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President Trump pulled the plug on ongoing bipartisan coronavirus relief talks in an abrupt move that jolted Wall Street and surprised lawmakers of both parties, but hours later called on Congress to approve a bill providing another direct check to many Americans, the Wall Street Journal reported. “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill,” Trump wrote earlier yesterday on Twitter. Trump’s tweets appeared to end the long-running effort between House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin to negotiate an agreement on another trillion-dollar-plus coronavirus relief deal. But later yesterday, Trump appeared to backtrack, calling on Congress to approve some additional assistance for airlines and a small-business aid program. He also tweeted that Congress should pass a bill providing another direct check to many Americans. “If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now,” Trump tweeted. Trump also called on Congress to quickly extend $25 billion in new payroll assistance to U.S. passenger airlines furloughing thousands of workers as air travel remains down sharply amid the coronavirus pandemic, according to Reuters. Democrats have largely resisted passing piecemeal bills, pushing instead for an overall agreement. Stocks turned lower yesterday on Trump’s tweets regarding the talks. Read more. (Subscription required.) 

In related news, Federal Reserve Chairman Jerome Powell yesterday reiterated his belief that the U.S. economy needs more fiscal support even though the recovery from the “natural disaster” of the coronavirus pandemic so far has been strong, MarketWatch.com reported. Powell argued in a speech that it was better for Congress to provide too much fiscal support than the reverse. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said. This would lead more businesses to declare bankruptcy and for households to run into severe economic distress. On the other hand, even if policy actions are more than is needed "it will not go to waste,” Powell said. “The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods,” the Fed chairman said. Read more.

House Speaker Nancy Pelosi (D-Calif.) said yesterday that there is no deal yet on a new coronavirus relief package as Democrats wait to see whether the Trump administration will agree to terms, the Washington Post reported. Pelosi spoke a day after President Trump, hospitalized with covid-19, tweeted his support for more stimulus legislation, writing, “WORK TOGETHER AND GET IT DONE.” Pelosi was asked if the president’s comment suggested that a deal was in hand or close. “No, it means that we want to see that they will agree on what we need to do to crush the virus so that we can open the economy and open our schools safely,” Pelosi said. She did not elaborate, but had said on Friday that agreeing on language on how to spend new testing and tracing money remained a sticking point. Democrats have pushed for months for a national testing strategy that the administration never produced. Pelosi also suggested Friday that Trump’s positive diagnosis could change the dynamic and help speed an agreement in the new round of economic relief talks that restarted about a week ago between her and Treasury Secretary Steven Mnuchin. Negotiations continued over the weekend, but there was little sign a breakthrough would be imminent. Pelosi asked airlines on Friday to hold off on impending furloughs of tens of thousands of workers pending a deal. United and American, the major carriers that have threatened furloughs, have said they can reverse them if there is a deal to extend payroll support for the industry that just expired, but Congress must act fast.

Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi (D-Calif.) failed to strike a deal for a new stimulus package during a 90-minute meeting Wednesday but said they will continue negotiating, with time running out until the election, Bloomberg News reported. “We still don’t have an agreement, we still have more work to do,” Mnuchin told reporters, adding, “We’ve made progress in a lot of areas.” Pelosi said that she and Mnuchin were seeking some “further clarification” on each others’ positions and that “our conversations will continue.” The speaker said that the House will go forward with a vote Wednesday night on a $2.2 trillion Democratic stimulus plan she described as “our proffer” in negotiations with the White House. That legislation is less than the $3.4 trillion bill Democrats passed in May, but still more than Republicans have said they could accept. Senate Majority Leader Mitch McConnell (R-Ky.) said earlier that it was rife with “poison pills” that have nothing to do with pandemic relief. Read more.

In related news, The Trump administration has proposed including a $20 billion extension in aid for the battered airline industry in a new stimulus proposal to House Democrats worth over $1.5 trillion, White House chief of staff Mark Meadows said yesterday. “There’s $20 billion in the most recent proposal for the airlines that would give them a six month extension,” said Meadows. Meadows declined to provide the total value of the White House’s latest proposal but said the figure is “certainly above the $1.5 trillion that has been articulated to date.” “As you get above $1.5 trillion, it gets extremely difficult to justify based on the facts,” he cautioned, explicitly stating that $2 trillion was too much. “If it starts with a 2, it’s going to be a real problem,” he added. Read more.

The House Judiciary Committee yesterday approved (19-5) a bill that would extend bankruptcy protections to borrowers with private or federally held student loans, Bloomberg Law reported. H.R. 2648, the "Student Borrower Bankruptcy Relief Act," strikes the section of the Bankruptcy Code that makes it much more difficult for student loan borrowers to discharge their student debt in bankruptcy, Forbes reported. Borrowers must generally prove that they have an “undue hardship” in order to discharge their student loan debt in bankruptcy. These restrictions initially only applied to federal student loans, but were subsequently expanded to cover private student loans following the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The “undue hardship” standard applied to student loan debt is not adequately defined in statute, so bankruptcy judges have established various tests (which vary by jurisdiction) to determine discharge eligibility. Read more.

Click here to view the full text of H.R. 2648. 

The House Judiciary Committee also approved other pieces of legislation to amend the Bankruptcy Code, including:

- H.R. 7370, the Protecting Employees and Retirees in Business Bankruptcies Act of 2020 (20-10 vote).

- H.R. 8366, To amend title 11 of the United States Code to increase the amount of the allowable homestead exemption. or the Protecting Homeowners in Bankruptcy Act of 2020 (18-5 vote).

House Democrats released a scaled back $2.2 trillion proposal to extend support to the U.S. economy in face of the continuing damage from the coronavirus pandemic, Bloomberg News reported. The plan follows through on discussions last week to prompt a last-ditch attempt at negotiations with the White House and break an impasse on COVID-19 relief that’s lasted since early August. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin talked yesterday after the Democratic plan was released and plan to speak again today, Pelosi’s spokesman said. While the details of the legislative text adds clarity to the talks, the top-line spending level is no closer to that so far supported by Republicans. President Donald Trump has indicated he could support as much as $1.5 trillion in aid — still higher than the $650 billion put forth in a “skinny” aid package by Senate Republicans earlier this month. Should no deal be forthcoming, House Democrats have said they aim to proceed on their own in voting on the new plan, allowing the party’s candidates in the Nov. 3 elections to highlight a recent vote on coronavirus relief. The last vote was on the bigger, $3.4 trillion HEROES Act back in May. A key source of division has been Democrats’ push for large-scale aid to state and local authorities. The plan released yesterday has $436 billion for one year of assistance, less than a previous demand for $915 billion, which had triggered scorn among Trump administration officials who called it a bailout for poorly run states. The Democratic plan includes new aid for airlines, restaurants and small businesses that wasn’t in in the original package passed by the House in May, and it has more than double the amount for schools. 

House Democrats have started drafting a stimulus proposal of roughly $2.4 trillion that they can take into possible negotiations with the White House and Senate Republicans, according to House Democratic officials, Bloomberg News reported. The bill could get passed by the House next week. While smaller than the $3.4 trillion package the House passed in May, it remains much larger than what Senate Republicans have said they could accept. President Donald Trump has indicated he’d be willing to go as high as $1.5 trillion. “When you are talking about $2.2 trillion and $1.5 trillion you are in deal-making territory” said Representative Dan Kildee (D-Mich.). House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer had earlier pressed the White House for a $2.2 trillion package. As the top-line figure remains well above what the Trump administration has favored, the new House bill may do little on its own to resolve the impasse in talks that’s persisted since August. Senate Republicans have been unable to coalesce around an earlier $1 trillion proposal, and instead backed a $650 billion plan that ended up getting blocked by Democrats as insufficient. The bill adds to the previous $2.2 trillion Pelosi-Schumer plan with help for the U.S. airline industry to avert massive job losses, which could start Oct. 1 when restrictions expire from a prior round of federal assistance. Also included is small-business aid and a bailout for restaurants. 

Top U.S. economic policymakers opened the door yesterday to further aid for small businesses hit by the coronavirus-triggered recession, but differed over how broad it might extend and the manner in which it should be delivered, Reuters reported. In testimony before the House of Representatives Financial Services Committee, Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell were pressed by lawmakers concerned the multi-trillion-dollar effort to battle the economic fallout from the pandemic had left a broad swathe of businesses vulnerable, from the smallest corner restaurants to commercial office properties and hotels. Mnuchin and Powell said that they were looking for ways to extend more help, but also that they were hitting legal and practical limits that might require action by Congress to avoid. Fed loans backed by commercial buildings as collateral, for example, were often prohibited by existing lending agreements that forbid the owners from further borrowing, Powell said. And proposals that the U.S. central bank loosen requirements for its Main Street Lending Program to make it more accessible to smaller firms, he said, overlooked the fact that larger businesses have been the ones interested in central bank credit. “There is very little demand below a million dollars,” Powell said in response to Mnuchin’s suggestion that the minimum loan size under the facility could be lowered from $250,000 to $100,000. Help for small businesses, Powell said, would better come through another grant-type program like the Paycheck Protection Program because “trying to underwrite the credit of hundreds of thousands of small businesses would be very difficult,” for the Fed.

The Trump administration is urging U.S. lawmakers to pass separate bills to aid airlines and other sectors, given failure to reach agreement on a broader package of stimulus funding, Reuters reported. The U.S. Congress has been deadlocked over another round of economic stimulus aimed at blunting the effects of the coronavirus pandemic that has now killed over 200,000 people in the U.S. U.S. airlines, facing a huge drop in demand due to virus-related lockdowns, on Tuesday mounted a last-ditch bid to persuade Congress to approve a new $25 billion bailout to help avert thousands of furloughs set to begin Oct. 1. Delta Air Lines has agreed to delay a decision on pilot furloughs until Nov. 1, the pilots union said on Tuesday. Two key Republican senators this week introduced a bill that would authorize $28.8 billion in payroll aid for the airlines. But congressional aides say a stand-alone measure is unlikely to win passage given aid requests from so many other struggling industries. White House Press Secretary Kayleigh McEnany said that talks about a broader stimulus measure were continuing with House of Representatives Speaker Nancy Pelosi, and said the White House’s agreement to accept a measure valued at $1.5 trillion could still lead to some progress. In the absence of a bigger bill, she urged Pelosi to work on separate legislation to address the needs of airlines, which have warned that they will be forced to carry out mass layoffs unless they receive additional assistance.

Federal Reserve Chairman Jerome Powell said the economic response to the coronavirus alleviated the fallout from the pandemic-induced recession but suggested Congress would likely need to spend more money to shore up parts of the economy that continue to struggle, the Wall Street Journal reported. “Our economy will recover fully from this difficult period,” Powell said in prepared remarks posted yesterday that are set for delivery at a congressional hearing today. The Fed will “do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.” Powell begins three days of hearings on Capitol Hill today, beginning with the House Financial Services Committee, where he will testify alongside Treasury Secretary Steven Mnuchin. Both men will also appear before the Senate Banking Committee on Thursday. Powell testifies tomorrow before a separate House panel overseeing the U.S. response to the coronavirus pandemic. Powell said that the economy had rebounded in recent months following the end of lockdowns imposed to slow the spread of the virus, and that gains in household spending likely reflected federal stimulus efforts that included expanded unemployment benefits. Powell has said the government will need to do more to support hard-hit businesses, state and local governments, as well as unemployed workers in those sectors to prevent deeper scars from slowing any rebound. Read more. (Subscription required.) 

To watch the House Financial Services hearing scheduled for 10:30 a.m. today, please click here.