'Not out of the woods': Here's what 5 top executives said this week about the prospect of more economic stimulus
- Earnings season kicked off on Tuesday, and executives are sounding off on the stimulus stalemate and the risks it poses to the ongoing economic recovery.
- Hopes for a pre-election deal faded on Thursday after Senate Majority Leader Mitch McConnell said he'll only bring a smaller measure to a vote. The statement effectively dooms the larger proposal penned by the White House and Democrats.
- Here's what five executives had to say about the lack of near-term aid and the challenges it presents.
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With earnings season officially underway, executives are weighing in on the stimulus stalemate that's gripped the US
The chance of a pre-election relief deal faded through the week as Senate Majority Leader Mitch McConnell doubled down on his opposition to a major bill. The senator indicated Thursday that he plans to bring only a smaller measure to a vote, dashing hopes for the $1.8 trillion to $2.2 trillion package currently being negotiated by Democrats and the White House.Several indicators suggest the pace of economic recovery slowed into the fall as previous support programs dried up. Here's what five executives had to say about the lack of new stimulus and the challenges it presents.
JPMorgan: 'We'll probably see delinquencies tick up'
The March CARES Act played a major role in keeping Americans from defaulting on their debt, JPMorgan Chief Financial Officer
She continued: "I think future stimulus would give us more confidence in the economy delivering on the base case."
Bank of America: 'Stimulus coming in would move us further'A new relief bill would help struggling businesses and unemployed Americans, Bank of America CEO
"Stimulus coming in would move us further" toward lowering the loss provision, Moynihan said.
"You'd see the reserves come out further because the lifetime expected loss would be lower. That's kind of the way it works."Read more: Buy these 7 unheralded stocks right now for near-term upside of at least 25% as growth accelerates to a new level, RBC says
PNC: 'We're going to see an acceleration' in charge-offs
As Congress nears its deadline to pass another relief measure, firms are bracing for more loans to sour. Such charge-offs will likely begin in pandemic-sensitive industries earlier in the year and trickle down to consumer debt in the second half of 2021, PNC CEO William Demchak said Wednesday.
"The consumer number in my view is going to be highly dependent on whether they provide more fiscal stimulus, which I think they absolutely need to do," Demchak added. "With PPP effectively running out and with the CARES Act having run out, we're going to see an acceleration [in charge-offs.]"The CEO cited a survey of small businesses as further evidence that new stimulus is needed. Roughly 60% of respondents expect to be out of business should the legislative deadlock last another year, Demchak said.
Wells Fargo: 'Future credit performance may deteriorate'The US's unprecedented fiscal and monetary response to the pandemic helped the economy improve significantly, but slowed reopenings and the expiration of some stimulus programs "are presenting headwinds," Wells Fargo CEO
For one, "future credit performance may deteriorate" as Americans receive less help from relief payments and expanded unemployment benefits, the CEO said. A recent study from Federal Reserve researchers found Americans used the majority of their stimulus checks on paying down debts and bolstering savings.In separate comments made during a Friday virtual panel, Scharf warned the nation is "not out of the woods" despite enjoying a steady climb from virus-induced lows.
"The consumer has been extraordinarily strong through this crisis, and it's not luck, and it's not because they weren't affected. It's because of the CARES Act, specifically the unemployment assistance," Scharf said, adding the bank is seeing signs of Americans' cash balances "starting to go away."Read more: 'I'm extremely concerned': A former Goldman Sachs hedge-fund chief says a flood of troubling signals shows the stock market is teetering — and warns a small correction could soon morph into something much larger
United Airlines: 'We will continue ... to urge them to act'The airline industry in particular hinges on the prospect of more aid. Carriers began laying off tens of thousands of workers earlier this month to cut costs and weather the slowdown in travel activity.
House Democrats' $2.2 trillion proposal would allocate $25 billion to airline relief, the same amount set aside in the CARES Act. While Senate Republicans have balked at the measure, House Speaker Nancy Pelosi has opposed a standalone bill for airlines without a larger stimulus bill.
As Congress continues to deliberate on fresh aid,
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