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Treasury Secretary Janet Yellen said yesterday that the U.S. economy remains in crisis from the pandemic even as she defended developing plans for future tax increases to pay for new public investments, Reuters reported. Yellen spoke at a hearing of the House Financial Services Committee that was ostensibly to discuss the country’s recovery from the coronavirus-triggered recession, but turned instead into a skirmish over priorities far beyond it. Republican members of the committee challenged Yellen and Fed Chair Jerome Powell on issues like plans to build climate change into financial regulation, and specifically quizzed Yellen on how the United States can simultaneously be in crisis and healthy enough to consider raising taxes. The immediate hole remains deep, Yellen said, with “a huge problem of joblessness” following the loss of employment due to the pandemic. “But once the economy is strong again President Biden is likely to propose that we engage in long-term plans to address longstanding investment shortfalls...in infrastructure, investment to address climate risk, investments in people, R&D, manufacturing,” she said. “It is necessary to pay for them.” One possibility is boosting the corporate tax rate back to 28% and fixing a “global race to the bottom” in what companies pay. On the broad economic environment, Powell downplayed concerns of some lawmakers about the possibility of coming inflation as the Fed’s loose monetary policy coincides with an economic reopening expected to spark the strongest growth since the 1980s. “We do expect inflation will move up over the course of the year,” but it will be “neither particularly large nor persistent,” Powell said in testimony after some members said they were concerned about rising prices.

Auto executives and dealers entered 2021 hoping to restock dealerships depleted by pandemic-related factory shutdowns last spring. Instead, parts shortages and other factors disrupting production have extended the inventory crunch, and auto retailers said that it could be months before relief comes, the Wall Street Journal reported. For buyers, there are slimmer pickings, higher prices and longer waits, dealers and analysts said. Many consumers have had to order models from the factory or pick from vehicles still in transit to the dealership, rather than immediately driving their new rides off the lot. The lack of new cars stands as a barrier to what could be a strong bounceback year for the industry. Analysts said pent-up demand, continued low interest rates and a new round of stimulus checks going to consumers should help lift showroom traffic in the coming months as the industry’s spring selling season gets under way. A monthslong shortage of semiconductors has forced auto makers to cut production of even their most-lucrative vehicles. Winter storms in Texas last month disrupted plastics production, leading to shortages of seat foam and other materials, car makers and suppliers have said. A backup at West Coast ports is delaying vehicle-part shipments from Asia. The supply-chain disruptions began late last year and have hit almost every major auto manufacturer in recent months, from Volkswagen AG and Nissan Motor Co. to General Motors Co.

As Congress considers extending the government’s flagship small business coronavirus-aid plan, some of the smallest businesses want government officials to make some recent changes in the program retroactive, the Wall Street Journal reported. The new rules allow sole proprietors, independent contractors and the self-employed to use gross income rather than net profit when determining the size of their forgivable loan. The tweak followed complaints that the program had disproportionately benefited larger businesses, leaving behind sole proprietors and many minority-owned businesses. Bharat Ramamurti, deputy director at the National Economic Council, said he was sympathetic to borrowers unable to benefit from the changes. The Biden administration wanted to move quickly on its loan calculation modification and “retroactivity is a separate legal question,” he said. “It didn’t make sense to hold off on allowing all these other businesses to take advantage of [the new rules] if we could at least make the change prospectively for tens of thousands of them,” he said, adding that the best solution would be for Congress to make the changes retroactive. Roughly 164,000 loans have been submitted using the new formula, the Small Business Administration said. Another 136,000 small-business owners who might have benefited from the change received PPP loans this year based on the older, less generous formula, according to figures provided by the SBA.

Mall owner CBL & Associates Properties Inc. reached a truce with bank lenders led by Wells Fargo Bank NA, agreeing to a restructuring proposal that will end negotiations that started months before the company filed for bankruptcy, WSJ Pro Bankruptcy reported. CBL, one of the largest mall owners in the U.S., filed for bankruptcy in November with $4 billion in debt. Under the chapter 11 plan unveiled yesterday, Wells Fargo and other banks owed more than $980 million would walk away with $100 million in cash and more than $880 million in new loans. Bondholders would receive an 89% stake in the reorganized company, $555 million in new secured notes and $95 million in cash. If approved in the U.S. Bankruptcy Court in Houston, the restructuring proposal would eliminate CBL’s $1.6 billion in debt and preferred obligations and slash the company’s interest expenses.

Washington Prime Group Inc., the owner of a nationwide group of shopping malls reeling from the pandemic, approached investors to sound out early interest in providing bankruptcy financing as it prepares to file for chapter 11, Bloomberg News reported. Guggenheim, the company’s investment bank, has asked prospective lenders to indicate their interest in providing a potential $150 million debtor-in-possession loan. The real estate investment trust, which owns about 100 malls throughout the U.S., acknowledged that it may have to file for court protection from creditors amid “substantial doubt” about its ability to keep operating. Bloomberg News previously reported that Washington Prime was contemplating bankruptcy. The mall owner’s bankruptcy plans are not yet final and the discussions around the financing could change. Washington Prime is under forbearance with creditors until March 31 after missing a Feb. 15 interest payment. It remains in talks with creditors around a financial restructuring, according to an earnings statement released Wednesday.

The number of U.S. air passengers screened topped 1.5 million Sunday for the first time since March 2020, as air travel continues to rebound from a pandemic-related drop, the U.S. Transportation Security Administration (TSA) said yesterday, Reuters reported. COVID-19 devastated air travel demand, with U.S. airline passengers down 60% in 2020. But with a growing number of Americans getting vaccinated, demand and advanced bookings have started to rise in recent weeks. TSA said that it screened 1.54 million people Sunday, the highest single day since March 13, 2020 and the 11th consecutive day screening volume exceeding 1 million per day. Still, U.S. air travel demand was down Sunday about 30% versus pre-COVID-19 levels. International and business travel demand both still remain weak. For the last week, trade group Airlines for America said passenger demand was down 47% over pre-pandemic levels, while international travel demand was down 68%. The United States bars most non-U.S. citizens from travel who have been in Brazil, South Africa, China and most of Europe and many countries still restrict entry by Americans.

Caesars Entertainment Inc. sued a group of insurance carriers, accusing them of declining to cover an estimated loss of more than $2 billion because of the COVID-19 pandemic, the Wall Street Journal reported. The casino and hotel company alleges in the lawsuit that it had purchased property insurance coverage to protect against “all risk of physical loss or damage” and resulting business interruption. Most of the policies don’t exclude loss or damage caused by a virus or pandemic, Caesars said in the lawsuit filed Friday in the Eighth Judicial District Court of Clark County, Nev. The company said that it has paid more than $25 million in premiums to secure the all-risk policy portfolio providing more than $3.4 billion in coverage limits. Caesars, which was formed as a result of Eldorado Resort Inc.’s combination with Caesars Entertainment Corp. last year, swung to a loss of $1.76 billion in 2020. The suit is the latest case of a company trying to recover lost business during the pandemic through insurance. The insurers have had the upper hand so far. Of the more than 200 rulings in suits pitting businesses against insurers, more than 80% have been in favor of insurers, according to a COVID-19 litigation-tracking effort at the University of Pennsylvania Carey Law School.

U.S. companies including hotel chain Hilton Worldwide Holdings Inc. are so anxious to lock in low borrowing costs now, before inflation fears push yields even higher or close the market altogether, that they’re paying millions of dollars in penalties to refinance debt early, Bloomberg News reported. The corporations, which also include car renter Avis Budget Group Inc. and financial index company MSCI Inc., are selling new bonds and using the money they raise to buy back existing notes. But those repurchases come at a cost: high fees they have to pony up to buy back securities early. Usually those fees, known as call premiums, would be lower or even zero if the company waited anywhere from a few months to a year. More of these deals may be coming. There’s at least another $70 billion of outstanding bonds that would make sense to refinance now instead of waiting for the next date at which buybacks become cheaper, according to a Bloomberg Intelligence analysis. Many companies are betting they’ll come out ahead if they just pay the fees now, because if they wait too long, they’ll end up having to pay much higher interest costs, or may find they can’t even sell notes.

Cineworld’s U.S. chain Regal will reopen next month after prolonged closures caused by the pandemic, in time for big-budget release “Godzilla vs. Kong”, it said today as it laid out an exclusivity deal with Warner Bros., Reuters reported. The world’s second-largest cinema operator, whose reopening plans follow larger U.S. rival AMC’s, said its multi-year deal with Warner Bros. will allow it to run the studio’s movies exclusively in U.S. cinemas for 45 days, with certain provisions, starting next year. With capacity limits rising to 50% or more across most U.S. states, Cineworld will be able to operate profitably in its biggest markets, he said. In the United Kingdom, Warner Bros. and Cineworld have agreed to an exclusive theatrical window of 31 days before the film goes to premium video on demand, with an extended window of up to 45 days for films that open to an agreed upon box-office threshold. 

The Biden administration is preparing a massive spending proposal on infrastructure and other domestic priorities like child care and drug costs that could put fights over hot-button issues like climate change and taxes front and center, The Hill reported. A source familiar with the plans confirmed that administration officials are eyeing $3 trillion as the topline figure for its Build Back Better jobs and infrastructure proposal, though they cautioned talks are fluid and the final number could change. The sweeping package would constitute the White House’s follow-up to the $1.9 trillion economic relief measure signed into law earlier this month. The new package is expected to be split into two separate bills. The first would focus on infrastructure, with spending on manufacturing and climate change measures, broadband and 5G, and the nation’s roads and bridges. The other measure would include funds for pre-K programs, free community college tuition, child tax credits and health care subsidies, according to multiple reports.