The trigger date to end the $600 per week unemployment stimulus is a week away, and as Congress looks for a viable solution, top credit card execs warn that a failure to act will cause economic havoc, particularly for the credit card industry. Business Insider reports:
- Some of the biggest names on Wall Street are pushing Congress to speed up deliberations on a second stimulus bill, no matter the cost.
- Most major banks surprised to the upside with their second-quarter results as bolstered credit reserves were overshadowed by soaring trading-desk revenue. The strong performances were made possible by a combination of Federal Reserve monetary support and market volatility.
Three top industry executives support a quick response to the deadline.
- The economy is “still facing a very, very uncertain” outlook, Goldman Sachs CEO David Solomon said Wednesday, and a hefty government response is likely the best option for stemming additional pain.
- “Even though it’s hard and it’s expensive, we are better to blunt the economic impact now in the short term, by spending more, than to allow it to get worse and deal with the consequences of being worse,” he said in an online event hosted by the Economic Club of New York.
As reported in the American Banker,
- “So far our customers are making their payments,” Discover Financial Services Chairman and CEO Roger Hochschild said Thursday. “We do worry that if [government aid is] pulled back too quickly it’ll both impact not just those who were getting support” but also slow overall consumer spending. “The withdrawal of that stimulus is going to impact everyone,” he added.
- Just as the unemployment bonus is about to expire, the number of unemployment claims made for the week ending July 18 jumped by 109,000 from the previous week to more than 1.4 million, the Labor Department said Thursday. The increase broke a streak of weekly declines going back to the end of March when businesses closed to prevent spread of the virus. In total, almost 53 million unemployment claims have been filed over the past 18 weeks.
- “I’ve seen a lot of things, but nothing like this in terms of the speed and magnitude of the impact the pandemic has had on the economy,”
- Hochschild said on a call with analysts Thursday. “I don’t think any of us in business have seen this.”
- Margaret Keane, the CEO at Synchrony Financial, expressed similar concerns in an interview with CNN this week. With the unemployment rate at 11.1% and COVID-19 cases rising sharply in certain parts of the country, she is worried that consumer defaults will surge unless new relief measures are put in place.
- “As forbearance and stimulus wears off, we’re definitely in a rockier place,” Keane said.
This is a classic pay-me-now-or pay-me-later challenge. With unemployment in double digits, and consumer spending dropping, there is plenty on the table, not just for consumers but also small businesses. Fortunately, the infrastructure is in place to move the money quickly; the challenge is to start the momentum and get the process rolling again.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group