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    Banks Fight $4 Billion Debt Relief Plan for Black Farmers

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    Lenders are pressuring the Agriculture Department to give them more money, saying quick repayments will cut into profits.WASHINGTON — The Biden administration’s efforts to provide $4 billion in debt relief to minority farmers is encountering stiff resistance from banks, which are complaining that the government initiative to pay off the loans of borrowers who have faced decades of financial discrimination will cut into their profits and hurt investors. More

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    China’s Biggest ‘Bad Bank’ Tests Beijing’s Resolve on Financial Reform

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    Chinese regulators say they want to clean up the country’s financial system, but a state-owned conglomerate may ultimately get in the way.HONG KONG — BlackRock gave it money. So did Goldman Sachs.Foreign investors had good reason to trust Huarong, the sprawling Chinese financial conglomerate. Even as its executives showed a perilous appetite for risky borrowing and lending, the investors believed they could depend on Beijing to bail out the state-owned company if things ever got too dicey. That’s what China had always done. More

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    As Trillions Flow Out the Door, Stimulus Oversight Faces Challenges

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    A sprawling system meant to police trillions of dollars is showing signs of strain as watchdogs warn of waste, fraud and abuse.WASHINGTON — Lawmakers have unleashed more than $5 trillion in relief aid over the past year to help businesses and individuals through the pandemic downturn. But the scale of that effort is placing serious strain on a patchwork oversight network created to ferret out waste and fraud. More

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    Fear of Inflation Finds a Foothold in the Bond Market

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    There is little evidence for a big jump in prices, but some economists and bond investors fear President Biden’s policies could lead to inflation.The so-called bond vigilantes may be back, 30 years after they led a sell-off in Treasury securities over the prospect of higher government spending by a new Democratic administration.The Federal Reserve has downplayed the risk of inflation, and many experts discount the danger of a sustained rise in prices. But there is an intense debate underway on Wall Street about the prospects for higher inflation and rising interest rates.Yields on 10-year Treasury notes have risen sharply in recent weeks, a sign that traders are taking the inflation threat more seriously. If the trend continues, it will put bond investors on a collision course with the Biden administration, which recently won passage of a $1.9 trillion stimulus bill and wants to spend trillions more on infrastructure, education and other programs.The potential confrontation made some market veterans recall the 1990s, when yields on Treasury securities lurched higher as the Clinton administration considered plans to increase spending. As a result, officials soon turned to deficit reduction as a priority.Ed Yardeni, an independent economist, coined the term bond vigilante in the 1980s to describe investors who sell bonds amid signs that fiscal deficits are getting out of hand, especially if central bankers and others don’t act as a counterweight.As bond prices fall and yields rise, borrowing becomes more expensive, which can force lawmakers to spend less.“They seem to mount up and form a posse every time inflation is making a comeback,” Mr. Yardeni said. “Clearly, they’re back in the U.S. So while it’s fine for the Fed to argue inflation will be transitory, the bond vigilantes won’t believe it till they see it.”Yields on the 10-year Treasury note hit 1.75 percent last week before falling back this week, a sharp rise from less than 1 percent at the start of the year.Not all the sellers necessarily oppose more government spending — some are simply acting on a belief that yields will move higher as economic activity picks up, or jumping on a popular trade. But the effect is the same, pushing yields higher as prices for bonds fall.Yields remain incredibly low by historical standards and even recent trading. Two years ago, the 10-year Treasury paid 2.5 percent — many bond investors would happily welcome a return to those yields given that a government note bought today pays a relative pittance in interest. And during the Clinton administration, yields on 10-year Treasurys rose to 8 percent, from 5.2 percent between October 1993 and November 1994.Still, Mr. Yardeni believes the bond market is saying something policymakers today ought to pay attention to.“The ultimate goal of the bond vigilante is to be heard, and they are blowing the whistle,” he said. “It could come back to bite Biden’s plans.”Yet evidence of inflation remains elusive. Consumer prices, excluding the volatile food and energy sectors, have been tame, as have wages. And even before the pandemic, unemployment plumbed lows not seen in decades without stoking inflation.Indeed, the bond vigilantes remain outliers. Even many economists at financial firms who expect faster growth as a result of the stimulus package are not ready to predict inflation’s return.“The inflation dynamic is not the same as it was in the past,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago. “Globalization, technology and e-commerce all make it harder for firms to increase prices.”What’s more, with more than nine million jobs lost in the past year and an unemployment rate of 6.2 percent, it would seem there is plenty of slack in the economy.That’s how Alan S. Blinder, a Princeton economist who was an economic adviser to President Bill Clinton and is a former top Fed official, sees it. Even if inflation goes up slightly, Mr. Blinder believes the Fed’s target for inflation, set at 2 percent, is appropriate.“Bond traders are an excitable lot, and they go to extremes,” he said. “If they are true to form, they will overreact.”Indeed, there have been rumors of the bond vigilantes’ return before, like in 2009 as the economy began to creep out of the deep hole of the last recession and rates inched higher. But in the ensuing decade, both yields and inflation remained muted. If anything, deflation was a greater concern than rising prices.It is not just bond traders who are concerned. Some of Mr. Blinder’s colleagues from the Clinton administration are warning that the conventional economic wisdom hasn’t fully accepted the possibility of higher rates or an uptick in prices..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.Robert E. Rubin, Mr. Clinton’s second Treasury secretary, echoed that concern but took pains to support the stimulus package.“There is a deep uncertainty,” Mr. Rubin said in an interview. “We needed this relief bill, and it served a lot of useful purposes. But we now have an enormous amount of stimulus, and the risks of inflation have increased materially.”Mr. Rubin acknowledged that predicting inflation was very difficult, but he said policymakers ought to be ready to fight it. “If inflationary pressures do take off, it’s important to get ahead of them quickly before they take on a life of their own.”The Federal Reserve has plenty of options. Not only is it buying up debt, which keeps yields down, but the Fed chair, Jerome H. Powell, has called for keeping monetary policy relatively loose for the foreseeable future. If higher prices do materialize, the Fed could halt asset purchases and raise rates sooner.“We’re committed to giving the economy the support that it needs to return as quickly as possible to a state of maximum employment and price stability,” Mr. Powell said at a news conference last week. That help will continue “for as long as it takes.”While most policymakers expect faster growth, falling unemployment and a rise in inflation to above 2 percent, they nonetheless expect short-term rates to stay near zero through 2023.But the Fed’s ability to control longer-term rates is more limited, said Steven Rattner, a veteran Wall Street banker and former New York Times reporter who served in the Obama administration.“At some point, if this economy takes off bigger than any one of us expect, the Fed will have to raise rates, but it’s not this year’s issue and probably not next year’s issue,” he said. “But we are in uncharted waters, and we are to some extent playing with fire.”The concerns about inflation expressed by Mr. Rattner, Mr. Rubin and others has at least a little to do with a generational angst, Mr. Rattner, 68, points out. They all vividly remember the soaring inflation of the 1970s and early 1980s that prompted the Fed to raise rates into the double digits under the leadership of Paul Volcker.The tightening brought inflation under control but caused a deep economic downturn.“People my age remember well the late 1970s and 1980s,” Mr. Rattner said. “I was there, I covered it for The Times, and lived through it. Younger people treat it like it was the Civil War.”Some younger economists, like Gregory Daco of Oxford Economics, who is 36, think these veterans of past inflation scares are indeed fighting old wars. Any rise in inflation above 2 percent is likely to be transitory, Mr. Daco said. Bond yields are up, but they are only returning to normal after the distortions caused by the pandemic.“If you have memories of high inflation and low growth in the 1970s, you may be more concerned with it popping up now,” he said. “But these are very different circumstances today.” More

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    Powell Downplays Inflation Risks as Yellen Foreshadows Future Spending

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    The nation’s two most powerful economic policy officials testified together for the first time, reviewing the state of the economic recovery.The economy is healing, the nation’s top two economic officials told lawmakers on Tuesday, but workers and businesses will need continued government support to rebound from the pandemic — and one of the officials, Jerome H. Powell, the Federal Reserve chair, batted back concerns that vigorous policy help could stoke inflation.Mr. Powell testified Tuesday before the House Financial Services committee alongside Janet L. Yellen, his predecessor at the Fed and now the Treasury secretary, in their first side-by-side appearance in their current roles. In hopes of fueling a rapid rebound in spending and hiring, the government has been spending aggressively and the Fed is keeping borrowing costs at rock bottom.That all-in approach has helped to avert the most dire potential economic outcomes, Mr. Powell told lawmakers, and it has not created grave inflation risks in the process.Asked whether President Biden’s recently passed $1.9 trillion spending package to combat the virus could cause prices to shoot higher — especially as the administration eyes plans to spend as much as $3 trillion more on an infrastructure package — Mr. Powell said the Fed did not fear a jump in inflation.“We do expect that inflation will move up over the course of this year,” he said, adding that some of the rise would be procedural as low readings from March and April of last year dropped out of the data, and part of it might be driven by a recovery in demand.“Our best view is that the effect on inflation will be neither particularly large nor persistent,” he said. And if it does pick up in a more concerning way, “we have the tools to deal with that,” he added.Ms. Yellen faced questions about President Biden’s economic relief legislation, including Treasury’s role in putting it into action, as well as the administration’s plans to propose another big spending package on infrastructure, which could be financed in part by tax increases.She was pressed by Republican lawmakers about how higher taxes would affect consumers and small businesses. “I think a package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy,” Ms. Yellen replied, “and changes in the tax structure will help to pay for those programs.”And she argued that tax increases would be necessary to back up the package.“We do need to raise revenues in a fair way to support the spending that this economy needs to be competitive and productive,” she said.Ms. Yellen’s Treasury is in charge of executing Mr. Biden’s $1.9 trillion economic relief legislation, and has been racing to distribute $1,400 checks to millions of Americans. That is posing a test for Ms. Yellen’s team, which is not yet fully in place.Ms. Yellen pushed hard for a robust fiscal relief package. In her opening statement, she described the rescue legislation as precisely what the economy needed.“With the passage of the rescue plan, I am confident that people will reach the other side of this pandemic with the foundations of their lives intact,” Ms. Yellen said. “And I believe they will be met there by a growing economy. In fact, I think we may see a return to full employment next year.”Mr. Powell declined to weigh in on the new infrastructure idea, but he did say that the government’s broad response to the coronavirus pandemic had helped to keep a worst-case economic disaster from playing out..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.“While the economic fallout has been real and widespread, the worst was avoided by swift and vigorous action,” he said.Mr. Powell and Ms. Yellen faced a volley of questions on how financial regulators should deal with climate change risks. Republicans have expressed concern that the Fed’s growing attention to climate-related issues in its role as a bank overseer could end up making it harder or more expensive for carbon-heavy companies to get loans.“It’s really very early days in trying to understand what all of this means,” Mr. Powell said, noting that many large banks and large industrial companies were already thinking about and beginning to disclose how climate might affect them over time. “We have a job,” he said, “which is to ensure that the institutions we regulate are resilient to the risks that they’re running.”Separately on Tuesday, Lael Brainard, an influential Fed governor, announced that the Fed was establishing a Financial Stability Climate Committee “to identify, assess and address” climate-related risks to financial stability.The new body will approach its task in a way that “considers the potential for complex interactions across the financial system,” Ms. Brainard said, rather than just the risks to individual companies.That’s the kind of oversight some lawmakers fear.“Linking hypothetical climate scenarios to risks to the entire financial system seems to me highly speculative,” Representative Andy Barr, a Republican from Kentucky, told Mr. Powell and Ms. Yellen during the Tuesday hearing. More

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    The Financial Crisis the World Forgot

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutGuidelines After VaccinationCredit…Jasper RietmanSkip to contentSkip to site indexThe Financial Crisis the World ForgotThe Federal Reserve crossed red lines to rescue markets in March 2020. Is there enough momentum to fix the weaknesses the episode exposed?Credit…Jasper RietmanSupported byContinue reading the main storyMarch 16, 2021, 5:00 a.m. ETBy the middle of March 2020 a sense of anxiety pervaded the Federal Reserve. The fast-unfolding coronavirus pandemic was rippling through global markets in dangerous ways.Trading in Treasurys — the government securities that are considered among the safest assets in the world, and the bedrock of the entire bond market — had become disjointed as panicked investors tried to sell everything they owned to raise cash. Buyers were scarce. The Treasury market had never broken down so badly, even in the depths of the 2008 financial crisis.The Fed called an emergency meeting on March 15, a Sunday. Lorie Logan, who oversees the Federal Reserve Bank of New York’s asset portfolio, summarized the brewing crisis. She and her colleagues dialed into a conference from the fortresslike New York Fed headquarters, unable to travel to Washington given the meeting’s impromptu nature and the spreading virus. Regional bank presidents assembled across America stared back from the monitor. Washington-based governors were arrayed in a socially distanced ring around the Fed Board’s mahogany table.Ms. Logan delivered a blunt assessment: While the Fed had been buying government-backed bonds the week before to soothe the volatile Treasury market, market contacts said it hadn’t been enough. To fix things, the Fed might need to buy much more. And fast.Fed officials are an argumentative bunch, and they fiercely debated the other issue before them that day, whether to cut interest rates to near-zero.But, in a testament to the gravity of the breakdown in the government bond market, there was no dissent about whether the central bank needed to stem what was happening by stepping in as a buyer. That afternoon, the Fed announced an enormous purchase program, promising to make $500 billion in government bond purchases and to buy $200 billion in mortgage-backed debt.It wasn’t the central bank’s first effort to stop the unfolding disaster, nor would it be the last. But it was a clear signal that the 2020 meltdown echoed the 2008 crisis in seriousness and complexity. Where the housing crisis and ensuing crash took years to unfold, the coronavirus panic had struck in weeks.As March wore on, each hour incubating a new calamity, policymakers were forced to cross boundaries, break precedents and make new uses of the U.S. government’s vast powers to save domestic markets, keep cash flowing abroad and prevent a full-blown financial crisis from compounding a public health tragedy.The rescue worked, so it is easy to forget the peril America’s investors and businesses faced a year ago. But the systemwide weaknesses that were exposed last March remain, and are now under the microscope of Washington policymakers.How It StartedThe Fed began to roll out measure after measure in a bid to soothe markets.Credit…John Taggart for The New York TimesFinancial markets began to wobble on Feb. 21, 2020, when Italian authorities announced localized lockdowns.At first, the sell-off in risky investments was normal — a rational “flight to safety” while the global economic outlook was rapidly darkening. Stocks plummeted, demand for many corporate bonds disappeared, and people poured into super-secure investments, like U.S. Treasury bonds.On March 3, as market jitters intensified, the Fed cut interest rates to about 1 percent — its first emergency move since the 2008 financial crisis. Some analysts chided the Fed for overreacting, and others asked an obvious question: What could the Fed realistically do in the face of a public health threat?“We do recognize that a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain,” Chair Jerome H. Powell said at a news conference, explaining that the Fed was doing what it could to keep credit cheap and available. But the health disaster was quickly metastasizing into a market crisis.Lockdowns in Italy deepened during the second week of March, and oil prices plummeted as a price war raged, sending tremors across stock, currency and commodity markets. Then, something weird started to happen: Instead of snapping up Treasury bonds, arguably the world’s safest investment, investors began trying to sell them.The yield on 10-year Treasury debt — which usually drops when investors seek safe harbor — started to rise on March 10, suggesting investors didn’t want safe assets. They wanted cold, hard cash, and they were trying to sell anything and everything to get it.How It WorsenedNearly every corner of the financial markets began breaking down, including the market for normally steadfast Treasury securities.Credit…Ashley Gilbertson for The New York TimesReligion works through churches. Democracy through congresses and parliaments. Capitalism is an idea made real through a series of relationships between debtors and creditors, risk and reward. And by last March 11, those equations were no longer adding up.The Coronavirus Outbreak More

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    Investors Are Focused on Treasurys. Here’s What the Fed Could Do.

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyInvestors Are Focused on Treasurys. Here’s What the Fed Could Do.Central bankers have said they aren’t worried about a pop in longer-term bond yields. If they do become concerned, they have some options.The Federal Reserve chair, Jerome H. Powell, may be asked about higher bond yields during a scheduled event on Thursday.Credit…Al Drago for The New York TimesMarch 4, 2021, 5:00 a.m. ETLonger-term interest rates have jumped in recent weeks, a move that has been broadly interpreted as a sign that investors are betting higher growth and slightly faster inflation may be right around the corner.Federal Reserve officials have mostly brushed off the increase to date, saying it is a signal of economic optimism. But many investors have wondered whether the central bank might feel a need to intervene. The adjustment has at times roiled stock markets, which tend to sink when interest rates increase, and it could weigh on consumer spending and growth if it is sustained and borrowing becomes more expensive.Jerome H. Powell, the Fed’s chair, is set to speak at noon on Thursday at a Wall Street Journal event, where he may be asked to address the recent bond activity.Many on or adjacent to Wall Street have begun to put forward a two-part question: They are curious whether the Fed will step in to keep rates low and, if so, how. Below, we run through a few of the most likely options, along with plain-English explainers of what they mean and how they work.First, a little background.The yield on a 10-year Treasury note, a reference point for the cost of many types of borrowing, has popped since the start of the year. After dropping as low as about 0.5 percent in 2020, the yield jumped to 1.6 percent during the day last Thursday. It hovered around 1.5 percent by Wednesday.That is still very low by historical standards: The 10-year yield was above 3 percent as recently as 2018, and in the 1980s it was double digits. But a rapid adjustment in longer-term rates around the world has drawn attention. Global officials like Christine Lagarde, head of the European Central Bank, have voiced concern about the increases.U.S. officials have generally painted the adjustment as a sign that investors are growing more optimistic about growth as millions of Americans begin receiving Covid-19 vaccines and the government supports the economy with spending. And while markets appear to be penciling in slightly higher inflation, Fed officials had been hoping to push price expectations — which had been slipping — a little bit higher.“If you look at why they’re moving up, it’s to do with expectations of a return to more normal levels, more mandate-consistent levels of inflation, higher growth, an opening economy,” Mr. Powell said of rates during a hearing on Feb. 23.But last week’s gyrations prompted U.S. officials to make clear they’re watching to make sure that market moves don’t counteract the Fed’s policies, which make borrowing inexpensive to encourage spending and help the economy recover more quickly.“I am paying close attention to market developments — some of those moves last week and the speed of those moves caught my eye,” Lael Brainard, a Fed governor, said at a Council on Foreign Relations webcast on Tuesday. “I would be concerned if I saw disorderly conditions or persistent tightening in financial conditions that could slow progress toward our goal.”The question is what the Fed could do if rates get too high.Lael Brainard, a Fed governor, said she was monitoring market developments. Credit…Brian Snyder/ReutersBuying longer-term bonds is one option.The Fed’s most obvious choice to push back on a surge in longer-term bond yields is to just buy more of the bonds in question: If the central banks snaps up five-year, 10-year or 30-year securities, the added demand will push up prices, forcing yields — which move in the opposite direction — lower.The Fed is already buying $120 billion in mortgage-backed securities and Treasury bonds each month, a program it started last year both to soothe markets and to make many types of credit cheaper. Right now, it’s purchasing many types of bonds, but it could shake up that approach to focus on longer-term debt.There’s precedent for such a maneuver. The Fed bought long-term bonds to push down interest rates and bolster the economy in 2011. A similar policy was used in the 1960s. Economists and business networks often call such policies either “maturity extension” — shifting future purchases toward longer-dated debt — or “Operation Twist,” which tends to refer to selling short-term notes while buying longer-term bonds.Promising to ‘cap’ certain yields is another.The Fed’s more drastic option is called “yield curve control.” While it sounds nerdy, the approach is simple. The central bank could just pledge to keep a certain rate — say the five-year Treasury yield — below a certain level and buy as many bonds as necessary to keep that cap in place.Other central banks around the world, including the Bank of Japan and the Reserve Bank of Australia, have used yield curve control. But the tool carries risks: For example, it could force the Fed to buy huge sums of bonds and vastly expand its balance sheet in a worst-case scenario. That could matter for perceptions, since politicians sometimes criticize the Fed’s growing holdings, and it might have implications for market functioning.Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, told reporters on Tuesday that she was not worried about the yield curve yet. But she suggested that if the Fed did need to do something, shifting to long-term purchases would probably be preferable.“Right now I don’t think of yield curve control as something we would implement, myself, right away,” she said.The Fed can take several steps to deal with rockiness in the bond markets.Credit…Jim Lo Scalzo/EPA, via ShutterstockAdvertisementContinue reading the main story More

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    Federal Reserve Officials Fretted Over Covid Surge at December Meeting

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    #masthead-section-label, #masthead-bar-one { display: none }Covid-19 VaccinesVaccine QuestionsDoses Per StateDistribution DelaysHow 8 Vaccines WorkAdvertisementContinue reading the main storySupported byContinue reading the main storyFed Officials Fretted Over Virus Surge at December MeetingMinutes from the central bank’s December gathering show that the chair, Jerome H. Powell, and his colleagues were hoping for a 2021 rebound.Federal Reserve officials were warily eyeing a coronavirus surge in December, but hoped that vaccine breakthroughs might set the stage for a strong economic rebound in 2021.Credit…Alex Welsh for The New York TimesJan. 6, 2021, 3:15 p.m. ETFederal Reserve officials were warily eyeing a surge in coronavirus cases at their Dec. 15-16 meeting, but they hoped that vaccine breakthroughs might set the stage for a strong economic rebound in 2021.“With the pandemic worsening across the country, the expansion was expected to slow even further in coming months,” according to minutes from the gathering of the Federal Open Market Committee, released Wednesday. “Nevertheless, the positive vaccine news” was “viewed as favorable for the medium-term economic outlook.”Central bank officials held interest rates steady at near zero at the meeting, and committed to buying up $120 billion in bonds each month “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.” They have been rapidly expanding their holdings of government and mortgage-backed debt since March to keep markets calm and many types of credit cheap.The Fed essentially sets the price of borrowed money to help to guide demand in the economy, goosing conditions when times are tough to help bolster growth and hiring. The central bank also tries to keep price increases stable at around 2 percent, though officials formally updated their policy-setting approach last year to emphasize that they would welcome slightly faster increases after years and years of weaker ones.Minutes showed that the Fed discussed the balance sheet guidance in depth at the meeting, with “a few” remarking that the new wording signaled that the Fed could ramp up bond buying “if progress toward the committee’s goals proved slower than anticipated.”Many analysts had expected that the Fed would shift its bond purchases toward longer-dated debt to try to eke out a bigger bang per buck, given that short-term rates are already very low, but the minutes suggest that there was little appetite for such a change. Only “a couple of participants indicated that they were open to” shaking up the composition of purchases.The Fed’s December meeting took place as virus cases surged after Thanksgiving. Since then, the number of new cases moderated at first but then resumed their increase..css-fk3g7a{font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:0.875rem;line-height:1.125rem;color:#121212 !important;}@media (min-width:740px){.css-fk3g7a{font-size:0.9375rem;line-height:1.25rem;}}.css-1sjr751{-webkit-text-decoration:none;text-decoration:none;}.css-1sjr751 a:hover{border-bottom:1px solid #dcdcdc;}.css-rqynmc{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:0.9375rem;line-height:1.25rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-rqynmc{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-rqynmc strong{font-weight:600;}.css-rqynmc em{font-style:italic;}.css-zs9392{margin:10px auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-zs9392{font-size:1.25rem;line-height:1.4375rem;}}#NYT_BELOW_MAIN_CONTENT_REGION .css-zs9392{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.75rem;margin-bottom:20px;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-zs9392{font-size:1.5rem;line-height:1.875rem;}}.css-121grtr{margin:0 auto 10px;}.css-16ed7iq{width:100%;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;-webkit-box-pack:center;-webkit-justify-content:center;-ms-flex-pack:center;justify-content:center;padding:10px 0;background-color:white;}.css-pmm6ed{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;}.css-pmm6ed > :not(:first-child){margin-left:5px;}.css-5gimkt{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:0.8125rem;font-weight:700;-webkit-letter-spacing:0.03em;-moz-letter-spacing:0.03em;-ms-letter-spacing:0.03em;letter-spacing:0.03em;text-transform:uppercase;color:#333;}.css-5gimkt:after{content:’Collapse’;}.css-rdoyk0{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-eb027h{max-height:5000px;-webkit-transition:max-height 0.5s ease;transition:max-height 0.5s ease;}.css-6mllg9{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;position:relative;opacity:0;}.css-6mllg9:before{content:”;background-image:linear-gradient(180deg,transparent,#ffffff);background-image:-webkit-linear-gradient(270deg,rgba(255,255,255,0),#ffffff);height:80px;width:100%;position:absolute;bottom:0px;pointer-events:none;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-qmg6q8{background-color:white;margin:1.5rem auto 1.9rem;max-width:600px;}#NYT_BELOW_MAIN_CONTENT_REGION .css-qmg6q8{padding:0;width:calc(100% – 40px);max-width:600px;margin-right:auto;margin-left:auto;}.css-qmg6q8 strong{font-weight:700;}.css-qmg6q8 em{font-style:italic;}@media (min-width:740px){.css-qmg6q8{margin:40px auto;}}.css-qmg6q8:focus{outline:1px solid #e2e2e2;}.css-qmg6q8 a{color:#326891;-webkit-text-decoration:none;text-decoration:none;border-bottom:1px solid #ccd9e3;}.css-qmg6q8 a:visited{color:#333;-webkit-text-decoration:none;text-decoration:none;border-bottom:1px solid #ddd;}.css-qmg6q8 a:hover{border-bottom:none;}.css-qmg6q8[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-qmg6q8[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-qmg6q8[data-truncated] .css-5gimkt:after{content:’See more’;}.css-qmg6q8[data-truncated] .css-6mllg9{opacity:1;}.css-11uwurf{border:1px solid #e2e2e2;padding:15px;border-radius:0;margin:0 auto;overflow:hidden;}@media (min-width:600px){.css-11uwurf{padding:20px;}}#NYT_BELOW_MAIN_CONTENT_REGION .css-11uwurf{border-top:1px solid #121212;border-bottom:none;}Covid-19 Vaccines ›Answers to Your Vaccine QuestionsWith distribution of a coronavirus vaccine beginning in the U.S., here are answers to some questions you may be wondering about:If I live in the U.S., when can I get the vaccine? While the exact order of vaccine recipients may vary by state, most will likely put medical workers and residents of long-term care facilities first. If you want to understand how this decision is getting made, this article will help.When can I return to normal life after being vaccinated? Life will return to normal only when society as a whole gains enough protection against the coronavirus. Once countries authorize a vaccine, they’ll only be able to vaccinate a few percent of their citizens at most in the first couple months. The unvaccinated majority will still remain vulnerable to getting infected. A growing number of coronavirus vaccines are showing robust protection against becoming sick. But it’s also possible for people to spread the virus without even knowing they’re infected because they experience only mild symptoms or none at all. Scientists don’t yet know if the vaccines also block the transmission of the coronavirus. So for the time being, even vaccinated people will need to wear masks, avoid indoor crowds, and so on. Once enough people get vaccinated, it will become very difficult for the coronavirus to find vulnerable people to infect. Depending on how quickly we as a society achieve that goal, life might start approaching something like normal by the fall 2021.If I’ve been vaccinated, do I still need to wear a mask? Yes, but not forever. Here’s why. The coronavirus vaccines are injected deep into the muscles and stimulate the immune system to produce antibodies. This appears to be enough protection to keep the vaccinated person from getting ill. But what’s not clear is whether it’s possible for the virus to bloom in the nose — and be sneezed or breathed out to infect others — even as antibodies elsewhere in the body have mobilized to prevent the vaccinated person from getting sick. The vaccine clinical trials were designed to determine whether vaccinated people are protected from illness — not to find out whether they could still spread the coronavirus. Based on studies of flu vaccine and even patients infected with Covid-19, researchers have reason to be hopeful that vaccinated people won’t spread the virus, but more research is needed. In the meantime, everyone — even vaccinated people — will need to think of themselves as possible silent spreaders and keep wearing a mask. Read more here.Will it hurt? What are the side effects? The Pfizer and BioNTech vaccine is delivered as a shot in the arm, like other typical vaccines. The injection into your arm won’t feel different than any other vaccine, but the rate of short-lived side effects does appear higher than a flu shot. Tens of thousands of people have already received the vaccines, and none of them have reported any serious health problems. The side effects, which can resemble the symptoms of Covid-19, last about a day and appear more likely after the second dose. Early reports from vaccine trials suggest some people might need to take a day off from work because they feel lousy after receiving the second dose. In the Pfizer study, about half developed fatigue. Other side effects occurred in at least 25 to 33 percent of patients, sometimes more, including headaches, chills and muscle pain. While these experiences aren’t pleasant, they are a good sign that your own immune system is mounting a potent response to the vaccine that will provide long-lasting immunity.Will mRNA vaccines change my genes? No. The vaccines from Moderna and Pfizer use a genetic molecule to prime the immune system. That molecule, known as mRNA, is eventually destroyed by the body. The mRNA is packaged in an oily bubble that can fuse to a cell, allowing the molecule to slip in. The cell uses the mRNA to make proteins from the coronavirus, which can stimulate the immune system. At any moment, each of our cells may contain hundreds of thousands of mRNA molecules, which they produce in order to make proteins of their own. Once those proteins are made, our cells then shred the mRNA with special enzymes. The mRNA molecules our cells make can only survive a matter of minutes. The mRNA in vaccines is engineered to withstand the cell’s enzymes a bit longer, so that the cells can make extra virus proteins and prompt a stronger immune response. But the mRNA can only last for a few days at most before they are destroyed.Officials have been voicing hope that vaccine distribution, which has gotten off to a slow start in much of the United States, will pave the way for an economic rebound in the latter half of 2021. They have been clear that their outlook hinges on the success of that process and the path of the pandemic.“The second half of the year looks much more promising because of vaccinations,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said on a call with reporters this week.But even if the rebound is remarkable, officials have been clear that they are likely to remain patient in taking support away from the economy.Ms. Mester, who has a history of favoring higher rates than many of her colleagues, has said she probably would not be worried about 2.5 percent inflation. Her colleague Charles Evans, who is president of the Federal Reserve Bank of Chicago and a monetary policy voter this year, said during an event on Tuesday that a 3 percent price gain pace “would not be so bad.”Presidents at 11 of the Fed’s 12 regional banks share rotating votes on monetary policy. The Federal Reserve Bank of New York president and members of the Board of Governors in Washington hold a constant vote on interest rates.In the near term, economic weakening — rather than navigating a rapid rebound — is likely to be the main challenge confronting the Fed. Private payrolls contracted by 123,000 jobs between November and December, data from ADP showed on Wednesday. The government’s official employment report on Friday is expected to show either a marked slowing in job gains or a return to outright losses.According to the December minutes, “Participants saw increased challenges for the economy in the coming months, as the ongoing surge of Covid-19 cases and the related mandatory and voluntary measures prompted greater social distancing and damped spending, especially on services requiring in-person contact.”The Fed’s December meeting took place before two significant developments that could affect the economy in the short term. Late last month, Congress agreed to provide additional support to the American economy in the form of a $900 billion relief bill.And Democrats appeared on the cusp of retaking the Senate, which could pave the way for easier passage of the priorities of President-elect Joseph R. Biden Jr., which could include additional fiscal help for firms and families.“The Fed will welcome greater prospects of fiscal support, which most officials believe is better targeted to address challenges unique to the Covid cycle than monetary policy,” economists at Evercore ISI wrote in a research note on Wednesday.AdvertisementContinue reading the main story More