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Wells Fargo has found evidence that some employees filed fraudulent applications to get money from a Small Business Administration relief program supporting companies dealing with coronavirus lockdowns, according to an internal memo.
“We have terminated the employment of those individuals and will cooperate fully with law enforcement,” the bank’s head of human resources, David Galloreese, wrote in the memo, which was posted on an internal website on Wednesday. “These wrongful actions were personal actions and do not involve our customers.”
The memo said the employees had created fake profiles to file for money from the Economic Injury Disaster Loan program. In early March, Congress allocated money to support around $7 billion in lending in response to the pandemic. It added another $10 billion through the CARES Act to fund $10,000 cash grants, which applicants could get even if their loan applications were denied.
The memo did not specify how many people had been fired. A person familiar with the bank’s operations said that between 100 and 125 people had been dismissed and that the investigation was continuing. The person was not authorized to speak publicly about the matter.
Bloomberg reported the firings earlier Wednesday.
United Airlines lost $1.8 billion in the three months through September, with operating revenue down 78 percent compared with the same period in 2019.
The results, reported after markets closed on Wednesday, were in line with the second quarter of the year, which spanned the depths of the coronavirus crisis and in which United lost $1.6 billion on an 87 percent decline in revenue.
“Having successfully executed our initial crisis strategy, we’re ready to turn the page on seven months that have been dedicated to developing and implementing extraordinary and often painful measures,” United’s chief executive, Scott Kirby, said in a statement. “We are now focused on positioning the airline for a strong recovery.”
The airline said it ended September with more than $19 billion in cash and other available liquidity, boosted by a large debt offering backed by its mileage program and the ability to borrow $5.2 billion from the Treasury Department. Through the quarter, the airline was consuming $25 million in cash a day. The airline expects to operate about 40 percent as many flights this month as it did a year ago.
The announcement comes one day after Delta Air Lines reported a $5.4 billion loss over the same period, with operating revenue down 79 percent compared with a year prior.
Treasury Secretary Steven Mnuchin said on Wednesday that he did not expect an economic relief package to be enacted before the Nov. 3 election, as he and Speaker Nancy Pelosi of California have continued to struggle to reach an agreement on a broad package to support the economy.
Negotiators on Wednesday resumed discussions over a coronavirus relief package, even though Democrats and Republicans remain wildly divided over the scope and size of another stimulus bill.
Speaking at a Milken Institute conference on Wednesday, Mr. Mnuchin said that his conversation with Ms. Pelosi was “comprehensive” but indicated that important differences remained. He said that it was unlikely that a deal could be reached and enacted before the election.
“At this point, getting something done before the election and executing on that will be difficult,” Mr. Mnuchin said.
Ms. Pelosi and Mr. Mnuchin spoke on Wednesday for about an hour, discussing the language of the administration’s latest $1.8 trillion framework as compared to House Democrats’ $2.2 trillion stimulus plan, which Ms. Pelosi pushed through the House earlier this month.
They agreed to speak again on Thursday.
“One major area of disagreement continues to be that the White House lacks an understanding of the need for a national strategic testing plan,” Drew Hammill, a spokesman for Ms. Pelosi, said on Twitter. “The Speaker believes we must reopen our economy & schools safely & soon, & scientists agree we must have a strategic testing plan.”
The Treasury secretary suggested that the gap on the top-line cost of the bill was not that wide, but that the differences on the policies within a package remained significant. He said that the White House had already made big compromises on funding for state and local governments and that Republicans continued to want liability protections for businesses that were seeking to reopen during the pandemic.
“We continue to make progress on certain issues; on certain issues we continue to be far apart,” he said.
Mr. Mnuchin criticized Democrats for insisting on a comprehensive bill and not passing smaller bills on areas where the two sides agreed. He said that people and businesses needed immediate assistance and estimated that there was $300 billion in unused relief money that could be repurposed with congressional approval.
“Let’s not wait for the big bang and everything being perfect,” he said.
President Trump has pushed negotiators to “go big!!!” days after abruptly ending talks, but Senate Republicans remain reluctant to accept a broad sweeping bill, citing concerns about the cost of such a package after approving nearly $3 trillion in legislation earlier this year.
Senator Mitch McConnell of Kentucky, the majority leader, has said he plans to have the Senate vote to advance a scaled-back bill that would amount to a fraction of the $2.2 trillion Ms. Pelosi has demanded, but that is unlikely to pass without the Democratic support needed to clear the 60-vote threshold.
Wall Street dropped on Wednesday, turning lower after Treasury Secretary Steven Mnuchin said it was unlikely that the White House and Democrats would be able to reach a deal on a new economic aid package before the election.
The S&P 500 fell by more than half a percent, a relatively small decline that reflects the fact that investors had already stopped expecting an agreement anytime soon. Still, the slide came immediately after Mr. Mnuchin made his comments at a Milken Institute conference.
“At this point, getting something done before the election and executing on that will be difficult,” Mr. Mnuchin said.
Investors have been regrouping this week after stocks surged in the first two weeks of October, in part on hopes that a stimulus deal would come together. Investors are also wary of the upcoming election — and the uncertainty that might follow a close race.
Also drawing investors’ attention are earnings reports from companies that offer a glimpse of how they are handling the economic slump caused by the coronavirus pandemic. Among the companies to report their results on Wednesday was Goldman Sachs, which rose slightly after reporting a jump in revenue from its trading business. Wells Fargo and Bank of America were some of the worst-performing stocks of the day, dropping sharply after their results.
Pilgrim’s Pride, the giant U.S. poultry producer, jumped in early trading after it said it would pay more than $110 million to settle federal charges it helped fix prices on chicken. In June, the company’s chief executive and three other current and former executives at companies that supply chicken to groceries and restaurants across the United States were indicted on a price-fixing charge.
The world’s leading finance ministers and central bank governors said on Wednesday that the global economy was “showing signs of recovery” and that the economic outlook was improving thanks to an extraordinary policy response to the coronavirus pandemic.
In a joint statement following a virtual Group of 20 meeting, the officials said the robust fiscal and monetary policy actions taken this year were working, but the recovery remained uneven and more must be done. They also noted that the world economy continued to experience a “sharp contraction” this year even as countries reopened.
“We reaffirm our determination to continue to use all available policy tools as long as required to safeguard people’s lives, jobs and incomes; support the global economic recovery; and enhance the resilience of the financial system, while safeguarding against downside risks,” the statement said.
The International Monetary Fund this week raised its 2020 economic outlook, projecting that the global economy would contract 4.4 percent. That was a modest improvement from its midyear forecast, as output has picked up more quickly as economies reopened.
The economic officials at the Group of 20 meeting agreed to take steps to ease international trade and reinforce supply chains, which in many cases have been disrupted by the pandemic.
They also agreed to a six-month extension of a debt relief measure for poor countries that was expected to expire in December.
The finance ministers and central bankers also continued their discussions on an international framework for taxing digital services but acknowledged that the pandemic had slowed the already fraught negotiations.
President Trump on Wednesday talked up his pre-pandemic economic record and painted a dark picture of the economy if Democrats win November’s election, suggesting he would return the U.S. back to strength in a second term.
Mr. Trump, who has accused state and local governments of holding back the recovery by restricting business activity, also argued that young and healthy people should get back to work.
In webcast remarks before the Economic Club of New York, along with clubs in Chicago, Pittsburgh, Washington, Florida and Sheboygan, Wisc., Mr. Trump warned of “crippling poverty” and a “steep depression” under Democrats, who he said would usher in “very high taxes.”
Mr. Trump’s comments come as his campaign tries to renew focus on economic issues, where the president has outpolled his Democratic rival, Joseph R. Biden Jr., despite trailing in national head-to-head matchups overall. Even after the nation’s plunge into recession amid the spreading pandemic this spring, voters continue to give Mr. Trump higher marks on the economy than any other major issue.
In his speech, the president offered a preview — but few details — of the economic policies he would pursue in a second term, should he win one. He vowed to cut taxes for the middle class, echoing a promise he made before the 2018 midterm elections, after which he did not propose a new middle-class tax cut plan. He threatened to impose tariffs on companies that move activity abroad from the United States and bar those companies from receiving federal contracts.
Part of Mr. Trump’s enduring appeal on economic issues has been his relentless cheerleading of his own performance, which he continued in the speech, often exaggerating his achievements or claiming results that are not actually true.
Mr. Trump said the administration and Congress’s economic response to the pandemic crisis had helped to fuel a rapid rebound.
While it is true that jobs have returned rapidly, the rebound has happened so quickly in large part because employers cut jobs swiftly — and temporarily — amid widespread state and local lockdowns early in the pandemic. Only about half of the 22 million jobs slashed between February and April have returned.
The unemployment rate, which declined to 7.9 percent from 14.7 percent in April, has fallen faster than most analysts had forecast. But economists warn that the improvement could slow, especially as job losses increasingly turn permanent. S&P Global economists warned on Wednesday that the unemployment rate will not reach pre-pandemic levels until 2024.
Goldman Sachs had a significantly more profitable quarter than expected, lifted by continued strength in the trading of stocks and bonds and gains from certain investments.
The bank reported earnings of $3.62 billion, far higher than Wall Street analysts had projected, and revenue of $10.78 billion for the third quarter.
At a time when the markets were particularly active, Goldman continued its winning streak in trading, with significant gains from handling bond products tied to interest rates, mortgages, corporate credit and commodity prices, which together drove bond division revenue up 49 percent from the same period last year. Stock trading revenue was also higher, but by a less substantial margin.
Revenue in the firm’s asset-management division was up 71 percent, driven by investments in stocks held by Goldman.
Company shares rose slightly on Wednesday.
Lower credit losses expected
Bank of America earned $4.9 billion in the third quarter, up from $3.5 billion in the second quarter, but down from $5.8 billion in the same period a year ago.
Revenue fell 11 percent from a year ago, to $20.3 billion.
The bank’s quarterly provision for credit losses was smaller than the previous quarter, at $1.4 billion in the third quarter, compared with $5.1 billion. The bank said it was expecting fewer losses in its consumer loans, but more in its commercial loans, particularly in industries hit hard by the coronavirus pandemic such as travel and entertainment.
Layoffs add to expenses
Third-quarter earnings for Wells Fargo were $2 billion on revenue of $18.9 billion.
The bank’s earnings were affected by the cost of a round of layoffs — $718 million. Another expense the bank faced in the third quarter: nearly $1 billion trying to help customers struggling to repay their loans come up with new payment plans to keep them from defaulting.
Both Bank of America and Wells said robust activity on Wall Street helped strengthen their earnings.
A group of tech, finance, media and other executives are calling on Americans to stay cool during a heated election season. “The health of our economy and markets depends on the strength of our democracy,” the LinkedIn co-founder Reid Hoffman said in a statement signed by more than 50 business leaders, published first in Wednesday’s DealBook newsletter.
The group, convened by the Leadership Now Project, also includes Eddie Fishman, the chief operating officer of D.E. Shaw; Seth Klarman, the chief executive of Baupost Group; Lisa Lewin, the chief executive of General Assembly; Marissa Mayer, the former Yahoo and Google executive; and Alan Patricof, the founder of Apax and Greycroft.
The executives expressed support for three principles:
“America has successfully held elections through previous challenges, like the Civil War, World Wars I and II, and the 1918 flu pandemic,” the statement concludes. “Now, it is our turn.”
The statement is a testament to the times. “Nothing about 2020 is usual,” said Michael Porter of Harvard Business School, who advises the Leadership Now Project. He said there was “an essential role for business in addressing political dysfunction,” citing recent data showing that political gridlock is causing a “disastrous decline” in the United States’ competitiveness.
A contested election is a big worry for business. If recent market moves are any indication, businesses are making peace with the possibility of higher taxes under a Biden administration as a trade-off for a definitive election result. Some Wall Street advisers have been preparing clients for the possibility of a contested election, as President Trump repeatedly casts doubt on mail-in ballots and is noncommittal on what he will do if he loses the vote.
That’s why some executives, like the group putting their names to the Leadership Now missive, may feel the need to state what was once obvious.
L’Oréal, the French cosmetics company, announced on Wednesday that Nicolas Hieronimus would be appointed chief executive, succeeding Jean-Paul Agon, who will step down May 1, 2021. The company, which has struggled with decreased demand for its products during the pandemic, said it had a legal retirement age, and Mr. Agon must hand over the reigns before he turns 65 in July 2021. Mr. Agon will remain as chairman, a role he has held since 2011. Mr. Hieronimus has worked at L’Oreal for 33 years, and has been the deputy chief executive since 2017.
Starbucks announced new commitments to inclusion, diversity and equity on Wednesday, following up on pledges the company made to fight racism in June after the killing of George Floyd in police custody.
The company said it would achieve representation of Black, Indigenous and people of color of at least 30 percent at all corporate levels and at least 40 percent at all retail and manufacturing roles by 2025. Starbucks also released diversity data that showed that its work force is 69 percent female and 47 percent Black, Indigenous and people of color.
The coffee chain also said it would incorporate “measurements focused on building inclusive and diverse teams” into executive compensation programs starting in 2021.
In 2018, two African-American men were arrested at a Starbucks in Philadelphia, leading the company to apologize in full-page newspaper ads and to require companywide anti-bias training.
For some companies, the only response to the pandemic has been to hunker down and try to avoid running out of cash before their customers can return.
Pret, the 37-year-old British sandwich and coffee chain that’s ubiquitous in central London, is now clearly willing to try anything, Eshe Nelson reports:
Pret wants to sell its food in supermarkets, and has already begun selling coffee beans on Amazon.com.
It has signed up to all the major food delivery platforms to bring its sandwiches, soups and salads to its work-from-home customers.
It opened a so-called dark kitchen in North London to prepare its food strictly for delivery, modeled on the success of Sweetgreen and Shake Shack, and hopes to open another dark kitchen in either New York or New Jersey soon.
It is devising a special menu of hot evening meals for delivery, such as a Chipotle Chicken Burrito Bowl.
And then there is the coffee subscription, an effort to drive people back to the stores: Five drinks a day made by a barista (coffees, teas and smoothies) for £20 a month. On the face of it, it could be an extraordinarily good deal. With two lattes a week, a subscriber will break even. And the first month is free. (Small print: You can’t order five drinks at once — there must be 30 minutes between each drink order.)