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A top financial regulator warned mayors and governors on Monday that extended shutdowns due to the coronavirus pandemic could hurt banks by increasing loan defaults and degrading the value of assets like commercial real estate, Politico reported. “The nation’s mayors and governors should be aware of a set of risks to the nation’s banking system created by continued state and local lockdown orders,” acting Comptroller of the Currency Brian Brooks said in letters to the National League of Cities, the U.S. Conference of Mayors, and the National Association of Governors. “Certain aspects of these orders potentially threaten the stability and orderly functioning of the financial system.” Brooks, who took the helm of the bank regulator on Friday, is wading into a heated debate over the trade-offs between the job losses and business closures caused by the lockdowns and the health risks of lifting those orders. The other two federal bank regulators — the Federal Reserve and the FDIC — have not made similar statements, and Fed Chair Jerome Powell has warned that a second outbreak of the virus could harm public confidence and cause even greater economic pain. Brooks, a former business associate of Treasury Secretary Steven Mnuchin, cited as a potential downside “certain cities’ initiatives to cut off water, electric or other utilities” to businesses operating in violation of lockdown orders.

The Federal Reserve thawed credit markets in March by promising a whatever-it-takes program to buy corporate bonds. Ten weeks later, the Fed has yet to buy a single bond, the Wall Street Journal reported. Just the announcement of the backstop ended panic selling, boosted prices and fueled a record surge of new corporate-bond sales. Companies are now reluctant to sign up for Fed purchases because such a move could be seen as a sign of weakness during a market rebound, some bond fund managers and bank executives said. The Fed has yet to officially launch the initiative, which enables it to buy limited amounts of new and pre-existing bonds of companies, in part because it is hashing out the technical details. Only companies that certify they are U.S.-based and haven’t received other aid under the CARES Act — a $2 trillion financial-relief package that includes loans and grants to businesses — can participate in the program, which would disclose their names, the amount of their bonds that the Fed would purchase and the prices paid. Those terms “could give bond issuers pause, especially those that already have access to the markets,” said Arvind Narayanan, co-head of investment-grade credit at Vanguard Group, which manages $1.8 trillion of fixed-income assets.

Wells Fargo & Co will stop providing loans to a majority of its independent auto dealer customers due to the economic challenges brought on by the Covid-19 pandemic, Reuters reported. “We are doing everything we can to help customers weather the economic impacts of this health crisis ... we also have an obligation to review our business practices in light of the economic uncertainty presented by Covid-19,” a Wells Fargo spokeswoman said. Wells Fargo has let the majority of its independent dealership customers know that it will suspend accepting loan applications, the spokeswoman said, adding that the bank will continue doing business with customers with whom it has “deep, long-standing relationships.” The bank in April said it has set aside nearly $4 billion to cover expected loan losses due to the coronavirus outbreak.

One of the biggest questions surrounding the government’s efforts to help businesses struggling amid the coronavirus pandemic is whether the programs are constructed in a way that will prevent a wave of bankruptcies, keeping a short-term shock from turning into drawn-out economic pain, the New York Times reported. A new analysis from a group of Harvard University researchers suggests that the answer, should markets turn ugly again, might be no. Highly indebted public companies that employ millions of people are largely left out of the major direct relief options that Congress, the Federal Reserve and the Treasury have devised to help companies make it through the pandemic. Much of that is by design. Policymakers have prioritized getting help to businesses that came into the coronavirus crisis in good health, lowering the chances that taxpayers will wind up bailing out big companies that loaded up on risky debt. It could also help officials avoid the kind of angry criticism that surrounded 2008 bank and auto company rescues. But it leaves a slice of America’s companies fending for themselves amid the sharpest downturn since the Great Depression, putting them at greater risk of bankruptcy and their workers at greater risk of job loss. Publicly traded firms that employ about 8.1 million people — roughly 26 percent of all employment at tracked publicly traded companies — are all or mostly excluded from direct government relief, based on an analysis by Samuel Hanson, Jeremy Stein and Adi Sunderam of Harvard, along with Eric Zwick of the University of Chicago. Not all of those companies are likely to run into trouble, some have deep-pocketed investors behind them and others made poor financial choices that left them vulnerable to shock. But excluding a broad swath of employers could affect how successful the government is at preventing wide-scale bankruptcies if virus-related economic pain lingers, the researchers warned.

The U.S. economy could take the better part of a decade to fully recover from the coronavirus pandemic and related shutdowns, a U.S. budget agency said, as a series of surveys pointed to continuing weakness in global manufacturing, the Wall Street Journal reported. The Congressional Budget Office, a nonpartisan legislative agency, said the sharp contraction triggered by the coronavirus caused it to mark down its 2020-30 forecast for U.S. economic output by a cumulative $7.9 trillion, or 3 percent of gross domestic product, relative to its January projections. GDP isn’t expected to catch up to the previously forecast level until the fourth quarter of 2029, the CBO added. The roughly $3.3 trillion in stimulus programs enacted by Congress since March will only “partially mitigate the deterioration in economic conditions,” the CBO said. “After you get the initial bounce of economic activity simply from removing the lockdowns, I think what we’ll see is an economy that is running at a level of activity notably below where we were prior to Covid,” said Michelle Meyer, chief U.S. economist at BofA Merrill Lynch. The CBO analysis came as new surveys showed that factories in the U.S. and abroad continued to reduce output and shed jobs in May, though the pace of deterioration moderated as governments moved to ease coronavirus-related restrictions on their economies.

The outbreak of protests and riots during the weekend roiled retailers of all stripes, adding new stress to an industry that has already been upended by the coronavirus pandemic, the New York Times reported. But even as major chains boarded up stores and halted operations, they largely sought to convey empathy for protesters following the death of a black man, George Floyd, while in police custody, and did not condemn the damage to their businesses. Many large retailers would not discuss the extent of the damage or how many stores they had to close because of the unrest. “We can fix the damage to our stores," Nordstrom said on its website. "Windows and merchandise can be replaced. We continue to believe as strongly as ever that tremendous change is needed to address the issues facing black people in our country today.” Target, which is based in Minneapolis, where Floyd was killed, said over the weekend that about 200 stores would close or have shorter hours as a result of protests and looting. On Monday, the chain said that it was no longer sharing the number of affected stores “as the situation remains incredibly dynamic,” and emphasized its commitment to rebuilding and reopening damaged locations while supporting the Minneapolis and St. Paul communities. CVS said that more than 250 locations across 21 states faced varying levels of damage from protest activity and that 60 stores remained closed while repairs were made. Adidas, which also sells the Reebok brand, said that after some stores were damaged during protests, it decided to close all its retail stores in the United States “until further notice.” Nike and Apple also closed some stores.

As the coronavirus pandemic upended the U.S. health-care system, EmCare IAH Emergency Physicians, a Houston staffing company owned by private equity firm KKR, made a little-noticed request of the government: It applied for a $317,379 interest-free loan, Bloomberg News reported. KKR had for years paid lobbyists to fend off efforts to ban a practice known as surprise billing used by EmCare and other providers that has driven up the cost of health care. But that didn’t stop the U.S. Health and Human Services Department from approving the loan and almost 300 others totaling more than $60 million to subsidiaries of KKR-owned companies. Shut out from many coronavirus relief programs, private equity companies have found a back door at HHS, where they have borrowed at least $1.5 billion, according to a Bloomberg News analysis of more than 40,000 loans disclosed by the department. KKR has more than $58 billion of cash to invest. Health-care facilities owned by Apollo Global Management, which started the year with about $46 billion, received at least $500 million in HHS loans. And Cerberus Capital Management’s Steward Health Care System LLC, which threatened to close a hard-hit Pennsylvania hospital, received at least $400 million in loans. Last month Cerberus was working to quadruple the size of a fund to invest in distressed loans to $750 million.

As they reopen stores full of merchandise from March that no one will want in June, retailers are struggling to make room for summer goods trapped in overstuffed warehouses. With five big retailers having filed for bankruptcy in May, some of the industry’s survivors can’t get financial backing for their holiday season orders — prompting an urgent appeal to the Treasury Department and Federal Reserve for help, the Washington Post reported. Even though stores were closed for much of March and April, huge amounts of shoes, shirts, suits and swimwear poured into the U.S. from global supply chains that continued churning despite the pandemic. Retailers have to decide what to do with their leftover March goods and a glut of seasonal gear while they place their bets on what consumer spending will look like in six months. Without a Treasury or Fed guarantee of its routine financing, the retail industry could suffer “a commercial credit crisis that threatens to seize up our economy and stall the safe restart in its infancy," the American Apparel and Footwear Association will warn Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome H. Powell in a letter early this week. The trade group represents more than 1,000 name-brand companies, including manufacturers and retailers. Read more. 

In related news, many retailers and restaurants, already crippled by the coronavirus pandemic, are grappling with damage to their properties and new closures following protests sparked by the death of George Floyd that have sometimes turned violent, the Wall Street Journal reported. From Minneapolis, where Floyd died while handcuffed and in police custody, to California and Georgia, big and small retailers and restaurants have shut locations in anticipation of violence or are working to rebuild after destruction over the past week. Target Corp., Walmart Inc., Nike Inc. and small family businesses have collectively closed hundreds of locations or are recovering from looting and physical damage related to protests. Adidas said that it was temporarily closing all its U.S. stores, while Amazon.com Inc. said it had scaled back or adjusted delivery routes in a handful of cities to protect employees. Many executives and business owners expressed solidarity with protesters, who object to broader issues of racism and social justice. Read more. (Subscription required.) 

A new study predicted that nearly two-thirds of publicly traded restaurants are at risk of bankruptcy as the Covid-19 pandemic batters the industry, Bloomberg News reported. The concern is higher for small companies and restaurants that specialize in dine-in, consulting firm Aaron Allen & Associates said in an analysis. It identified Bloomin’ Brands Inc., Potbelly Corp. and Chili’s owner Brinker International Inc. among those at greater risk. “It’s really the full-service model that’s in the biggest danger,” principal Aaron Allen said. “Some of those that are in casual dining — a lot of those had already been bleeding cash, bleeding locations.” The study paints a bleak picture for an industry already upended by broad stay-at-home orders that led to sharp declines in restaurant sales. While Americans are starting to venture out again, the dining recovery may be slow with unemployment on the rise, cautious spending and also ongoing concerns about health and safety. That could create an opportunity for a lucky few companies at the top of the food chain, Allen said. Some of the largest firms entered the downturn with the financial wherewithal to survive and perhaps lead an industry consolidation. “The big will eat up the smaller and weaker competition.”