US weighs ‘war bonds’

Fed to boost small business lending efforts

WASHINGTON, April 7, (AP): The White House is considering coronavirus “war bonds” to fund the federal response to the pandemic.

Larry Kudlow, the director of the national economic council, says the federal government, like most Americans, should make the most of low interest rates.

The US government has had little trouble finding people willing to lend it money so far, even without anything branded as “war bonds.” It’s been able to borrow at interest rates near record lows despite ballooning deficits, as investors around the world look for safe places to park cash.

The Federal Reserve said Monday it will support the government’s $349 billion small business lending program, which had a rocky start Friday.

The Fed said that it will buy loans that banks make to small businesses as part of the program, which is being carried out by banks and the Small Business Administration and was set up under the $2.2 trillion economic relief package.

The loans can be forgiven if they are spent on payroll, to encourage firms to keep paying their employees or rehire workers they may have recently laid off.

By purchasing the loans, the Fed would create an incentive for the banks to engage in more lending. Buying the loans should free up more cash for banks to lend. Otherwise, when banks make a loan, they are typically required to hold some cash in reserve in the case of default. The Fed’s two-sentence announcement said further details will be provided this week.

Joseph Brusuelas, chief economist at RSM, an advisory firm that works with medium-sized companies, said the Fed’s move is intended to encourage more banks to participate because many are reluctant to lend to small companies.

“This should help ... reverse risk aversion among potential lenders to provide bridge financing for small firms that otherwise would likely not survive the first phase of the crisis,” Brusuelas said.

The Independent Community Bankers of America, in a letter Saturday, urged Treasury Secretary Steven Mnuchin to work with the Fed to set up a purchase program for the small business loans. By taking loans off bank balance sheets, they argued that it would make it easier for smaller banks to participate.

“This program should not be limited by the balance sheet capacity of par

In this file photo, the seats and aisles are empty as seen through the window of the closed Penndot Drivers License

Center in Butler, Pennsylvania. (AP)

ticipating lenders,” Rebecca Romero Rainey, CEO of the ICBA, said in the letter.

It could potentially help some larger banks as well. Wells Fargo said it did $10 billion in loan applications over the weekend, the maximum the bank was allowed to do. Because of the bank’s prior scandals, Wells Fargo is under restraints from the Federal Reserve on how many loans it can hold on its books.

The Fed is also expected to launch a program that would aid states and cities by buying municipal bonds. The rescue package approved last month directed Mnuchin to support such an effort as part of the $454 billion the legislation provided the Treasury to backstop the Fed’s efforts to support the banking system and economy.

Airlines: American Airlines is suspending more flights at the city’s three major airports, JFK, LaGuardia and Newark, in New Jersey.

American said late Sunday that it will run 13 flights daily from the three airports beginning this week, down from an average of 271 flights per day last April.

United Airlines over the weekend reduced its 157 daily flights, to 17. Spirit Airlines has completely cut off service to the city and JetBlue, which is based in

New York City, has slashed operations in the city by about 80%.

Delta Air Lines, American Airlines, United Airlines and JetBlue applied for a share of the $25 billion in federal grants designed to cover airline payrolls for the next six months. None disclosed the amount they are seeking. Boeing said it will suspend operations Wednesday at a South Carolina plant where it builds the two-aisle 787 passenger jet. Over the weekend, Boeing extended a two-week halt in work at assembly plants in the Seattle area. Several Boeing workers have tested positive for the new coronavirus.

Boeing rival Airbus is also suspending production at assembly plants in Germany and the US as the coronavirus continues to hit airlines and aircraft makers.

Stepping up: Apple has sourced more than 20 million face masks through its supply chain, CEO Tim Cook said in a video posted on Twitter.

Apple hopes to quickly expand distribution beyond the US. It plans to ship over a million face shields to healthcare workers by the end of the week, and continue to send that many every week going forward, Cook said.

Ford Motor Co has manufactured and shipped over 1 million clear plastic face shields to hospitals and first responders all over the US. The company sent its millionth protective shield to New York City as part of a shipment of more than 30,000 spokeswoman Elizabeth Kraft said.

Hilton and American Express are donating a million US hotel rooms to medical workers who need to sleep or isolate from their families. American Express and Hilton are paying for the rooms, which are being provided at or below cost by Hilton franchisees.

Infusions: Carnival Corp shares soared 20% Monday after Saudi Arabia bought a big stake in the Miami-based cruise line. The kingdom’s public investment fund acquired an 8.2% stake in Carnival, according to a filing with regulators.

The Saudi investors likely saw a bargain: Carnival’s shares after Monday’s gain were still down 80% since the start of the year as the company canceled sailings due to the new coronavirus.

Carnival has more than 100 ships, including the Diamond Princess – which was quarantined off the coast of Japan in February. Wells Fargo analyst Timothy Conder said in a note that the company’s recent $6 billion capital raise should provide it with enough liquidity through November.