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Daily Financial Regulation Update -- Tuesday, September 1, 2020

September 01, 2020

By FedACTion Task Force

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Congress

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

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

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

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

U.S. Department of the Treasury

Treasury and IRS Issue Guidance Deferring Certain Payroll Tax Obligations for Employers affected by COVID-19

August 28, 2020

The U.S. Department of the Treasury and Internal Revenue Service (IRS) released guidance on the Presidential Memorandum dated August 8, 2020 directing the Secretary of the Treasury to use his authority to defer the withholding, deposit and payment of certain payroll tax obligations. The guidance allows employers to defer withholding and paying the employee’s portion of the Social Security payroll tax if the employee’s wages or compensation during any bi-weekly pay period (during the period beginning on September 1, 2020 and ending on December 31, 2020) are less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay cycles. Employers must withhold and pay the deferred taxes ratably from wages and compensation paid between January 1, 2021 and April 30, 2021, or interest, penalties and additions to tax will begin to accrue with respect to such amounts on May 1, 2021.

Federal Reserve Board

Modeling the Consumption Response to the CARES Act

August 31, 2020

The Federal Reserve Board’s Divisions of Research & Statistics and Monetary Affairs released a paper titled “Modeling the Consumption Response to the CARES Act” seeking to predict the effects of the 2020 CARES Act on economic consumption. The authors extend a model that matches responses of households to past consumption stimulus packages accounting for two novel features of the COVID-19 crisis. First, during the lockdown, many types of spending are undesirable or impossible. Second, some of the jobs that disappeared during the lockdown will not reappear when lockdowns are lifted. The authors estimate that, if a lockdown is short-lived, the combination of expanded unemployment insurance benefits and stimulus payments should be sufficient to allow a swift recovery in consumer spending to its pre-crisis levels. If a lockdown lasts longer, an extension of enhanced unemployment benefits will likely be necessary if consumption spending is to recover.

Consumer Financial Protection Bureau

CFPB Report Examines Early Impact of COVID-19 Pandemic on Consumer Credit

August 31, 2020

The Consumer Financial Protection Bureau issued a report examining the early effects of the COVID-19 pandemic on consumer credit. The report found that consumers have not experienced significant increases in delinquency or other negative credit outcomes as reported in credit record data following the onset of the COVID-19 pandemic in the United States. This is in spite of the sharp increases in unemployment resulting from the COVID-19 pandemic. The report focused on mortgage, student and auto loans and credit card accounts from March 2020 to June 2020, and notes that outcomes may reflect payment assistance provided to American consumers through the CARES Act.

U.S. Small Business Administration

Small Business Facts: Black Business Owners Hit Hard By Pandemic

August 31, 2020

The U.S. Small Business Administration released its August 2020 Small Business Facts titled “Black Business Owners Hit Hard by Pandemic.” According to the release, the effects of the COVID-19 pandemic have varied across demographic groups, and Black business owners have shown the biggest decline in business activity. The number of Black people who were working and self-employed in July 2020 was 18.4% lower than in July 2019.  Declines have been bigger for Black women than for Black men, with a decline for Black women in July 2020 of 19.8% and a decline for Black men of 17.6%.

U.S. Department of Housing and Urban Development/Federal Housing Administration

HUD Provides $100 Million in CARES Act Funding to Native America Tribes to Support COVID-19 Recovery Efforts

August 31, 2020

The U.S. Department of Housing and Urban Development (HUD) awarded a total of $100 million to Tribes across the nation as part of HUD’s Indian Community Development Block Grant Imminent Threat program. The funding helps address problems that pose an imminent threat to public health or safety of Tribal residents and will be used to help Tribes prevent, prepare for, and respond to COVID-19.