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Advice for Businesses in Dealing with the Expanding Coronavirus Events

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Daily Financial Regulation Update -- Saturday, August 8, 2020

By
FedACTion Task Force
On Aug 08, 2020

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Major Developments

Federal Reserve Bank of Boston

Congressional Oversight Commission Holds Hearing “Examination of the Main Street Lending Program established by the Federal Reserve pursuant to the CARES Act.”

August 7, 2020

Eric S. Rosengren, President and Chief Executive Officer of the Federal Reserve Bank of Boston, delivered testimony at the Congressional Oversight Commission’s hearing “Examination of the Main Street Lending Program established by the Federal Reserve pursuant to the CARES Act.” Earlier data as of July 27 released by the Federal Reserve suggested a sluggish start to the Main Street Lending Program (Program), with only eight Program loans closed and purchased by the Main Street SPV. Rosengren’s testimony, however, indicated there has been a gradual uptick in Program activity, citing, among other things:

  • More than $530 million in Program loans are active in the Program portal, representing 54 loans.
  • Of that total 54 loans, 18 loans with a combined value of $109 million have commitments for purchase or have been closed and purchased by the Main Street SPV.
  • More than $421 million in loans are in various stages of review in the portal.
  • The largest number of loans in the portal – 29 – are under the Main Street New Loan Facility.
  • The Main Street Priority Loan Facility currently has 24 loans valued at $328 million in the portal.
  • There is only one loan utilizing the Main Street Expanded Loan Facility in the portal.

The Federal Reserve will continue to provide updates on the Program.

Congress

Click here to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), Enacted March 27, 2020.

Click here to view the full text of the Paycheck Protection Program Increase Act of 2020, Enacted April 24, 2020.

Click here to view the full text of the Paycheck Protection Program Flexibility Act of 2020, Enacted June 5, 2020.

Click here to view a running list of proposed legislation from the Senate Committee on Banking, Housing, and Urban Affairs, Senate Committee on Small Business and Entrepreneurship, House Committee on Financial Services, and House Committee on Small Business.

Federal Agencies

Federal Reserve Board

Modern Pandemics: Recession and Recovery

August 7, 2020

The Board of Governors of the Federal Reserve System released a discussion paper titled “Modern Pandemics: Recession and Recovery.” The authors examine the immediate effects and bounce-back from six modern health crises: 1968 Flu, SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014), and Zika (2016). Key takeaways include:

  • Time-series models for a large cross-section of countries indicate that real Gross Domestic Product (GDP) growth falls by around three percentage points in affected countries relative to unaffected countries in the year of the outbreak.
  • Bounce-back in GDP growth is rapid, but output is still below pre-shock level five years later.
  • Unemployment for less educated workers is higher and exhibits more persistence, and there is significantly greater persistence in female unemployment than male.
  • The negative effects on GDP and unemployment are felt less in countries with larger first-year responses in government spending, especially on health care.
  • Full Paper

Federal Reserve Bank of New York

Securing Secured Finance: The Term Asset-Backed Securities Loan Facility

August 7, 2020

The Federal Reserve Bank of New York’s Liberty Street Economics blog released a post discussing the Term Asset-Backed Securities Loan Facility (TALF), including its establishment, how it operates, its impact on market conditions, and how it differs from the TALF that was established by the Federal Reserve System in 2009.

Office of the Comptroller of the Currency

OCC Reduces September 2020 Assessments in Response to COVID-19

August 7, 2020

The Office of the Comptroller of the Currency (OCC) is reducing assessments in response to COVID-19. Assessments due on September 30, 2020, for all OCC-supervised banks will be calculated using the December 31, 2019, Call Report for each institution, rather than the June 30, 2020, Call Report. The change will result in lower assessments for most banks. However, if a bank’s assets as reported on the June 30, 2020, Call Report are lower than on the December 31, 2019, Call Report, the OCC will calculate the assessment due on September 30, 2020 using the June 30, 2020, Call Report.

Department of Housing and Urban Development/Federal Housing Administration

COVID-19 Fraud Bulletin: Reverse Mortgages

August 4, 2020

The Office of Inspector General of the U.S. Department of Housing and Urban Development released a fraud bulletin outlining potential common reverse mortgage schemes that borrowers may face during the COVID-19 pandemic, along with actions to take and actions to avoid if a borrower is considering a reverse mortgage loan.

Department of Labor

July 2020 Employment Situation Report

August 7, 2020

The U.S. Bureau of Labor Statistics has released its July 2020 Employment Situation Summary. Total nonfarm payroll employment rose by 1.8 million in July, and the unemployment rate fell to 10.2%. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed due to the COVID-19 pandemic and efforts to contain it. In July, notable job gains occurred in leisure and hospitality, government, retail trade, professional and business services, other services and health care.

International

European Banking Authority

EBA Provides Clarity on the Implementation of the Reporting and Disclosure Framework in the Context of COVID-19 Measures

August 7, 2020

The European Banking Authority (EBA) published FAQs related to the implementation of its guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis (Guidelines). The technical clarifications provided by the EBA will assist supervisors and credit institutions in the implementation of the Guidelines. The implementation questions and technical clarifications have been included in a newly added Section 4 to the EBA Report on the implementation of selected COVID-19 policies.

Bank of England

Technical Annex: Updated Estimates of the Cash-Flow Deficit of UK Companies in a Covid-19 Scenario - Financial Stability Report August 2020

August 7, 2020

The Bank of England has released a technical annex that describes the data and assumptions used to produce the analysis in the August Financial Stability Report of how the COVID-19 pandemic might affect UK corporate finances in 2020.