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BPAA Federal Policy Update - June 12, 2020

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COVID-19 and Federal Update:                                       

  • SBA loosens loan forgiveness rules for PPP recipients Small business owners who tapped a government-backed aid program received a break on loan forgiveness this week. The Treasury Department and Small Business Administration loosened the rules of the government-backed Paycheck Protection Program to ensure the majority of small business owners who received aid are able to get at least part of the money forgiven. The new rule stipulates that even if loan recipients don't meet the 60 percent threshold, the federal government will still forgive part of the loan, so long as 60 percent of the amount forgiven went toward payroll.
    • The agencies' relaxation of the rule means that business owners won't be on the hook for the full amount borrowed if they choose to spend more than 40 percent on operating costs like rent and utilities. If the loans are not forgiven, a business will have five years at 1 percent interest to repay the loan, rather than the initial two years.
    • Another key aspect of the PPFA is that it gives businesses until Dec. 31 to rehire workers in order for their salaries to count toward forgiveness; previously, they had until June 30 -- a problem for some in states where businesses were slower to open their economies. The employee salary eligible for forgiveness is still capped at $100,000.
    • The law also eased rehiring requirements for businesses. For instance, if a small business owner is unable to rehire an individual who was an employee on or before Feb. 15, or is able to prove they were unable to hire a similarly qualified candidate, their loan may still be eligible for forgiveness.
    • In order to have their loan forgiven, small business owners must fill out an application, released in mid-May, and submit it to the bank or lender that approved their initial request. The application focuses on key criteria centered around what types of expenses are forgivable. It also includes a step-by-step calculator for determining forgiveness eligibility. The SBA said Monday that it will release a modified loan forgiveness applications. The second round of PPP funding began April 27 after the initial tranche of $349 billion evaporated in just 13 days. As of Wednesday, more than 4.5 million loans worth close to $511 billion had been distributed through the program. Congress allocated about $610 billion to the PPP, leaving roughly $100 billion left over in the fund. Read the full article at Fox Business

 

  • Bloomberg Government -  Mnuchin Wants Business Aid, Maybe More Checks More money is needed for struggling businesses and possibly for more stimulus checks, Treasury Secretary Steven Mnuchin told lawmakers, adding that they’ll need to consider how to address high unemployment rates. Mnuchin said he supports more fiscal intervention as the country slowly tries to reopen— even as the coronavirus continues to spread in many areas—though he was vague about potential solutions to the debate over unemployment benefits, a key focus for Democrats. Despite the broad focus and lack of details, Mnuchin’s testimony to the Senate Small Business Committee yesterday was a clear sign the Trump administration wants a bill to continue to bolster the economy, even as growth starts to rebound.
    • “I definitely think we are going to need another bipartisan legislation to put more money into the economy,” Mnuchin said.
    • Mnuchin said travel, leisure and restaurant businesses are a top priority. Another round of direct payments are “one of the things we want to consider,” he said. The latter option is fiscally aggressive enough that Sen. Mitt Romney (R-Utah) said he was “puzzled by the statement that you make that we’re going to need a stimulus to get the economy going again.”
    • House Democrats have proposed extending the current level of $600 extra per week in unemployment benefits through January 2021, a move Republicans oppose. Mnuchin said the program will need to be changed so a large number of people are no longer being paid more with unemployment benefits than they would be paid by a job. But he also acknowledged some will remain unemployed through no fault of their own.
    • “I think we’re going to need to fix unemployment,” Mnuchin said. “We knew there was issues with the enhanced unemployment where in certain cases we were paying people more not to work than work. I think we’ve seen from the recent numbers that didn’t have a big impact, because people want their jobs. But we will have a significant amount of unemployment and we’re going to need to look at doing something there.”

 

  • Tsunami Or Ripple? Forecasting The 2nd Wave Of Coronavirus As some states see declining COVID-19 cases and gradually reopen, infectious disease experts warn that a second wave of COVID-19 is inevitable, though the extent of the resurgence remains unclear. The "second wave" of a pandemic refers to a recurrent rise of infections following an overall decline in spread from the initial cluster of cases. Some fear that easing restrictions and public disregard for preventative measures as time passes may make the second wave of cases greater than the initial burst.
    • "I think people mistake the idea of society reopening with the idea that society is safer, but things are no safer today than they were weeks ago when we were in full lockdown," said Dr. Lawrence Kleinman, MD MPH of Rutgers University.
    • "It's really important for the public to understand that the recipe for their personal safety has not changed and is not changing even as society opens up. I worry that we are going to see that the more social interactions occur, the less care people will take, the more illness there will be, and the more people who will get very sick and die." Some experts worry if current efforts of distancing, masking, hand-washing and screening for symptoms aren't maintained, larger numbers cases are likely, which may require many cities to reimpose self-quarantining polices. Read more here

 

  • MBS Update: Fed Expands Federal Reserve Board Expands Main Street Lending Program The Federal Reserve Board on Monday announced that it is expanding its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act. The Board lowered the minimum loan amount, raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term to five years, providing borrowers with greater flexibility in repaying the loans. The Board expects the Main Street program to be open for lender registration soon and to be actively buying loans shortly afterwards.
    • "Supporting small and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery," Federal Reserve Chair Jerome H. Powell said. "I am confident the changes we are making will improve the ability of the Main Street Lending Program to support employment during this difficult period."
    • Small and medium-sized businesses are a vital part of the economy and employ tens of millions of people, and, because their needs vary widely, the Board has extensively sought feedback and revised the Main Street program accordingly.
    • The changes include:
      • Lowering the minimum loan size for certain loans to $250,000 from $500,000;
      • Increasing the maximum loan size for all facilities;
      • Increasing the term of each loan option to five years, from four years;
      • Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
      • Raising the Reserve Bank's participation to 95% for all loans.
    • Once they have successfully registered for the program, lenders are encouraged to begin making Main Street loans immediately. The Main Street Lending Program intends to purchase 95% of each eligible loan that is submitted to the program, provided that the required documentation is complete and the transactions are consistent with the relevant Main Street facility's requirements. The Main Street Lending Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.
    • Additional frequently asked questions and answers for lenders and borrowers are also available.

 

Labor Update

  • Politico Reports – Unemployment Claims Declining: The number of workers that applied for jobless benefits last week could top 2.5 million, even though every state has loosened stay-at-home orders and allowed businesses to reopen in recent weeks, your host Rebecca reports . That figure includes the 1.5 million claims filed in traditional state unemployment programs and the nearly 706,000 people who applied for benefits under the new temporary Pandemic Unemployment Assistance program created for people who are ineligible for traditional unemployment benefits.
    • The new requests for unemployment assistance come even as some Americans go back to work. The Department of Labor reported last week that 2.5 million jobs were unexpectedly added to the economy in May, despite widespread predictions that more than 7 million would be lost, and the unemployment rate fell to 13.3 percent in May, from a peak of 14.7 percent in April.
    • LONG RECOVERY AHEAD: The Federal Reserve on Wednesday projected that the U.S. economy will contract by 6.5 percent this year, and that the unemployment rate will only drop to 9.3 percent by the end of the year.
    • And despite the gradual decline in jobless claims, the weekly unemployment numbers remains at historically elevated levels. Thursday’s unemployment claims report represents data from last week but arrived just as the U.S. surpassed 2 million coronavirus cases , dampening recent optimism that the economy might quickly rebound.

 

 

Political Update

  • Trump Will Give Convention Speech in Jacksonville, Capping a Dispute Over Safety The move from Charlotte, N.C., where the Republican convention was originally planned, came after the president demanded to hold an event without social distancing rules. President Trump will deliver his Aug. 27 convention speech in Jacksonville, Fla., inside an arena that holds 15,000 people, after his demands for an event without social distancing rules led to a rift with Democratic leaders in North Carolina, where the Republican convention was originally planned.
    • Ronna McDaniel, the chairwoman of the Republican National Committee, confirmed on Thursday that the speech would take place at the VyStar Veterans Memorial Arena in Jacksonville, a diverse city where the mayor and the governor are both Republican allies of Mr. Trump’s. An R.N.C. official would not say what, if any, coronavirus safety precautions would be put in place.
    • Jacksonville, roughly a six-hour drive from Charlotte, was seen as the top contender as Republican officials considered a range of last-minute replacements. Former Vice President Joseph R. Biden Jr., the presumptive Democratic nominee, is leading Mr. Trump in Florida by about three percentage points, according to polls. And Mr. Trump, who changed his residence from New York to Florida last year, is uniquely focused on winning his adopted home state, which he won by a slim margin four years ago. Read the full article at The New York Times

 

  • Politico -- Biden clinches Democratic presidential nomination Former Vice President Joe Biden has clinched a majority of delegates to the Democratic convention, locking up the party’s presidential nomination, according to The Associated Press. The AP now projects that Biden has won 1,993 delegates to the national convention, just over the magic number of 1,991 required to secure the nomination on the first ballot. For Biden, it was a matter of when, not if, he would hit that number after Sen. Bernie Sanders (I-Vt.) ended his campaign in early April, following a string of dominating victories for the former vice president in primaries throughout March.
    • "It was an honor to compete alongside one of the most talented groups of candidates the Democratic party has ever fielded — and I am proud to say that we are going into this general election a united party," Biden said in a statement emailed to reporters shortly after the AP's declaration. "I am going to spend every day between now and November 3rd fighting to earn the votes of Americans all across this great country so that, together, we can win the battle for the soul of this nation, and make sure that as we rebuild our economy, everyone comes along."
    • Because all of his opponents had dropped out, Biden was already considered his party’s presumptive nominee. His campaign has already signed on to joint fundraising agreements with the Democratic National Committee — something the party was unwilling to do while Sanders was still in the race. Read more at Politico.

 

  • Economic Optimism Key to GOP Victories: A rosier-than-expected jobs report last week buoyed House Republican plans already in place to make the nation’s economy a critical part of their pitch to voters, even as it remains fragile and the recovery outlook hazy. “Our guys have a message to run on,” Rep. Tom Emmer (Minn.), chairman of the National Republican Congressional Committee, told Bloomberg Government. “The message is rebuilding the U.S. economy with the president, who is more than capable of doing it.”
    • That message is key to both Trump’s re-election prospects and those of House Republicans, whose hopes of winning back the majority two years after losing it are inextricably tied to the top of the ticket.
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