White House economic adviser Kevin Hassett says Q2 GDP will be the ‘biggest negative number since the great depression,’ -20% To -30%
“The unemployment rate for the first week of May, we’re going to see a number that’s going to be 16, maybe 17% … for second quarter GDP it’s going to be the biggest negative number that we've seen since the Great Depression,” says Kevin Hassett, Senior Advisor to the President. pic.twitter.com/J3i4CKTMF8
— Squawk Box (@SquawkCNBC) April 27, 2020
The narrowing group of winners in the S&P 500 doesn’t bode well for the future performance of U.S. stocks, according to Goldman Sachs Group Inc.
The latest report on new unemployment claims was abysmal, coming in at 4.4 million last week, some 100,000 more than surveyed economists had expected.
The wave of defaults that are right behind the CARES Act forbearance issue should be the focus of our attention.
In came Congress to help pass a sweeping bi-partisan piece of legislation, signed into law by President Donald Trump that provided $1.8 trillion in aid to spread across small business, consumers, housing, and more. It was this piece of Legislation that created a new form of forbearance. Rather than follow the blueprint from the last recession, where one had to prove something called “hardship,” in order to insure that taxpayer dollars only went to those who needed it, this was quite different.
First, CARES Act forbearance was made available to all homeowners with a government backed mortgage. That removed any friction in allowing people to get relief from mortgage payment. Yet it also introduced moral hazard by allowing people who were still employed and able to make their payments to skip them anyway. Unlike 2008, consumers need only ask for assistance with no proof of hardship.
Second, The CARES Act offered 6 months of forbearance with an option to extend for another 6 months, a term far longer then the four month terms used previously.
Third, the legislation stated that loans in forbearance were to be considered “current” and the consumers credit would be reported as such; Forbearance loans would not be considered delinquent mortgages.
There were gasps heard across the mortgage industry simply due to the magnitude of the CARES Act forbearance. Estimates of impact showed massive dollars of outlays depending on who would take forbearance. This is also where the FHFA and Director Mark Calabria began to ignore the facts and depart from basic commercial market practice in the world of secured mortgage finance.
The Mortgage Bankers Association as well as top economists began looking at potential impact in ranges of $40 billion to $100 billion in skipped payments. Calabria, an economist, made his prediction in public comments that total forbearances would be under 1 million borrowers by May, but the actual number was already more than three times that and rising by the 3rd week of April.
The billions of dollars in coronavirus relief targeted at small businesses may not prevent many of them from ending up in bankruptcy court. Business filings under Chapter 11…
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