May 19, 2024

You are here: Home / 2020 / Archives for May 2020

Archives for May 2020

Coronavirus Aid: Millions Can See Its End, and They’re Scared

May 29, 2020 by Leave a Comment

Research routinely finds that unemployment insurance is one of the most effective parts of the safety net, both in cushioning the effects of job loss on families and in lifting the economy. In economists’ parlance, the program is “well targeted” — it goes to people who need the money and who will spend it. Various studies have found that in the last recession, the system helped prevent 1.4 million foreclosures, saved two million jobs and kept five million people out of poverty.

The impact could be greater in this crisis because the program is reaching more people and giving them more money. The government paid $48 billion in benefits in April and has reached $86 billion in May, according to the Treasury Department.

Ms. Markowska, of Jefferies, expects government data on Friday to show that personal income actually increased in April thanks to the unemployment benefits, stimulus payments and other programs. That money has flowed through the economy in rent payments, grocery store trips and other spending — not only helping the recipients but also preventing a steeper downturn.

  • Frequently Asked Questions and Advice

    Updated June 1, 2020

    • How do we start exercising again without hurting ourselves after months of lockdown?

      Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.

    • My state is reopening. Is it safe to go out?

      States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • How many people have lost their jobs due to coronavirus in the U.S.?

      More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • How can I help?

      Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.

“These are paycheck-to-paycheck folks, who are going to spend this money,” said Elizabeth Ananat, a Barnard College economist who has been studying the effects of the pandemic on low-wage workers. “They’re going to spend this money, keeping us from having a rent-payment crisis and from having a malnourished-children crisis. That strikes me as pretty good for the economy over all.”

When Julie Glasser was summoned to an online department meeting in late March, she thought she might learn how her company, a vacation-rental start-up in Portland, Ore., was scaling back acquisitions or adapting to the growing pandemic. It took until the end of the meeting for her boss to deliver the real news: Everyone on the call was laid off, immediately.

A single mother of two, Ms. Glasser applied for unemployment benefits the same day. She enrolled in health insurance through the Affordable Care Act and signed up for food stamps. Still, there was no way she could cover her costs.

Article source: https://www.nytimes.com/2020/05/28/business/economy/coronavirus-stimulus-unemployment.html

Filed Under: Economy News

Rolls-Royce junk? Legendary British firm’s credit rating cut below investment grade

May 29, 2020 by Leave a Comment

The British company’s rating has been lowered to “BB” from “BBB”, (below investment grade) in response to Rolls-Royce’s worsening near-term prospects as whole fleets of planes remain grounded. 

“Actions to contain the pandemic, including government-imposed social-distancing measures, travel restrictions, and stay-at-home orders, have suddenly and sharply reduced global demand for air travel,” said SP. 

READ MORE: ‘Tsunami of job losses’: Airlines going bust firing HUNDREDS OF THOUSANDS of employees as pandemic crushes global travel

Rolls-Royce said it had taken swift action to boost its liquidity and cut costs to deal with the short-term impact of the health crisis. “While it is disappointing to lose our investment grade rating with SP, none of our borrowing facilities contain covenants or credit rating triggers that demand early repayment nor do any of our contracts with airlines,” the company said.

Also on rt.com Rolls-Royce to cut 9,000 jobs, mostly in the UK, in order to survive the coronavirus pandemic

Last week, the aerospace giant which supplies engines for large commercial aircraft such as the Boeing 787 and the Airbus A350 announced it will cut at least 9,000 jobs from its workforce due to the pandemic. The cut represents a layoff of over 17 percent of the company’s 52,000 workforce.

Rolls-Royce’s stock plunged ten percent, following the news of the credit rating’s cut.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/490127-rolls-royce-garbage-sp/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Russian economy shrinks 12 percent in April as coronavirus restrictions paralyzes business activities

May 29, 2020 by Leave a Comment

The steep decline eliminated the modest economic growth seen during the first three months of 2020, when the Russian economy expanded by 1.6 percent compared to the same period last year, according to the Ministry of Economic Development.

Also on rt.com Most Russian companies face huge losses due to virus lockdown have difficulty getting government aid

Given the disappointing April results, the ministry now estimates that Russia’s GDP shrank by 1.9 percent over the first four months of this year.

The ministry explained that the negative growth came as non-essential businesses remained closed for the whole month and negative economic conditions prevailed worldwide.

Russia introduced coronavirus-related restrictions in late March and has prolonged the measures several times since then in order to battle the spread of infection. The paid non-working period ended on May 12.

Also on rt.com Covid-19 lockdown in Russia has bicycle sales soaring

Sectors of the economy focused on consumer demand suffered most. For example, consumer services fell by more than a third due to restrictions on leisure, culture and sporting activities, while retail sales dropped by a nearly a quarter. Although stores and food retailers remained open the whole time, their turnover also fell by 9.3 percent.

According to an earlier forecast, the second quarter could be the most painful for the Russian economy, as it is expected to shrink by more than nine percent. The nation’s annual GDP contraction is set to stand at five percent, while the country expects to return to pre-coronavirus levels no sooner than the first half of 2022.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/490090-russian-economy-contracts-april/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Around 2 BILLION people may lose their jobs in the next couple of months due to pandemic

May 29, 2020 by Leave a Comment

That’s according to a study by the Boston Consulting Group (BCG), seen by RIA Novosti.

“It’s hard to overestimate the radical changes in the global workforce due to the crisis caused by the outbreak of COVID-19,” said the report, citing estimates by the International Labor Organization that global labor income losses will reach $3.4 trillion this year.

In the next two to three months, one out of six people in the world will lose their jobs, with the unemployment rate to exceed 17 percent, said the authors of the research.

Also on rt.com Global human development to decline for first time in 30 years due to Covid-19, warns UN

The impact of the crisis on the labor market will vary greatly across industries, with those most directly affected by quarantine measures to be hit the hardest. According to BCG analysis, more than 80 percent of all the layoffs in the world are likely to occur in the non-food retail sector, manufacturing, hotel and restaurant business, tourism and construction.

“We expect that the world’s unemployment rate will start returning to balance by the end of 2020. However, [the] pandemic has already launched the process of long-term structural changes – from flexible and remote work schemes to accelerated automation – and these changes will affect up to 1.5 billion jobs over the next decade.”

BCG estimates that by 2030, automation will put 12 percent of existing jobs at risk, and about 30 percent of jobs will require completely new skills.

The study also indicated that more than 10 percent of the global workforce is highly likely to work remotely on a permanent basis, while for office workers, the figure could reach 30 percent.

Also on rt.com US billionaire wealth skyrockets to over $3 TRILLION during pandemic

BCG said that in order to prevent the collapse of supply on the labor market, support measures should be provided by governments – from subsidizing salaries and expanding social protection to financial and tax exemptions and temporary redistribution of employment.

“In addition, now it is time to prepare for the after COVID-19 future, introducing in the next one to three years a common strategy for professional skills, in which retraining will be central,” said the BCG.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/490080-global-job-losses-pandemic/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Defying Trump, Twitter Doubles Down on Labeling Tweets

May 29, 2020 by Leave a Comment

The executive order is likely to face legal challenges.

Harold Feld, the senior vice president of Public Knowledge, a policy nonprofit group, said the order appeared to be intended to limit speech on social media that disagreed with the president. That was “literally the worst case scenario that the authors of the First Amendment were afraid of,” he said.

Twitter’s confrontation with Mr. Trump has also opened new fissures in Silicon Valley. Mr. Dorsey has doubled down on fact-checking tweets, but Mark Zuckerberg, Facebook’s chief executive, has distanced his social network from that effort.

“I just believe strongly that Facebook shouldn’t be the arbiter of truth of everything that people say online,” Mr. Zuckerberg said in a taped television interview that ran Thursday morning on Fox News.

His comments were at odds with some of his own company’s actions. In the past, Facebook, too, introduced fact-checking labels, using third-party services to review potentially false information. The approach has been scattershot and uneven, and critics have argued that third-party fact checkers have been unable to keep up with the billions of pieces of content on the social network.

Facebook has also said it would not allow posts that facilitated voter fraud or misinformation intended specifically to suppress voting.

“We’re talking about this as if it’s about fact-checking, but it’s not,” said Angelo Carusone, president of Media Matters for America, a left-leaning media watchdog. “It’s about whether platforms will facilitate fraud that undermines civic engagement.”

In a statement, Facebook said it opposed modifying Section 230 because that would “restrict more speech online, not less.”

Article source: https://www.nytimes.com/2020/05/28/technology/trump-twitter-fact-check.html

Filed Under: Media Business

Renault workers protest automaker’s plan to axe nearly 15,000 jobs

May 29, 2020 by Leave a Comment

The rally was held outside one of the company’s plants in Choisy-le-Roi on Friday. It comes just one day after people burned tires outside a Nissan facility in Barcelona to protest the plant’s closure. The two automakers are part of a longstanding alliance which also includes Mitsubishi Motors.

The Choisy-le-Roi plant, which reportedly employs about 250 people, turned out to be the only site Renault plans to close. The planned closure was announced at a Friday news conference by Jean-Dominique Senard, chairman of the board of directors of Renault. He said that Choisy-le-Roi activities will be transferred to other facilities in the Paris region. It was earlier feared that the carmaker was set to cease operations at several French plants.

Earlier in the day, the French carmaker presented a draft restructuring plan containing measures including job cuts and lowering production capacity by almost a fifth. The cutbacks are intended to save Renault €2 billion over three years as it struggles to cope with the major crisis facing the automotive industry. The measures will affect just under 10 percent of the company’s global workforce – nearly 4,600 posts will be reduced in France, with more than 10,000 additional positions eliminated elsewhere.

Also on rt.com Nissan workers in Barcelona stage massive protest over factory closure plans

“In a context of uncertainty and complexity, this project is vital to guarantee a solid and sustainable performance, with customer satisfaction as a priority,” Clotilde Delbos, Renault’s interim chief executive officer, said in a statement.

Apart from cutting jobs, the French group, which is 15-percent-owned by the government, said that it wants to reorganize activities at some of its plants, including those located in Flins and Guyancourt, while other plants will face “a strategic review.”

The major plan also suggests that Renault’s global production capacity will fall to 3.3 million vehicles in 2024, down from the current four million. Renault will also have to suspend its expansion plans in Morocco and Romania, and it will conduct a “study of the adaptation” of its production capacities in Russia.

Also on rt.com Sinking alliance? Coronavirus puts Renault’s existence in question threatens 20,000 jobs at Nissan

Renault has been seeking a €5 billion state-guaranteed loan to stay afloat during the coronavirus pandemic. While the French government recognizes that the company may “disappear” amid the crisis, it has not approved the deal so far. French Finance Minister Bruno Le Maire earlier said that the decision on the funds depends on the company’s commitments, including on electric vehicles, fair treatment of subcontractors and keeping hi-tech activities at home.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/490075-renault-layoffs-protest-france/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Most Russian companies face huge losses due to virus lockdown & have difficulty getting government aid

May 29, 2020 by Leave a Comment

This is nearly 67 percent of the total of over six million small and medium-sized enterprises, large companies and individual entrepreneurs working in the country, Russia’s business ombudsman, Boris Titov, said in his report on Thursday.

According to the survey cited in the document, more than half of firms called the situation they’re facing a “crisis” and “catastrophe,” while six in ten said their chances of survival are below fifty percent. 

Also on rt.com Russia has enough reserves to protect its people amid coronavirus pandemic – Putin

As many firms had to halt or at least downsize operations to comply with the measures to contain the outbreak, the Russian government laid out plans to offset the economic fallout from the pandemic, including financial support to businesses. However, not every crisis-hit company qualified for receiving the state aid, and around a third of those who did, finally could use the funds, according to Titov’s data.

“In other words, only about ten percent of companies in Russia have used [government] support,” the report said.

Also on rt.com Russian aviation industry gets government lifeline to stay afloat during pandemic-related flight restrictions

The ombudsman found out that firms mostly benefited from tax breaks, direct subsidies to pay salaries to their employees as well as a reduction in employee insurance payments, but some other measures laid out by the government proved to be less effective. For example, banks take too long to consider applications for cheap credit and around 30 percent of them are denied.

Russia is set to spend around 3.2 trillion rubles (around $45.2 billion) to support the economy during the Covid-19 crisis, according to the Ministry of Economic Development. Among other measures, the anti-crisis package includes over $11.8 billion support for small and medium-sized businesses, while around $8.4 billion is reserved to help industries most affected by the outbreak.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/489994-russian-companies-coronavirus-losses/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

‘Just Sitting in Limbo.’ For Many Professionals, Careers Are on Hold.

May 28, 2020 by Leave a Comment

Mr. Dudley, 48, of Fairfield, Conn., said he was grateful to have had a salary that allowed him to accumulate savings, and to have had a bit of a break, but acknowledged that unemployment was taking a psychological toll.

“Despite all efforts to create balance in my life, a lot of my self-worth was aligned with my professional status,” he said. “When that changes, it’s huge blow to your ego.”

The anxiety is not exclusive to those who are unemployed. Some people who are gainfully employed but were considering new roles are also unsure of how to proceed.

Kari Hayden Pendoley has been running the corporate foundation at a skin care company in San Francisco for seven years, but was thinking about changing careers. She started taking steps to build her public profile, and by March, she had some public speaking jobs lined up. Then all the events she was supposed to speak at got canceled.

“It was like the universe was saying, ‘Maybe that isn’t what you’re supposed to be doing,’” she said.

Ms. Pendoley, 40, is refocusing on her work at the skin care company, but has put plans for her next step on hold. “I’m just sitting in limbo,” she said.

Article source: https://www.nytimes.com/2020/05/27/business/coronavirus-careers-on-hold.html

Filed Under: Economy News

Should We Fear Post-Pandemic Inflation?

May 28, 2020 by Leave a Comment

Consider the path of oil prices in the years ahead that is implied by the futures market. On Wednesday, a barrel of West Texas Intermediate crude oil for delivery in July cost $32.22. The price for delivery next July is around $37 — implying a 15 percent surge in the price of oil over the coming year, which would tend to push overall consumer prices upward.

But that still suggests a depressed oil market — a level at which there are widespread bankruptcies among drillers and a price well below its level at the beginning of the year ($61). Even the most distant available futures contract, for February 2031, last traded at $56.65, implying expectations that a decade from now oil prices will still be below their pre-pandemic level.

You could apply the same logic not only to other commodities, but also to service industries that are heavily affected by the pandemic. Hotels, for example, are currently running far below capacity, with only 32 percent occupancy in the week ended May 16, according to the research firm STR. That has led them to slash prices, with average daily rates down 42 percent from a year earlier.

As public health concerns start to recede, it is plausible that hotels will start filling up and raising their prices in ways that create an apparent surge of inflation even while occupancy remains far below long-term norms. In other words, inflation would be not so much a reflection of an economy that had overheated as an artifact of the strange spring of 2020.

It is easy to see the outlines of a predicament for the Fed in the next few years. There could easily be inflation rates that are well above its 2 percent target while prices over all are still below pre-pandemic levels. That would suggest that all the problems deflation can create — in particular, making debts more onerous — would still be very much alive, even as the economic headlines pointed to spiking prices.

  • Frequently Asked Questions and Advice

    Updated June 1, 2020

    • How do we start exercising again without hurting ourselves after months of lockdown?

      Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.

    • My state is reopening. Is it safe to go out?

      States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • How many people have lost their jobs due to coronavirus in the U.S.?

      More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • How can I help?

      Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.

It certainly could be a political problem for the Fed, and cause pain for American workers, if prices for consumer goods rise while wages are stagnant or falling. But it would fundamentally reflect an economy that was starting to heal, not one that had overheated or in which policymakers had flooded the system with too much money.

And that speaks to an irony in the inflation hand-wringing that has emerged in the last few weeks. In many ways, an inflation surge in the early 2020s would be a signal that all the efforts being taken now (to flood the financial system with cash, to prop up smaller businesses and aid unemployed people) had worked — preventing a deflationary spiral akin to what happened in the Great Depression.

Article source: https://www.nytimes.com/2020/05/28/upshot/should-we-fear-inflation.html

Filed Under: Economy News

Bank Regulator’s Battle With Anti-Redlining Law Comes to an End

May 28, 2020 by Leave a Comment

The reinvestment act was established to prevent redlining — a practice in which banks refused to lend in certain neighborhoods based on race, ethnicity or income — and ensure that less affluent communities had fair access to financial services.

Compliance is crucial for banks: Mergers and other regulatory approvals are contingent on it. Currently, banks are required to carry out a certain amount of economic activity — either lending, philanthropy, or other banking business — in low-income areas that usually align with their physical locations. But the law has become somewhat outdated in the era of online banking, because banks can attract customers and do business in areas far afield of their branch networks.

Years before he was comptroller, Mr. Otting collided with the C.R.A. as chief executive of a California bank called OneWest — then owned by Treasury Secretary Steven Mnuchin. In 2014, OneWest and another bank, CIT, agreed to a $3.4 billion merger. Community groups nearly scuttled the deal by arguing that both banks had dismal records of complying with the reinvestment act.

One such group, the Greenlining Institute, alleged that Mr. Otting had created the illusion of grass-roots support for the merger using a form email that could be personalized and sent in with a few clicks. According to the Fed, 2,093 of the 2,177 comments ultimately submitted in favor of the merger were identical form letters.

Regulators approved the merger after both banks pledged to increase their activity in poor communities, but Mr. Otting has said the experience left him with a sour taste.

“I went through a very difficult period with some community groups that didn’t support our community, who came in at the bottom of the ninth inning, that tried to change the direction of our merger,” he said at a banking conference in April 2018, The Wall Street Journal reported. “And so I have very strong viewpoints.”

Even before Mr. Otting arrived in Washington in November 2017, Treasury officials were working on a plan to update the rules. A group of policymakers held more than 90 meetings with banks, community groups and trade organizations to determine the best way to reshape the requirements. They created a blueprint and presented it to Mr. Mnuchin, who signed off and sent it to the White House, and then to regulators.

Article source: https://www.nytimes.com/2020/05/28/business/economy/community-reinvestment-act-joseph-otting.html

Filed Under: Economy News
« Previous Page
Next Page »