by Greg Valliere, AGF Management Ltd.
UNCHARTED WATERS: Never in American history has Washington pumped out such an enormous amount of aid to the rest of the country. Regrettably, the coronavirus disaster relief is off to a rocky start, not a good omen for keeping the economy from sinking into a deepening recession.
WE HEARD FROM SMALL BUSINESS OWNERS yesterday who reported that their banks were totally unprepared for the flood of applications for aid. Bank officials complain that they have received confusing guidance from Washington, and as a result, they’re reluctant to lend until there’s clarity. Banks have to worry about due diligence, especially for applicants who aren’t bank customers.
LIKEWISE, AN UNPRECEDENTED FLOOD of unemployment claims have clogged the system, but we think this will be ironed out more quickly than the small business loan snafus. By late April these programs, including loans for big corporations, should be running more smoothly.
NEVERTHELESS, WE ANTICIPATE widespread criticism this weekend of the federal government’s response; if snags persist, it’s inevitable that there will be comparisons to Barack Obama’s botched roll-out of Obamacare. This could become a major political headache for the Trump Administration; Trump needs to turn this around before late April.
YET THE PRESIDENT spent time yesterday in bitter twitter battles with 3M and
Chuck Schumer, while sniping at governors. There’s a need to extinguish this firestorm over Washington aid as quickly as possible. A more immediate firestorm is that many hospitals are running out of crucial supplies.
AMID CONFUSING SIGNALS about wearing masks and whether the entire country should lock down, Trump’s approval ratings have slipped this week, and it’s difficult to see how increasing the visibility and clout of Jared Kushner will help. Trump apparently favors a “Team of Rivals” approach — but what worked for Lincoln will not work in an environment of withering media scrutiny.
WE’RE IN TOTALLY UNCHARTED WATERS, everyone is performing triage — we get that. Steve Mnuchin has done a pretty good job, but now he needs the banks to do a pretty good job. If a perception grows that Washington is botching the relief, Trump will pay a political price.
THE BIGGER STORY, of course, is the heartbreaking increase of new cases and deaths. We end this week as we ended last week — we wish you and your families good health during this unprecedented crisis.
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This post was first published at the AGF Perspectives Blog.
