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A bipartisan group of senators is holding discussions to try to get a deal on a fifth round of coronavirus relief amid a months-long stalemate between congressional leadership and the White House, The Hill reported. The talks are one of the first signs of life for a potential coronavirus agreement as congressional Democrats, Senate Majority Leader Mitch McConnell (R-Ky.) and the White House have remained far apart on both the price tag and the policy details. The group includes Republican Sens. Mitt Romney (Utah), Rob Portman (Ohio) and Susan Collins (Maine) as well as Democratic Sens. Chris Coons (Del.), Joe Manchin (W.Va.), Mark Warner (Va.), Michael Bennet (Colo.) and Dick Durbin (Ill.), the No. 2 Senate Democrat. Senators involved in the talks are eyeing an eventual government funding deal as a vehicle for coronavirus relief. Congress has to fund the government — either with a full-year omnibus or with a short-term continuing resolution — by Dec. 11. Any effort to revive the chances of another coronavirus deal faces an uphill path, even as cases climb across the country and some cities and states reinstate restrictions to try to curb the spread of the disease heading into what health experts expect to be a brutal winter season. McConnell has stood firm at pushing for a roughly $500 billion spending package similar to what has been blocked twice in the Senate. Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) say $2.2 trillion is the starting line for any negotiations. Read more. 

In related news, Federal Reserve Chairman Jerome Powell said that the central bank’s actions to backstop a range of credit markets after the coronavirus convulsed Wall Street this past spring had unlocked almost $2 trillion to support businesses, cities and states, the Wall Street Journal reported. In testimony prepared for delivery at a congressional hearing today, Powell said that the Fed’s unprecedented steps to stabilize financial markets had largely succeeded in restoring the flow of credit from private lenders. Treasury Secretary Steven Mnuchin on Nov. 19 told Powell that he would not grant extensions for five lending programs that have backstopped markets for corporate and municipal debt and to purchase loans made to small businesses and nonprofits when those programs expire on Dec. 31. Powell didn’t elaborate in his testimony, released yesterday, about the central bank’s disagreement with Mnuchin’s decision. The Fed had earlier said that it would have preferred the lending programs had stayed open because the pandemic emergency hasn’t receded. Mnuchin is slated to testify alongside Powell at today’s hearing and didn’t address the conflict in his prepared testimony. Read more. (Subscription required.)

Click here to access a live web stream of the Senate Banking Committee's hearing "The Quarterly CARES Act Report to Congress" scheduled for 10 a.m. EDT today. 

Amid the ongoing financial distress caused by the COVID-19 pandemic, bankruptcies are set to rise dramatically, according to a commentary in Fortune. The business busts will strike small firms disproportionately, which is bad news for more than just the business owners. It’s bad for the whole economy, because the surge of financial pain may overwhelm the bankruptcy system. The worrisome outlook emerges from new research by Robin Greenwood of the Harvard Business School, Benjamin Iverson of Brigham Young University’s Marriott School of Business, and David Thesmar of the MIT Sloan School of Management. Their findings are full of surprises, starting with the reality of bankruptcies in the pandemic so far, according to the commentary. Despite a parade of high-profile chapter 11 filings, especially in retail — J.C. Penney, Neiman Marcus, J. Crew, Brooks Brothers — overall bankruptcies through August were “actually 1% lower than in the same timeframe in 2019,” the authors report. It’s no illusion that big companies were more likely to file during the first eight months of 2020, but small businesses were much less likely to file. Maybe that’s because they still had some Paycheck Protection Program funds. Or maybe, as a Jeffries note to clients hypothesized, it’s because many small businesses were so strapped they couldn’t afford to hire a bankruptcy lawyer. In any case, the researchers argue that the numbers have to rocket. “We expect overall bankruptcies to increase by as much as 140 percent in the current year,” they write. “By all metrics, corporate financial distress is set to increase.” Economists don’t see bankruptcies as necessarily bad. When tough times strike, some businesses inevitably will struggle; the bankruptcy process helps sort out which should be given a second chance and which should be liquidated. The resulting reallocation of capital and labor, painful as it may be, helps to rebuild the economy. The danger in the pandemic crisis is that the process may not work as it should. That’s partly because “the balance sheets of small firms are hit the hardest by the current recession,” the researchers find, which is a problem because “small firms restructure very rarely.” Instead of working things out with their creditors, they mostly just fail. They’re less likely to get a second chance because some of their most valuable assets, such as the entrepreneur’s know-how, can’t be pledged to investors. Read more.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.