executive Stéphane Bancel said.

Author(s): Peter Loftus

Publication Date: 16 March 2021

Publication Site: Wall Street Journal

The Tax Cut Ban and the Constitution

Mary Pat Campbell

Link: https://www.wsj.com/articles/the-tax-cut-ban-and-the-constitution-11616107345?mod=opinion_lead_pos1

Excerpt:

The $1.9 trillion bill marketed as Covid relief includes $350 billion in federal aid to states and localities. While states can use the money to increase spending, Congress decreed that they can’t use it to cut taxes. “A state or territory shall not use the funds,” the bill says, “to either directly or indirectly offset a reduction in the net tax revenue” from a new law or regulation.

Because the mandate applies to “indirect” revenue offsets, states are at risk of violating the law for any tax reduction “during the covered period,” which stretches through 2024. Ohio’s lawsuit by Attorney General Dave Yost argues that “this coercive offer of federal funds violates the Constitution.”

Author(s): Editorial board

Publication Date: 18 March 2021

Publication Site: Wall Street Journal

The Pension Bailouts Begin

Mary Pat Campbell

Link: https://www.wsj.com/articles/the-pension-bailouts-begin-11616107042

Excerpt:

It was perhaps inevitable that Congress would bail out multi-employer pensions for the Teamsters and other private unions after doing so for coal miners in 2019. But the Democrats’ spending bill does nothing to fix the structural problems that have made these union pensions funds so sick.

….

Unions like the plans because workers continue to accrue benefits if they switch employers. If one business goes bankrupt, others must pick up the cost for worker benefits. Workers also don’t lose benefits—at least not immediately—if union-driven costs contribute to putting employers out of business.

But the plans are riddled with perverse incentives that make them risky. Employers award generous benefits and make paltry contributions so they can pay higher wages. Pension funds invest in riskier assets to achieve higher returns to support generous benefits and low contributions, but their investments often underperform. As a result, 430 or so multi-employer plans are now at risk of failing.

Author(s): Editorial Board

Publication Date: 18 March 2021

Publication Site: Wall Street Journal

Cuomo and the Covid Death Count

Mary Pat Campbell

Link: https://www.wsj.com/articles/cuomo-and-the-covid-death-count-11615590254

Excerpt:

Far from the cable studios, happily, researchers are seeking a more serious understanding of the pandemic’s toll. One study finds that those who died of Covid-19 lost on average 9.3 years of life, equal to the remaining life expectancy of a 78-year-old.

The highest-cost deaths, it follows, were likely those not directly caused by the illness. In separate studies, U.S. government and Virginia Commonwealth University researchers say a third of “excess deaths” might fall into this category — delayed medical care, unemployment stress, substance abuse, suicide, depression, etc. One study looked at the effect of unemployment and predicted 30,231 additional deaths over a 12-month period.

What does this mean? Suppose half of these were unrecognized Covid deaths. Even so, the remaining half — accounting for 15% of excess deaths — would have to be no younger than 53 on average for fully one-third of the years lost in the pandemic to have been lost by somebody who didn’t die of Covid.

Author(s): Holman W. Jenkins, Jr.

Publication Date: 12 March 2021

Publication Site: Wall Street Journal

China’s Youthful, Debt-Fueled Spending Spree Sparks a Reckoning

Mary Pat Campbell

Link: https://www.wsj.com/articles/chinas-youthful-debt-fueled-spending-spree-sparks-a-reckoning-11615631400

Excerpt:

Chinese regulators attempting to rein in Ant Group Co. and a swelling online-lending industry have a target in their sights: the excessive, debt-fueled lifestyles of the country’s youth.

Leading up to last year’s coronavirus pandemic, a new generation of tech-savvy and free-spending citizens helped power rising consumption, a growing driver of China’s economy.

Many used short-term loans to pay for expenses such as prestige cosmetics, electronic gadgets and costly restaurant meals. They found credit easy to obtain, thanks to Ant and other Chinese financial-technology companies that provided unsecured loans to millions of people who didn’t have bank-issued credit cards. In 2019, online loans accounted for as much as half of short-term consumer loans in China, according to estimates from Fitch Ratings.

Now, new financial regulations are forcing lenders to reassess their business strategies and have sparked a reckoning about the American-style borrowing and spending habits of China’s younger population. Starting in 2022, Ant and its peers will have to fund at least 30% of the loans they make together with banks, a rule designed to make online lenders bear more risk.

Author(s): Xie Yu

Publication Date: 13 March 2021

Publication Site: Wall Street Journal

Drop in South Africa Cases Fuels Queries — Steep decline remains a mystery in country that hasn’t ramped up vaccines or lockdowns

Mary Pat Campbell

Link: https://www.wsj.com/articles/south-africas-drop-in-covid-19-cases-adds-to-questions-about-waves-of-infections-11615734003

Excerpt:

Since mid-January, confirmed Covid-19 infections in South Africa have fallen from a record of nearly 22,000 a day to around 1,000, without a large-scale vaccination campaign or stringent lockdown. Fewer than 5% of Covid-19 tests are finding traces of the virus, a sign health agencies are missing fewer cases. The government has lifted most remaining restrictions for the country of 60 million people.

The cause of this steep decline in cases remains somewhat of a mystery. As in other countries that have at some point experienced surprising drops in Covid-19 cases — such as India, Pakistan and some parts of Brazil — epidemiologists and virologists are piecing together different explanations for why the outbreak in South Africa isn’t following patterns set elsewhere.

Those include important population groups reaching sufficient levels of immunity to slow transmission, people sticking more closely to social-distancing rules, such as wearing masks and voluntarily reducing contacts, when deaths were mounting before the decline.

Author(s): Gabriele Steinhauser

Publication Date: 14 March 2021

Publication Site: Wall Street Journal

States Are Finding More Unreported Covid-19 Deaths

Mary Pat Campbell

Link: https://www.wsj.com/articles/states-are-finding-more-unreported-covid-19-deaths-11615730402

Excerpt:

Ohio in February announced more than 4,000 additional deaths while reconciling its data, and Indiana added about 1,500. Smaller revisions have also recently come from Virginia, Minnesota and Rhode Island. On Thursday, authorities in West Virginia said medical providers hadn’t properly reported 168 deaths to the state’s public-health department.

“Nobody likes surprises, and nobody likes data that’s wrong because that’s what drives decisions,” said Ayne Amjad, West Virginia’s state health officer.

Like many countries, the U.S. is trying to track pandemic events nearly as they happen, and a big part of this effort has required speeding up how deaths are reported.

Author(s): Jon Kamp

Publication Date: 14 March 2015

Publication Site: Wall Street Journal

Behind Greensill’s Collapse: Detour Into Risky Loans

Mary Pat Campbell

Link: https://www.wsj.com/articles/behind-greensills-collapse-detour-into-risky-loans-11615611953

Excerpt:

Behind Mr. Greensill’s failure: The business went beyond the scope of what it initially set out to do. Many of Greensill’s loans went to a small circle of borrowers close to Mr. Greensill, as well as acquaintances and his biggest outside backers.

A Wall Street Journal review of internal Greensill records, including board minutes and emails, along with interviews with more than a dozen people familiar with Greensill’s business, reveals how the company obscured its riskier loans behind a safe but barely profitable supply-chain finance business.

Greensill took on bigger, riskier long-term loans. In some cases, the loans were given other names before they were sold on to investors in the Credit Suisse funds, obscuring who the borrower was or the type of loan, the Journal found.

Author(s): Duncan Mavin, Julie Steinberg

Publication Date: 13 March 2021

Publication Site: Wall Street Journal

Europe Confronts a Covid-19 Rebound as Vaccine Hopes Recede

Mary Pat Campbell

Link: https://www.wsj.com/articles/europe-confronts-a-covid-19-rebound-as-vaccine-hopes-recede-11615558520

Graphic:

Excerpt:

The European Union’s fight against Covid-19 is stuck in midwinter, even as spring and vaccinations spur hope of improvement in the U.S. and U.K.

Despite months of restrictions on daily life, new Covid-19 cases have been rising again in the EU since mid-February, as more-virulent virus strains outpace vaccinations.

By contrast, virus infections and deaths have been falling rapidly in the U.S. and U.K. since January as inoculations take off among the elderly and other vulnerable groups. U.S. infections and deaths, which were higher on a per capita basis for most of 2020, have fallen below the EU’s.

Author(s): Marcus Walker in Rome, Bertrand Benoit in Berlin and Stacy Meichtry in Paris

Publication Date: 12 March 2021

Publication Site: Wall Street Journal