Roundtable Weekly -- March 13, 2020
POTUS Declares National Emergency to Combat Coronavirus; House of Representatives Readies COVID-19 Response Legislation that Puts “Families First”
President Trump declared a national emergency this afternoon to unleash billions of disaster reserve funds to combat the coronavirus, as House Speaker Nancy Pelosi (D-CA) announced this evening that she “clinched a deal” with Treasury Secretary Steven Mnuchin on legislation to assist families and businesses immediately impacted by the pandemic. (POLITICO, March 13)
- “To unleash the full power of the federal government today I am declaring a national emergency,” President Trump announced today in the Rose Garden. “Through shared sacrifice and national determination we will overcome the virus,” he added. Stocks rallied throughout the day today and shot-up after the announcement, regaining some of this week’s historic losses. (CNBC, March 13)
- The declaration authorizes the Federal Emergency Management Agency (FEMA) to utilize over $42 billion available in the Disaster Relief Fund, to pump money into the economy for COVID-19 response. States and cities can use the funds for emergency protective measures such as widespread coronavirus testing, diagnosis, treatment and stabilization. The money can also be used to purchase durable medical equipment, set-up temporary treatment tents, deploy portable and mobile care facilities, store a 30-day supply or prescriptions for acute conditions, and disseminate public health information.
- Senate Minority Leader Charles E. Schumer (D-NY) led other Senate Democrats in a March 11 letter urging President Trump invoke the Stafford Act to declare a national emergency.
- Trump also announced a public-private partnership to mobilize COVID-19 testing. “We want to make sure that people who need a test can get one safely, quickly, and conveniently,” he added. The aim of the effort is to supply up to 1.4 million tests next week and five million in a month, with drive-through tests available in critical locations.
- Google will aim to build an online screening website for COVID-19 testing. Debbie Birx, the White House Coronavirus Response Coordinator, said during the news conference that website users will have to log in, fill out a screening and risk factor questionnaire, and then be directed to a “drive through” testing facility. The goal is to provide test results within 36 hours. (AP and Techcrunch, March 13)
- This is a “pro-active, leaning-forward, aggressive” response to stay ahead of the pandemic, said Dr. Anthony Fauci, the top infectious disease expert at the National Institutes of Health, at the Rose Garden event. The emergency declaration removes constraints on government, public health experts, and medical professionals “to do everything they possibly can” to contain and mitigate the virus’s spread.
- On Capitol Hill, the House of Representatives today is expected to pass the Families First Coronavirus Response Act (H.R. 6201), following reports of agreement reached by House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin. (POLITICO, March 13)
- The Senate cancelled its planned recess next week to consider a relief package. "I am glad talks are ongoing between the Administration and Speaker Pelosi,” said Senate Majority Leader Mitch McConnell (R-KY). “I hope Congress can pass bipartisan legislation to continue combating the coronavirus and keep our economy strong." (Roll Call, March 12) As of this writing, Republicans are reportedly waiting for a “high sign” from President Trump for GOP support of the Families First Coronavirus Response Act. (POLITICO Playbook PM, March 13)
- Pelosi remarked that H.R. 6201 is “focused directly on providing support for American families.” She added, “the three most important parts of this bill are testing, testing, testing.” Specifically, the Families First Coronavirus Response Act includes:
- required medical insurance coverage for COVID-19 testing for all Americans;
- extension of unemployment insurance benefits;
- expansion of paid leave for full-time and hourly employees affected by the virus, including those staying home to care for family members;
- shoring up SNAP and other programs that provide food security for school children, low-income families, and the elderly;
- additional funds for Medicaid; and
- a credit to reimburse companies for mandatory paid sick leave
- Meanwhile, a framework suggested by Senate Democrats, and a plan of executive actions President Trump announced Wednesday in his oval office address, show that leadership of both parties want a quick economic response from Washington. (Brownstein Hyatt Farber Schreck, “Coronavirus Economic Update,” March 13)
- Lawmakers are focused on swift resolution of matters that have the highest chances of immediate bipartisan consensus. To that end, Congress is unlikely to address the European travel ban on foreign nationals announced by President Trump on Wednesday, which takes effect tonight at midnight. (New York Times, March 12). Likewise, a payroll tax holiday opposed by Democrats (CNBC, March 11), and long-term paid sick leave unrelated to the virus and opposed by business groups (The Hill, March 12), are off-the-table.
- Business groups most directly impacted by the COVID-19 fallout have recommended their own tailored measures of government response to assist their industries. For example, the U.S. Travel Association, the American Hotel & Lodging Association, and the American Resort Development Association joined 150 travel-related organizations urging “calm, rational, and fact-based decisions” as policy makers and public health officials respond to COVID-19. (March 10 Travel Industry Statement).
- Also, the American Society of Association Executives (ASAE) urged Congress to consider targeted assistance for tax-exempt organizations and trade groups suffering from event cancellations and reduced meeting attendance as a result of the pandemic. (ASAE Letter, March 6)
- Real Estate Roundtable President and CEO Jeffrey DeBoer notified all Roundtable members on March 9 that the organization’s March 31 Spring Business Meeting was canceled “in light of health and safety issues surrounding COVID-19.”
- The imminent economic relief package anticipated from the House today follows the $8.3 billion measure Congress sent to President Trump’s desk last week. That legislation focused on public health measures to bolster vaccine development and research, increased equipment stockpiles, and support for state and local health responses to the virus. (Roundtable Weekly, March 6).
In the coming weeks, further policies from Congress and the Administration are expected to address longer-term stimulus of the U.S. economy through measures such as infrastructure investment, workforce development, increased lending for small businesses, and stabilizing the capital markets. The Roundtable will continue to work with our colleague partner associations to unify the real estate industry’s message as policy makers develop and implement measures to mitigate the COVID-19 pandemic.
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Central Banks Around the World Move to Combat Economic Fallout of Coronavirus
Central banks around the world took dramatic action this week to mitigate the economic fallout of the coronavirus pandemic.
- The Federal Reserve Bank of New York announced a bold move yesterday to pump a series of cash injections totaling more than $1.5 trillion of temporary market liquidity into markets and begin buying longer-term bonds.
- This week’s actions are designed to mitigate investor fears as the Dow Jones industrial average plummeted more than 2,300 points yesterday – a 10 percent drop that is the worst one-day decline since the 1987 crash. (Wall Street Journal and Federal Reserve Bank of New York, March 12)
- “These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in its March 12 announcement. The short-term funding move was directed by Fed Chairman Jerome Powell, in consultation with the rate-setting Federal Open Market Committee. (Los Angeles Times, March 12)
- The Fed's substantial intervention opens the door to a resumption of bond-buying stimulus known as quantitative easing used during the financial crisis of 2008.
- U.S. central bankers meet are scheduled to meet next week in Washington, when they could move to slash rates again after implementing an emergency half-percentage-point cut last week.
- Economists widely expect another quarter-point rate cut at the Fed’s March 18 meeting, if not more, from the current range of 1% to 1.25% (Roundtable Weekly, March 6 and BGov, March 12)
European Central Bank and Individual Nations Respond
After the US Federal Reserve and Bank of England announced aggressive rate cuts in recent days to stimulate their respective economies, the European Central Bank (ECB) left its key interest rate unchanged at minus 0.5%.
- Instead, ECB President Christine Lagarde said the central bank would move forward with its $2.9 trillion (2.6 trillion euro) bond purchase program, while making bank loans available at rates as low as minus 0.75%. (ECB press release, March 12)
- In her March 12 statement, Lagarde noted the ECU will “add a temporary envelope of additional net asset purchases of 120 billion euros ($135.28 billion) until the end of the year, ensuring a strong contribution from the private sector purchase programmes.” She also stated, “We welcome the commitment of the euro area governments and the European Institutions to act now, strongly, and together in response to the repercussions of the further spread of the coronavirus.” (Video of ECU press conference, March 12)
- After Lagarde’s announcement, the spread between German and Italian government bonds increased to more than 2.5 percent as Italy battles a widespread outbreak.
- Today, the ECB’s chief economist Phillip Lane sought to further reassure European markets. In a blog post, Lane wrote, “We clearly stand ready to do more and adjust all of our instruments, if needed to ensure that the elevated spreads that we see in response to the acceleration of the spreading of the coronavirus do not undermine transmission [of monetary policy].”
- British regulators temporarily banned short selling on Italian and Spanish after regulators in Italy and Spain did the same to stem the market slide. (Financial Conduct Authority and Reuters, March 13)
- Germany’s state development bank KfW announced today it will provide a massive expansion of loans to companies in need and defer billions of euros in tax payments. Olaf Scholz, the German finance minister, told reporters in Berlin, “This is the bazooka, and we will use it to do whatever it takes.” He added there was “no upper limit on the amount of loans KfW can issue.” (rfi and Financial Times, March 13)
- German Chancellor Angela Merkel stated yesterday, “We are in a situation that is unusual in every respect and I would say more unusual than at the time of the banking crisis because we are dealing with a health problem, a health challenge for which scientists and medicine does not yet have an answer,” Merkel said. (Reuters, March 12)
- Central banks in Australia, Japan, South Korea, Indonesia, Norway and Sweden also announced stimulus measures today to relieve the strain on their banking systems.
- In China, The People’s Bank on Friday said it will release nearly $80 billion in liquidity into its financial system to assist loans to small businesses and low-wage individuals as the country continues to contend with the coronavirus. (Wall Street Journal, March 13)
- The US Federal Reserve’s first emergency move on March 3 to contain the coronavirus economic fallout was to cut interest rates half a point. The move came shortly finance ministers and central bankers from the Group of 7, which includes Britain, Canada, France, Germany, Italy and Japan, held a conference call.
On March 5, Federal Reserve Bank of New York President John C. Williams confirmed that the international community of central bankers are working together to stem the economic shock of the coronavirus. “… policy actions by central banks are clear indications of the close alignment at the international level,” Mr. Williams said. (NYTimes, March 5)
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Fannie & Freddie Get Updated Duty-To-Serve Criteria for Manufactured, Affordable and Rural Housing
Strict criteria for how the Government Sponsored Entities (GSEs) Fannie Mae and Freddie Mac must facilitate a secondary mortgage market for very low-, low-, and moderate-income families in manufactured, affordable and rural housing were released on March 11 by the Federal Housing Finance Agency (FHFA). (Updated FHFA Guidance)
- FHFA oversees the GSEs, which remain in government conservatorship since the financial crisis of 2008. The Housing and Economic Recovery Act of 2008 established a duty for Fannie Mae and Freddie Mac (the Enterprises) to serve the three specified underserved markets. (FHFA Duty-To-Serve Program)
- Under the Duty-to-Serve regulation, each Enterprise must prepare a three-year plan showing how it will increase the liquidity of mortgage investments and improve the distribution of investment capital available for mortgage financing for the three markets. The new evaluation criteria, which take effect 2021-2023 incorporate several changes:
- Revised ratings framework – The revisions establish four ratings to describe Enterprise performance;
- Higher expectations for impactful plans – The revisions require a minimum concept score of 30 for each objective, rather than the previous requirement that the concept scores of all objectives average a 30;
- Increased threshold for determining compliance – The revisions increase the threshold for compliance scores; and
- Technical changes – The updated Guidance also includes technical changes to reflect current practices that have streamlined processes and improved program administration.
- The evaluation guidance sets forth the process and standards by which FHFA will evaluate, and report annually to Congress on the Enterprises’ performance and achievements under their plans. The updated guidance will ensure that the Enterprises Duty-To-Serve programs have a measurable and significant impact in underserved communities.
- FHFA’s Duty-to-Serve Data and Tools webpage includes datasets on areas defined as rural, Indian tribes, high opportunity, and concentrated poverty. FHFA Manager Jim Gray gives an overview of the Duty-to-Serve program in a video on the FHFA website.
Federal Housing Finance Agency Director Mark Calabria addressed his agency’s oversight of Fannie and Freddie – who own or guarantee $5.6 trillion in single and multifamily mortgages – during The Roundtable’s 2020 State of the Industry Meeting in January. (Roundtable Weekly, Jan. 31)
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