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The Fed’s $4 Trillion Lifeline Never Materialized. Here’s Why.

WASHINGTON — As companies furloughed millions of workers and stock prices plunged through late March, Treasury Secretary Steven Mnuchin offered a glimmer of hope: The government was about to step in with a $4 trillion bazooka.

The scope of that promise hinged on the Federal Reserve. The relief package winding through Congress at the time included a $454 billion pot of money earmarked for the Treasury to back Fed loan programs. Every one of those dollars could, in theory, be turned into as much as $10 in loans. Emergency powers would allow the central bank to create the money for lending; it just required that the Treasury insure against losses.

It was a shock-and-awe moment when lawmakers gave the package a thumbs up. Yet in the months since, the planned punch has not materialized.

The Treasury has allocated $195 billion to back Fed lending programs, less than half of the allotted sum. The programs supported by that insurance have made just $20 billion in loans, far less than the suggested trillions.

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The programs have partly fallen victim to their own success: Markets calmed as the Fed vowed to intervene, making the facilities less necessary as credit began to flow again. They have also been undercut by Mr. Mnuchin’s fear of taking credit losses, limiting the risk the government was willing to take and excluding some would-be borrowers. And they have been restrained by reticence at the central bank, which has extended its authorities into new markets, including some — like midsize business lending — that its powers are poorly designed to serve. The Fed has pushed the boundaries on its traditional role as a lender of last resort, but not far enough to hand out the sort of loans some in Congress had envisioned.

Lawmakers, President Trump and administration officials are now clamoring to repurpose the unused funds, an effort that has taken on more urgency as the economic recovery slows and the chances of another fiscal package remain unclear. The various programs are set to expire on Dec. 31 unless Mr. Mnuchin and Jerome H. Powell, the Fed chair, extend them.

Here’s how that $454 billion failed to turn into $4 trillion, and why the Fed and Treasury are under pressure to do more with the money.

The Fed can lend to private entities to keep markets functioning in times of stress, and in the early days of the crisis it rolled out a far-reaching set of programs meant to soothe panicked investors.

But the Fed’s vast power comes with strings attached. Treasury must approve of any lending programs it wants to set up. The programs must lend to solvent entities and be broad-based, rather than targeting one or two individual firms. If the borrowers are risky, the Fed requires insurance from either the private sector or the Treasury Department.

Early in the crisis, the Treasury used existing money to back market-focused stabilization programs. But that funding source was finite, and as Mr. Mnuchin negotiated with Congress, he pushed for money to back a broader spate of Fed lending efforts.

The central bank itself made a major announcement on March 23, as the package was being negotiated. It said it was making plans to funnel money into a wide array of desperate hands, not just into Wall Street’s plumbing. Officials would set up an effort to lend to small and medium-size businesses, the Fed said, and another that would keep corporate bonds flowing. It would go on to expand that program to include some recently downgraded bonds, so-called fallen angels, and to add a bond-buying program for state and local governments.

Congress allocated $454 billion in support of the programs as part of the economic relief package signed into law on March 27. When the Congressional Budget Office estimated the budget effects of that funding, it did not count the cost toward the federal deficit, since borrowers would repay on the Fed’s loans, and fees and earnings should offset losses.

Mr. Mnuchin and congressional leaders did not settle on that sum for a very precise economic reason, a senior Treasury official said, but they knew conditions were bad and wanted to go big.

Overdoing it would cost nothing, and the size of the pot allowed Mr. Mnuchin to say that the partners could pump “up to $4 trillion” into the economy.

It was like nuclear deterrence for financial markets: Promise that the government had enough liquidity-blasting superpower to conquer any threat, and people would stop running for safer places to put their money. Crisis averted, there would be no need to actually use the ammunition.

Still, the huge dollar figure stoked hopes among lawmakers and would-be loan recipients — ones that have been disappointed.

Key markets began to mend themselves as soon as the Fed promised to step in as a backstop. Companies and local governments have been able to raise funds by selling debt to private investors at low rates.

Corporate bond issuance had ground to a standstill before the Fed stepped in, but companies have raised $1.5 trillion since it did, Daleep Singh, an official at the New York Fed, said on Tuesday. That is double the pace last year. The companies raising money are major employers and producers, and if they lacked access to credit it would spell trouble for the economy.

While self-induced obsolescence partly explains why the programs have not been used, it’s not the whole story. The Main Street program, the one meant to make loans to midsize businesses, is expected to see muted use even if conditions deteriorate again. In the program that buys state and local debt, rates are high and payback periods are shorter than many had hoped.

Continued lobbying suggests that if the programs were shaped differently, more companies and governments might use them.

The relatively conservative design owes to risk aversion on Mr. Mnuchin’s part: He was initially hesitant to take any losses and has remained cautious. They also trace to the Fed’s identity as a lender of last resort.

Walter Bagehot, a 19th-century British journalist who wrote the closest thing the Fed has to a Bible, said central banks should lend freely at a penalty rate and against good collateral during times of crisis.

In short: Step in when you must, but don’t replace the private sector or gamble on lost causes.

That dictum is baked into the Fed’s legal authority. The law that allows it to make emergency loans instructs officials to ensure that borrowers are “unable to secure adequate credit accommodations from other banking institutions.” The Fed specified in its own regulation that loan facilities should charge more than the market does in normal conditions — it wants to be a last-ditch option, not one borrowers would tap first.

The Fed has stretched its “last resort” boundaries. The Main Street program works through banks to make loans, so it is more of a credit-providing partnership than a pure market backstop, for instance.

Yet Bagehot’s dictum still informs the Fed’s efforts, which is especially easy to see in the municipal program. State finance groups and some politicians have been pushing the central bank to offer better conditions than are available in the market — which now has very low rates — to help governments borrow money for next to nothing in times of need.

The Fed and Treasury have resisted, arguing that the program has achieved its goal by helping the market to work.

Congress is not uniformly on board with wanting a more aggressive Fed that might become a first option for credit. Senator Patrick J. Toomey of Pennsylvania, a Republican on the committee that oversees the central bank, has repeatedly underlined that the Fed is a backstop.

And replacing private creditors during times of crisis would put central bankers — who are neither elected nor especially accountable — in the position of picking economic winners and losers, a role that worries the Fed.

Such choices are inherently political and polarizing. Already, many of the same people who criticize stringency in the state and local programs regularly argue that the programs intended to help companies should have come with more strings attached.

And it could become a slippery slope. If the Fed shoulders more responsibility for saving private and smaller public entities, Congress might punt problems toward the central bank before solving them democratically down the road.

“It’s opening Pandora’s box,” said David Beckworth, a senior research fellow at the Mercatus Center at George Mason University.

Being too careful could also carry an economic risk if it meant that the Fed failed to provide help where needed. The midsize business segment, which employs millions of people, has had few pandemic relief options. Struggling states and cities are also huge employers.

Yet those entities may be past the point of needing debt — all the Fed can offer — and require grants instead. And it is worth noting that just because the Fed and Treasury are not rewriting their programs to support broader use now does not mean the Fed would stand back if conditions were to worsen.

If that happens, “it’s going to stop pointing to the fact that it has a fire hose,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania. “It’s going to take it out and turn it on.”

Alan Rappeport contributed reporting.

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How United Airlines Is Trying to Plan Around a Pandemic

When the coronavirus pandemic wiped out travel in the spring, United Airlines slashed its flight schedule, salted away aircraft in the New Mexico desert and parked planes at hangars around the country.

That was the easy part.

Now, with what is normally the peak summer season behind it and travel proceeding in fits and starts, the airline is continuing to fine-tune every facet of its business, from maintenance to flight planning, as it tries to predict where a wary public will fly, a challenge even in the best of times.

“We can really throw away the crystal ball, which was hazy to begin with,” said Ankit Gupta, United’s vice president for domestic network planning.

This week, the airline announced a $1.8 billion loss during the third quarter, with revenues down 78 percent compared to the same period a year ago. While United said it was ready to “turn the page” from survival to rebuilding, it said it didn’t expect a recovery to begin in earnest until 2022.

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Credit…Lucy Hewett for The New York Times
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Credit…Lucy Hewett for The New York Times

Passenger volumes for U.S. airlines are down about 65 percent, according to an industry group, and major carriers have taken on enormous debt as they lose billions of dollars each month. After hopes for a second congressional rescue package faded last month, United furloughed more than 13,000 workers and American Airlines furloughed 19,000.

But while every airline is struggling, each struggles in its own way. United relies far more than its rivals on international travel, which is deeply depressed and is expected to take far longer than domestic travel to bounce back. Lucrative business travel will be slow to return, too, and the airline said this week that it had amassed more than $19 billion in cash and other available funds to cope with the downturn.

“We’ve got 12 to 15 months of pain, sacrifice and difficulty ahead,” United’s chief executive, Scott Kirby, said on an earnings conference call on Thursday. “But we have done what it takes in the initial phases to have confidence — it’s really about confidence — in getting through the crisis and to the other side.”

In navigating that path, the airline has focused on finding savings while positioning itself to serve the few passengers who still want to fly. When the virus devastated travel in March and April, the airline took hundreds of planes out of circulation. Among the first to go were twin-aisle jets used for international flights, which dropped early as countries closed borders. Single-aisle planes — the kind used for domestic routes — followed soon after.

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Credit…Lucy Hewett for The New York Times

About 150 planes were sent to long-term storage in Roswell, N.M. — yes, that Roswell — where the dry conditions are better suited for long-term aircraft preservation. Many others were parked at United’s hub airports in and near cities including Chicago, Washington and Newark, where technicians could more easily get them back into service if needed.

Since July, United has brought back more than 150 of the planes that the airline or its regional carriers had grounded, it said on Thursday. About 450 are still stashed away, but must be maintained in a way that allows flexibility.

To get it right, Tom Doxey, United’s senior vice president for technical operations, and his team consult models created by computer scientists and solicit guidance from maintenance crews. Generally, two considerations loom large: how soon a plane will need substantial maintenance and the likelihood that it will be among the first to start flying again.

“If you have an aircraft that maybe is less likely to come back soon, you kind of want it at the back of the parking lot,” Mr. Doxey said. “It goes into prolonged storage and it probably goes to a desert location.”

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Credit…Lucy Hewett for The New York Times

As demand for domestic flights picks up, United will most likely put single-aisle Airbus A320s or Boeing 737s to use, so it keeps many at the ready, he said. The same goes for the Boeing 777s or 767s, which can be used for international travel, whenever it rebounds. Planes that recently underwent intensive maintenance are kept closer at hand, too, than those that may soon be due for a deeper examination.

Fortunately for Mr. Doxey and United, some travel trends have started to emerge, making his job easier. Most of the people still flying are staying within the country, visiting friends and relatives or vacationing outdoors. If airline planners are right, travel to powdery ski slopes in the West may pick up soon, too. Those flights would put United’s smaller single-aisle planes to use.

Planning routes in such lean times can be incredibly complex, with airlines weighing a range of variables on limited resources. Not only do the right planes need to be in the right places, but planners must be sure that they have the gate agents, baggage handlers, flight attendants and pilots needed for each flight — out and back — all while trying to accommodate erratic travel trends.

To predict winter demand, Mr. Gupta and his domestic planning team consulted with resort operators and staff members near ski towns to gauge how many flights the company should add to snowy destinations. Based on recent and historical trends, they also added an unusual mix of direct flights to Florida this winter from the Northeast and the Midwest. On Thursday, United began offering preflight coronavirus tests to customers headed from San Francisco to Hawaii to help them avoid the state’s quarantine requirements and hopefully increase sales. It is also planning to expand service on dozens of routes to tropical destinations near and within the United States and resuming flights on nearly 30 international routes.

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Credit…Lucy Hewett for The New York Times

With few people flying internationally, though, United has less need for its wide-body jets, which account for a quarter of its fleet. But it has found a use for some of those bigger planes: When demand for air cargo spiked, United put its larger, fuel-efficient 787s to work hauling goods.

Before the pandemic, the airline operated more than 300 daily flights abroad, but that figure dipped to 11 during the depths of the crisis. Next month, the airline plans to operate more than 150 international departures each day. To understand when and how that demand might recover, Patrick Quayle, who oversees international network planning for United, and his team track a range of indicators, including national travel restrictions, the travel habits of dual citizens and the economic ties between countries.

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Credit…Lucy Hewett for The New York Times
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Credit…Lucy Hewett for The New York Times

“It’s a bit of playing United Nations and looking at alliances and looking at passport data, and it’s a bit of gut feeling, to be quite candid,” he said.

As difficult as planning has been, it is becoming even harder. The federal stimulus passed in March, the CARES Act, gave passenger airlines $25 billion to help keep tens of thousands employed. It also made life a little easier for network planners, allowing them to worry less about whether a flight would cover labor costs, a major expense, and freeing them up to make last-minute changes knowing that there were far more employees available to work than needed. The aid expired last month, though, and prospects of another round of funding have largely faded.

There may be some reason for hope, though. The Transportation Security Administration screened nearly one million people at airport checkpoints on Sunday, the highest number since mid-March, though it was still less than 40 percent of the number screened on the same weekday last year. Whatever happens in the months to come, Mr. Doxey said, United is prepared: “We have a plan in place.”

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Credit…Lucy Hewett for The New York Times
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Unemployment Claims Rise Anew in Latest Sign of Economic Distress

The American economy is showing fresh signs of deceleration, hammered by layoffs, a surge in coronavirus cases and the lack of fresh aid from Washington.

The Labor Department reported Thursday that 886,000 people filed new claims for unemployment benefits last week, an increase of nearly 77,000 from the previous week. Adjusted for seasonal variations, the total was 898,000.

The rise follows the announcement of layoffs by major companies including Disney and United Airlines in recent weeks and an impasse between Republicans and Democrats over another round of aid for the economy. A recent jump in coronavirus infections, principally in the Midwest and Western states, only added to the grim outlook.

“It’s discouraging,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The labor market appears to be stalled, which underscores the need for new stimulus as quickly as possible.”

The economy rebounded strongly in late spring and early summer as lockdowns eased in many parts of the country and employers brought back workers from furloughs. But those recalls have slowed, even as federal stimulus efforts have waned.

In past recessions, 800,000 new claims for state unemployment insurance in a week would have been extraordinary. But over the last 30 weeks, that figure has become a floor, not a ceiling.

The latest numbers “point to a lot of churn in the labor market, and it appears the rate of firings has picked up,” said Michael Gapen, chief U.S. economist at Barclays.

More layoffs are expected as sectors like leisure and hospitality struggle. In some states, restaurants have been able to salvage some business by serving diners outside, but that option will disappear in many areas as winter approaches.

“The course of the virus determines the course of the economy,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “You can’t fully reopen with the contagion so high.”

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Credit…John Bazemore/Associated Press

A federal program set to expire at the end of the year, Pandemic Emergency Unemployment Compensation, is seeing a surge in new applications. It provides 13 weeks of extended benefits after the end of regular state payments, which typically last 26 weeks.

In the week that ended Sept. 26, the most recent period with available data, nearly 2.8 million people were getting the extended benefits, a jump from fewer than two million the previous week. That increase was roughly equal to the decline in the number collecting state benefits.

But receiving those benefits, which are administered by the states, isn’t so easy, experts say. “The transition from regular state benefits to P.E.U.C. is not going smoothly,” said Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute, a left-leaning research group.

In some places, recipients of state unemployment benefits haven’t been notified of their eligibility for the federal extension, and aging computer systems have slowed the processing of applications.

If the program is not extended by Congress, “we’re going to see a disaster,” Ms. Shierholz said. “There will be a huge drop in living standards and an increase in poverty as well as downward pressure on economic growth.”

For workers facing the end of regular benefits, the extended payments have proven to be a lifeline.

Jared Gaxiola of Torrance, Calif., was laid off from his job as a freelance lighting technician in March, after live events were canceled across the country. When his state benefits ran out in mid-September, he was able to get a 13-week extension through Pandemic Emergency Unemployment Compensation.

Mr. Gaxiola, 35, hopes to find a job by the time the federal payments run out in December. But with entertainment work still scarce, he worries about how he will pay his rent in the new year.

“I could probably borrow money from my sister if I needed to,” Mr. Gaxiola said. “But I really don’t want to have to do that.”

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Credit…Jose A. Alvarado Jr. for The New York Times

Some workers who are caught between an unforgiving job market and uncertain prospects for help from the government have taken matters into their own hands.

For three years, Lea Polizzi worked more than 50 hours a week as a nanny and a freelance photographer in New York City. But in March, when the pandemic hit, the family she worked for on the Upper East Side left the city, and all of her photography gigs dried up.

Ms. Polizzi, 24, filed for unemployment benefits and started receiving about $200 a week from the state, as well as a $600 federal supplement. Those payments enabled her to meet expenses — including the $1,100 rent for her apartment in the Bushwick neighborhood of Brooklyn — while she looked for a job.

But the $600 payments expired at the end of July. Since then, Ms. Polizzi has used about 75 percent of her savings — roughly $4,000 — to pay bills.

“That was the money I had saved to use for vacations or emergency funds,” she said. “I was going to buy a new camera. And then as soon as everything started going down, I had to put everything on hold, because I knew that I was going to end up having to pay rent with it eventually.”

Ms. Polizzi recently received $900 from Lost Wages Assistance, a short-term supplement from the federal government, and she expects one more payment from the program in the next few weeks.

In the meantime, she is making masks, lingerie, hats and jewelry and selling the items online at $25 to $200 apiece.

She has made about 60 sales. “Hopefully, I’ll be able to make it work and just pay all my bills through my art ventures,” she said.

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Despite the challenging picture over all, a few workers have been able to find better-paying positions, securing shelter in the coronavirus storm.

Before the pandemic struck, Chloe Ezi was a lifeguard at a public aquatic center in Powder Springs, Ga. It was part-time work that paid $11 an hour, but she was able to bring in an extra $300 a week by teaching private swim lessons.

In March, Ms. Ezi was sent home during coronavirus lockdowns. Because she continued to be paid half her wages — about $75 a week — the pool operators told her that she was not eligible to file for unemployment benefits.

Ms. Ezi, 19, was called back to work in May, but because virus restrictions kept her from teaching private swim lessons, she was able to bring in only about $150 a week — barely enough to cover her $280 monthly car insurance bill, her $80 cellphone bill, and $100 monthly payments to Penn Foster College, where she is completing a dental assistant certificate program, plus groceries and other necessities.

“That’s not a lot to live off of,” Ms. Ezi said. “I was zeroing out my paycheck every month.”

To save money, Ms. Ezi lived with her boyfriend in his parents’ house.

“We’re all just a big family living in this house together,” she said. “It can get pretty stressful living with so many people like this.”

Tired of living in such close quarters, Ms. Ezi began looking for a job that would pay more. In August, she found a full-time position as a sales representative at a store that sells birding equipment, where she makes $13 an hour plus tips. She remains on the staff at the pool, where she still picks up an occasional shift.

Now she and her boyfriend can afford to rent a one-bedroom apartment in Smyrna, Ga. They moved in on Wednesday.

“My new job allowed us to finally get our own place,” she said. “I’m feeling pretty proud of myself right now.”

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Bank Earnings Show Diverging Fortunes on Wall Street and Main Street

Hundreds of thousands of small businesses are closing for good. Temporary layoffs at larger companies are becoming permanent. But the country’s largest banks, which together serve a majority of Americans through loans, credit cards or deposit services, are not raising an alarm.

In their third-quarter earnings reports this week, big banks have said they are generally prepared for a wave of loan defaults they expect in the second half of next year. And their own fortunes are just fine: A trading and investment banking bonanza on Wall Street is helping them stay profitable.

A few common themes have emerged from the reports.

The pandemic has made for a turbulent year across a wide range of markets, but all the trading that investors have done in response has kept the revenue rolling into the banks.

Goldman Sachs reported strong markets revenue on Tuesday, helping it generate profits of $3.62 billion — far surpassing analyst expectations of $2 billion. Trading of bond products linked to interest rates, corporate credit, mortgages, and the prices of oil and other commodities lifted the bond division’s quarterly revenue 49 percent higher from the same period last year. In stocks, divisional gains were 10 percent.

In a call with analysts, Goldman executives said some of the boom had come because the firm increased its share of trading activity on behalf of the market’s 1,000 biggest money managers and other active traders who give business to Wall Street.

Goldman’s asset-management operations benefited from a rally in stock prices as well. A rise in the value of its positions in companies like the online commerce platform BigCommerce (up more than 40 percent since its shares began trading in August) and the medical equipment maker Avantor (up nearly 30 percent this year) helped the division generate 71 percent more revenue.

But it was not just Goldman that benefited. Bank of America’s investment banking business had the second-best performance in its history in the third quarter, trailing only this year’s second quarter, according to the bank’s chief financial officer. At JPMorgan Chase, trading revenue rose 21 percent and investment banking revenue 52 percent from a year earlier.

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Credit…Justin Sullivan/Getty Images

Steeling themselves for widespread defaults by customers unable to pay credit-card, home-loan or other debts because of the pandemic, the biggest banks have sent vast sums of cash into special pools they will draw from to cover losses in the future. But in general, the banks say, their customers are doing better than they expected.

The reason? Bank officials pointed to the trillions of dollars the federal government has distributed in the form of enhanced unemployment benefits, forgivable small-business loans and other programs created this spring by the CARES Act.

“Recent economic data has been more constructive than we would have expected earlier this year,” JPMorgan’s chief financial officer, Jennifer Piepszak, said on a call with journalists on Tuesday. “Over all, consumer customers are holding up well. They have built savings relative to pre-Covid levels and, at the same time, lower debt balances.”

This quarter, the banks each set aside less money than in previous quarters to prepare for losses. Bank of America and JPMorgan Chase said their credit-card customers were making their payments again.

The bank with the most strained customers seems to be Wells Fargo, which said it had spent nearly $1 billion trying to help customers who were struggling to repay their loans come up with new payment plans to keep them from defaulting. Even so, the bank said, its borrowers are less likely to fall behind now than they were earlier this year.

While government relief programs have prevented serious problems so far in the financial sector, none of the banks are banking on more stimulus.

In their economic forecasting, each bank takes a range of possible outcomes into account, from better than expected to doomsday. On Wednesday, Bank of America’s chief financial officer, Paul Donofrio, said just one of the scenarios it was looking at might contain more stimulus money. And that model is based on a consensus of various Wall Street economists’ forecasts; the bank’s own internal models aren’t counting on further relief.

JPMorgan’s economic forecast accounts for the effects of a government stimulus package only until the end of 2020. No more stimulus is built into its models for 2021.

The bank’s chief executive, Jamie Dimon, and his peers have all pointed out that the industry is grappling with a great deal of uncertainty about the future. JPMorgan might be overprepared if the economy fares better than expected — but a worst-case scenario could still expose the bank to heavy losses.

Although his bank is not expecting further federal relief next year, Mr. Dimon said another round of stimulus would be important.

“There are still 12 million people unemployed. There is still a lot of pain and suffering. There are still a lot of small businesses that need help,” he said.

Indeed, calls for more government aid to struggling businesses are growing, even as an impasse in Washington seems unlikely to end as Election Day draws near.

On Wednesday, a former Goldman Sachs executive, Gary Cohn — who served for a year as President Trump’s economic adviser — urged lawmakers to get a deal done quickly.

“This isn’t a matter of politics, this is a matter of protecting our economy as we know it,” Mr. Cohn wrote on Twitter.

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Small-Business Loans Will be Forgiven, but Don’t Ask How

When the federal government began the Paycheck Protection Program in April, one rule was clear to small-business owners bedeviled by its chaotic and messy start: If most of the loan money was used to pay employees, the debt would be forgiven.

But as the program enters its loan forgiveness phase, those owners — and their lenders — are finding out that although the principle may have been simple, its execution is anything but.

Many lenders have yet to start accepting applications from borrowers to have the loans forgiven. They are waiting to see whether Congress will pass a proposal to automatically forgive debt of less than $150,000, which make up the bulk of loans made under the program.

Square, the mobile payments company, lent Audrey Kramer $5,600 in May to pay the only employee of Sweet Treat Stop, her mobile food truck bakery. She has been ready since July to apply to have the debt wiped away, but Square hasn’t started taking applications. It sent her an email this month saying that it was “waiting to release our forgiveness application until we get more information from Congress.”

Ms. Kramer is grateful for her loan — it helped her keep paying her baker even as her sales plunged — but she’s also eager to be done with it. “We’ve been cautious and we’ve never carried any debt at all on the business,” she said.

On Thursday night, the Small Business Administration, which runs the program, released new forgiveness forms and rules for loans under $50,000. Such loans make up nearly 70 percent of the program. The new rules mean that some borrowers can still have their loans forgiven even if they cut head count or wages after taking the loan, but they will have to submit payroll documents and other records.

Lenders said the change was a start, but did not go far enough. The Consumer Bankers Association, an industry trade group, renewed its call for all loans under $150,000 to be automatically discharged.

“It’s almost a nightmare to go through the forgiveness process as it is now written,” Richard Hunt, the group’s chief executive, said. “You have millions of small businesses in crisis, some going under, and Congress is not there in their time of need.”

Lenders said they were also wary of processing applications without knowing how crucial aspects of loan forgiveness will work, like how carefully they are expected to vet borrower-provided documents like payroll records. They are waiting for details on the Trump administration’s stated plan to audit all loans over $2 million. And they are getting nervous about whether they will be paid back by the government for loans they made to businesses that have since closed or gone bankrupt.

More than 5.2 million business owners borrowed a total of $525 billion through the paycheck program, which used banks and other lenders as conduits to issue the loans. From April to August, small businesses were encouraged to borrow cash to cover eight weeks of payroll and a handful of other expenses. Once the money is spent, borrowers must apply through their bank to have their loan paid off by the government.

But business owners looking to start the loan forgiveness process have found lenders mostly unwilling to work on those applications until there is clarity from Congress, especially because of the cost and complexity of handling fairly small loans. Loan forgiveness proposals have been introduced in both the House and Senate with bipartisan backing — Treasury Secretary Steven Mnuchin said he was a supporter — and were likely to be included if Congress passed an economic relief bill, but the fate of such legislation is uncertain, with the presidential election just weeks away.

Ed Sterling, the president of Flagler Bank in West Palm Beach, Fla., said lenders had been “waiting on the edge of our seats” for legislative action. The process for reviewing a loan-forgiveness application will take his bank about three times as long as it took to actually originate the loan, he said.

The S.B.A. has been slow to act on loan forgiveness applications that lenders have sent in. The agency began accepting the forms on Aug. 10. By late September, it had received 96,000, but had not yet approved or denied a single application, William Manger, the agency’s chief of staff, said at a House subcommittee hearing. By law, the agency has 90 days to respond after it receives an application. An S.B.A. representative said the agency sent its first approvals and loan payments to banks on Oct 2.

Lynn Ozer, a banker at who specializes in small-business lending, said borrowers she worked with at Fulton Bank in Lancaster, Pa., were “panicked” at the prospect of their forgivable loans becoming debts if they made mistakes on their paperwork. “We can’t help our borrowers if we ourselves don’t understand the guidance,” Ms. Ozer said.

Trapped in the middle are business owners like Léa Kujala, a co-owner of Northwest Treatment, a counseling center near Portland, Ore. Ms. Kujala got a $34,000 loan in April, which helped her and her business partner retain their three employees when their revenue nose-dived.

Now, Ms. Kujala would like to get the loan paid off, but her lender, U.S. Bank, has not yet opened its forgiveness portal to her. Ms. Kujala — who estimates that she has already spent five hours gathering records and preparing her application — is so concerned about the loan’s many rules and potential tripwires that she is keeping all of the money she got in a reserve account, just in case her loan isn’t forgiven. (She drained her business’s savings to make payroll, and will pay that back if her loan is discharged.)

“We’re super nervous about the fact that we don’t know what’s going to happen,” she said. And the loan was only a temporary salve: With her revenue still down at least 30 percent, Ms. Kujala is preparing to lay off one of her employees.

A U.S. Bank spokesman said the bank was sending out invitations in stages to its forgiveness portal. After the bank was contacted for this article, a representative told Ms. Kujala that she would get an invitation soon.

Most borrowers — and their lenders — can afford to wait before seeking loan forgiveness. The CARES Act, which created the P.P.P., initially set repayments on any remaining debt to begin six months after a loan was disbursed, but Congress later revised the law to give borrowers as long as 16 months to apply for forgiveness. For most borrowers, that means the issue won’t become urgent until mid-2021.

But there, too, the law has a gray area. More than four million borrowers — a majority — have loans that were made before the rules changed. To scrupulously follow the law, lenders would need to formally modify those loans and get each borrower’s signature on the changes. That’s a “momentous task,” said Brad Bolton, the chief executive of Community Spirit Bank in Red Bay, Ala. The S.B.A. has not yet responded to banks’ requests for clarification on the matter — and payments for the program’s earliest borrowers are scheduled to come due this month.

Most lenders, especially the biggest ones, have decided to take the risk and simply postpone all payments, said Tony Wilkinson, the chief executive of the National Association of Government Guaranteed Lenders, a trade group. “Because it’s a benefit to the borrower, they’re doing it unilaterally, because who is going to object?” he said.

Glenn Sandler, an accountant in Melbourne, Fla., has around 200 clients with P.P.P. loans, averaging around $40,000 each. He’s advising all of them to sit tight and wait for what he believes will be legislative fixes to the forgiveness process. “Hopefully, Congress will get off their butts,” he said.

Mr. Sandler thinks automatic forgiveness for small loans is likely, in part because the alternative — trying to collect payments from small businesses struggling to stay afloat — is untenable.

“They’re broke,” he said of the mom-and-pop ventures that he works with. “There’s a lot of people who won’t be able to pay it back. So, what, they’re going to go into collections with them? There’s no sense in that.”

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U.S. Unemployment Claims Remained Elevated Last Week

Applications for jobless benefits remained high last week, even as the collapse of stimulus talks in Washington raised fears of a new wave of layoffs.

Unemployment filings have fallen swiftly from their peak of more than six million last spring. But that progress has recently stalled at a level far higher than the worst weeks of past recessions. That pattern continued last week, the Labor Department said Thursday: More than 800,000 Americans filed new applications for state benefits, before adjusting for seasonal variations, roughly in line with where the total has been since early August.

“The level of claims is still staggeringly high,” said Daniel Zhao, senior economist at the career site Glassdoor. “We’re seeing evidence that the recovery is slowing down, whether it’s in slowing payroll gains or in the sluggish improvement in jobless claims.”

That slowdown comes as trillions of dollars in government aid to households and businesses has dried up. Prospects for a new stimulus package, already dubious in a divided Washington, appeared to fall apart this week when President Trump said he was pulling out of negotiations. Economists across the ideological spectrum warn that the loss of federal help will lead to more layoffs and business failures, and more pain for families.

The continued high level of jobless claims, combined with large monthly job gains, highlights the remarkable level of churn still roiling the U.S. labor market. Companies are continuing to rehire workers as they reopen, even as other companies cut jobs in response to still-depressed demand for goods and services. The result is a job market that is being pulled in two directions at once — and economic data that can appear to tell contradictory stories.

Adding to the challenge for analysts and forecasters, the pandemic has thrown the data itself into disarray. For the second week in a row, the jobless claims data carried a Golden-State-size asterisk: California last month announced that it would temporarily stop accepting new unemployment applications while it addressed a huge processing backlog and installed procedures to weed out fraud.

In the absence of up-to-date data, the Labor Department is assuming California’s claim number was unchanged from its pre-shutdown figure of more than 225,000 applications, or more than a quarter of the national total. The state began accepting new filings this week, and is expected to resume reporting data in time for next week’s report.

While the lack of data from California makes week-to-week comparisons difficult, the bigger picture is clear: The economic recovery is losing momentum, even as millions of Americans remain out of work.

Monthly jobs data released last week showed that job growth slowed sharply in September, and that last spring’s temporary furloughs are increasingly turning into permanent job losses. Major corporations like Disney and Allstate have announced thousands of new job cuts. And with winter approaching, restaurants and other businesses that were able to shift operations outdoors during warmer weather could be forced to pull back anew.

Separate data from the Census Bureau on Wednesday showed that 8.3 million Americans reported being behind on rent in mid-September, and 3.8 million reported that they were likely to be evicted in the next two months. Both figures have changed little since August.

“It seems increasingly unlikely that we’ll have a deal before the election, and bills are due now,” Mr. Zhao said. “Every week that passes puts extra pressure on workers’ households and small businesses, so any delay in the stimulus is going to have a meaningful impact on Americans.”

The situation is particularly dire for people who lost their jobs early in the pandemic, many of whom are now nearing the end of their unemployment benefits.

Last week was the 29th week since mass layoffs began in March. In most states, regular unemployment benefits last just 26 weeks, meaning that many people have already exhausted their benefits.

In March, Congress created a program funded by the federal government for people whose state benefits have expired. The number of recipients under that program, Pandemic Emergency Unemployment Compensation, swelled to nearly two million in mid-September, up from 1.4 million a month earlier.

The program adds only 13 weeks of additional benefits, however, so people who lost their jobs in March will receive those benefits only until mid-December. And the entire program will expire at the end of the year if Congress doesn’t extend it.

A separate program, which existed before the pandemic, offers an additional 13 to 20 weeks of benefits, depending on the state. But the benefits are based on state economic conditions, and the rapid decline in the unemployment rate means that workers in several states, including Idaho, Wyoming and Utah, would no longer qualify for it. Missouri will join their ranks next week.

Another emergency program, Pandemic Unemployment Assistance, also expires at the end of the year. That program covers freelancers, self-employed workers, part-timers and others who don’t qualify for benefits under the regular unemployment system. More than 460,000 people filed new applications under the program last week, and millions are receiving benefits in total.

The net result is that potentially millions of workers could see their benefits expire this winter. Epidemiologists warn that cases of the coronavirus are likely to rise as temperatures drop, and winter weather could reduce job opportunities.

“People are going to have their backs against the wall, and it’s pretty much the worst time of the year for the program to end,” said AnnElizabeth Konkel, an economist at the employment site Indeed.

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New Stimulus Hopes Fade While Economic Risks Grow

Here is the situation the U.S. economy faces, a month before Election Day: Job growth is stalling. Layoffs are mounting. And no more help is coming, at least not right away.

American households and businesses have gone two months without the enhanced unemployment benefits, low-interest loans and other programs that helped prop up the economy in the spring. And now, after President Trump’s announcement Tuesday that he was cutting off stimulus negotiations until after the election, the wait will go on at least another month — and very likely until the next presidential term starts in 2021.

It could be a dangerous delay.

Already, many furloughs are turning into permanent job losses, and major companies like Disney and Allstate are initiating new rounds of layoffs. The hotel industry is warning of thousands of closures, and tens of thousands of small businesses are weighing whether to close up shop for good. An estimated one of every seven small businesses in the United States had shut down permanently by the end of August — 850,000 in all — according to data from Womply, a marketing platform. The deeper those wounds, the longer the economy will take to heal.

Economists say lawmakers should be acting immediately to send more money to workers marooned on unemployment by the recession, to businesses of all sizes that are struggling to survive until the pandemic abates and their customers return in full force, and to state and local governments that have seen tax revenues decline and are already moving to lay off public employees.

While they disagree about exactly how much federal aid the economy needs right now, virtually all economists, across the ideological spectrum, agree on one thing: The correct dollar figure is not “zero.” Most estimates fall in a range between $1 trillion and $2 trillion.

Mr. Trump appeared to open the door to piecemeal measures like aid for airlines and individual checks, and his Treasury Secretary, Steven Mnuchin, and House Speaker Nancy Pelosi spoke twice on Wednesday about a stand-alone bill for airline relief. But prospects for even a limited package were uncertain and would fall far short of the amount that many economists say is needed to keep businesses and households solvent.

“The risk to waiting is that we may find ourselves in a place where we’re unable to turn back, we’ll hit a tipping point,” said Karen Dynan, a Harvard economist and Treasury Department official during the Obama administration.

R. Glenn Hubbard, a Columbia University economist who was chairman of the White House Council of Economic Advisers under President George W. Bush, said the economy still needed $1 trillion in immediate aid for people, businesses and state governments. “Failing to act will have real economic consequences,” he said.

Jerome H. Powell, the Federal Reserve chair, echoed those concerns in a speech on Tuesday, arguing that the government should go big and that not providing adequate support carried risks for the economy.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth.”

Business leaders have made urgent pleas for help, arguing that the risk of not acting could doom entire sectors. The Business Roundtable, a group of chief executives from major corporations like Apple and Walmart, warned on Tuesday evening that “communities across the country are on the precipice of a downward spiral and facing irreparable damage.”

Some 36,000 franchise businesses are likely to close by winter without additional federal support, said Matthew Haller, senior vice president for government relations and public affairs at the International Franchise Association in Washington, which represents owners of gyms, salons and other chains. “The situation’s pretty dire,” he said.

Laid-off workers are also under pressure. Ernie Tedeschi, an economist at Evercore ISI, estimates that unemployed Americans will begin to exhaust the savings they were able to amass from previous rounds of aid as early as this month, leaving them struggling to buy food or pay rent. Without another aid package, the economy will regain four million fewer jobs through the end of next year than it would have if lawmakers had struck a deal, he said in a research note on Wednesday.

The gridlock in Washington is a reversal from the spring, when fear of an imminent economic collapse led Congress to vote overwhelmingly to approve trillions of dollars in aid to households and businesses. The effort was largely successful: Households began spending again, companies began bringing back workers, and a predicted tidal wave of evictions and foreclosures mostly failed to materialize. The unemployment rate, which reached nearly 15 percent in April, fell to 7.9 percent in September.

But most of the aid programs expired over the summer, and in recent weeks economic gains have faltered. Economists say the loss of momentum is likely to grow worse if more aid doesn’t arrive soon. Federal Reserve officials had been expecting another aid package to arrive when they released their economic projections in September, minutes released on Wednesday showed, and warned that “absent a new package, growth could decelerate at a faster-than-expected pace in the fourth quarter.”

While Republicans, Democrats and the White House have sparred over the scope and size of another package, many economists say the amount is less important than how fast and where the money is deployed.

“When do you need money? The answer is, two months ago,” said Jason Furman, who ran the White House Council of Economic Advisers under President Barack Obama.

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Credit…Joseph Rushmore for The New York Times

Unemployment benefits are a top priority for many economists. The $600 a week in extra benefits that kept many households afloat in the spring expired at the end of July, leaving millions of families struggling to get by on only their regular state unemployment benefits, which often total just a few hundred dollars a week. Millions more people are depending on temporary programs that extend aid to those who don’t qualify for regular state benefits or whose benefits have expired. Those programs lapse at the end of the year.

Research has found that unemployment benefits are among the most effective forms of economic stimulus, because jobless workers are likely to spend the money rather than save it. But many economists said that is a secondary reason for extending benefits; the primary reason is to keep families from slipping into poverty or losing their homes.

“My principal reason for wanting the $600 to continue is not as a macroeconomist, it’s because I’m worried about people,” said Jay Shambaugh, a George Washington University economist who served as an adviser to Mr. Obama. “I think we can afford it and not have people starve.”

Senate Republicans have made clear they will not support restoring the full $600 supplement, which many of them opposed from the start. But even progressive economists say any amount is better than nothing.

“I don’t think it’s worth dying on the hill of ‘should it be $600 or $400,’” said Claudia Sahm, a former Federal Reserve economist who has been one of the most vocal proponents for federal spending since the start of the pandemic.

The consequences of failing to provide help to jobless families would be particularly dire for low-income families, many of them Black and Hispanic. Those workers were among the last to make gains after the previous recession, and have lost the most this time around.

“The gains that have been built up over time are fragile,” said Raghuram G. Rajan, a former chief economist of the International Monetary Fund who is now a professor at the University of Chicago. “You have a whole bunch of people who’ve struggled their way into a semblance of normalcy by 2019, and then you have this massive crisis. If we don’t try to protect those gains, it will take a longer time, a really long time to come back.”

Businesses are also in need of more help, particularly industries that have yet to return to full capacity as the virus persists. Major airlines began laying off workers this month after Congress failed to extend an earlier aid package. A hospitality-industry lobbying group last month released a report estimating that 1.6 million hotel workers could lose their jobs and 38,000 hotels could close without federal help. Restaurants are in similarly dire straits, especially as colder weather begins to shut down outdoor dining in much of the country.

With the pandemic lingering longer than many had expected, economists said businesses are facing new challenges that will require a different approach from what Congress previously funded. For instance, any new program probably needs to provide more flexibility to businesses, allowing them to make adjustments — including laying off workers — to survive a crisis that could stretch on another year or more.

Steven Hamilton, a George Washington University economist, said lawmakers should “radically expand” a tax credit that offsets the costs of retaining employees, along with additional aid for fixed costs like rent. He said any delay in help, especially until next year, “would be catastrophic.”

“It is much faster to close a business than to start one,” he said. “It took us a decade to regain the businesses lost in just three years during the Great Recession. The labor market seems to have hit a ceiling in recent months, and a big part of that is that many workers’ former employers no longer exist.”

And while companies have begun to bring back furloughed workers, the U.S. economy lost 216,000 government jobs in September, according to the Labor Department, with most of those cuts coming at the state and local level. Forecasters warn that much deeper cuts are coming as state and local governments reel from lost tax revenue.

Economists say that the failure to help state and local governments was one of the biggest policy mistakes of the last recession. Back then, state and local governments cut thousands of jobs, slashed spending and raised taxes, offsetting federal efforts to prop up the economy through deficit spending and tax cuts.

Economists have been arguing since the spring that insufficient aid for state and local governments was a significant flaw in the various relief packages.

“We’re in for a sizable reduction in economic activity coming from state governments if we don’t do anything,” said Wendy Edelberg, who runs the Hamilton Project, an economic-policy arm of the Brookings Institution. “It’s just a terrible thought that we didn’t learn that lesson post-2008, that state budgets are incredibly important to the aggregate economy.”

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In Killing Stimulus Talks, Trump Invites Political Risk for Himself and Republicans

WASHINGTON — President Trump’s decision to virtually storm away from bipartisan talks over a coronavirus aid bill less than a month before Election Day was a remarkably perilous act for a president about to face voters and for Republicans who are fighting to keep the Senate and now risk being blamed for the collapse of a compromise that had always faced steep obstacles.

Vulnerable Republicans were alarmed at what one of them, Senator Susan Collins of Maine, called a “huge mistake.” Democrats seized on the president’s move to accuse Mr. Trump of callous disregard for Americans struggling amid the pandemic. And by Tuesday night, Mr. Trump himself took to Twitter to try to walk back his own decision to kill the negotiations, suggesting that he might support narrower stimulus measures.

But such bare-bones plans have been rejected by Democrats and Republicans alike, and there was little reason to believe they would be successful now. If that holds, there will be no comprehensive plan to provide jobless aid or stimulus checks to Americans, furnish aid to small businesses and airlines, or send federal support to state and local governments, at least for now. The economic recovery will continue to shudder, and Mr. Trump will have left little ambiguity about how a plan to stabilize it finally fell apart.

“Trump made this really easy for Democrats,” said Tony Fratto, a former aide to President George W. Bush, who is now a partner at Hamilton Place Strategies in Washington. “Republicans can try to explain that the blame is on Democrats. Democrats only have to hold up Trump’s tweet, taking the blame himself.”

Former Vice President Joseph R. Biden Jr., the Democratic presidential nominee, did just that on Tuesday evening, in his own Twitter post that said, “Make no mistake: if you are out of work, if your business is closed, if your child’s school is shut down, if you are seeing layoffs in your community, Donald Trump decided today that none of that matters to him.”

Even as Republicans publicly blamed Speaker Nancy Pelosi for the breakdown, saying she had been unwilling to compromise, multiple aides privately likened the president’s tweets to his 2018 declaration that he would be “proud to shut down the government for border security.” His words at the time effectively handed Democrats political cover for the historic lapse in government funding that would follow, and top Republican officials feared that they could have the same effect now, with voters already casting ballots.

In an interview on ABC’s “The View” on Wednesday, Ms. Pelosi said Mr. Trump’s blitz of follow-up tweets calling for tailored aid measures was evidence that he had seen the political downside of ending negotiations, saying the president was “rebounding from a terrible mistake that he made yesterday, and the Republicans in Congress are going down the drain with him on that.”

Compounding the political risk, Mr. Trump said the halt in stimulus negotiations would give Republicans time to focus on quickly confirming his Supreme Court nominee, Judge Amy Coney Barrett, a move that polls have shown is unpopular with voters. By contrast, Americans are overwhelmingly in favor of another stimulus bill.

“This is going to make it very hard for him to make the case that he’s doing all he can to pull the nation out of economic malaise,” Mr. Fratto said.

Mr. Trump vowed that a recovery plan would pass “immediately after I win,” but there was little indication that the powerful political disincentives that have so far stymied efforts to strike a bipartisan deal would dissipate in the lame-duck session that bridges the weeks between Election Day and the start of a new Congress in January. The election outcome, aides and lawmakers warned, could in fact deepen the intransigence on both sides, further delaying relief to Americans.

For months, even as the economic need grew and the contours of a compromise became clear, political forces have conspired to thwart a stimulus deal. Republicans who feared Mr. Trump was headed for defeat in November began polishing their fiscally conservative credentials in anticipation of future campaigns, including the 2024 presidential race, by asserting their opposition to another costly aid plan. By staying out of the talks early and remaining disengaged at key moments, Mr. Trump confounded many in his own party by failing to push Republicans to cut a deal, a detachment that only grew after he signed executive orders in August that attempted to bypass Congress to deliver some relief.

And Democrats, sensing mounting Republican political vulnerability, have been unwilling to make many concessions — which could provide a potential political lifeline to Mr. Trump and his party — when they believe an electoral sweep for their party in November could allow them to push through a far more generous bill after Election Day. Top Democrats believe that voters increasingly see Mr. Trump as a “chaos” president, and that a last-minute agreement could temper that perception.

“Their political positions are far apart, and their polling, which is being done daily, says they’re not being punished for not doing a deal,” Douglas Holtz-Eakin, a former head of the Congressional Budget Office who runs the conservative think tank American Action Forum and remains close to many Republicans in Congress, said last week. “The minute that changes, they’ll shift.”

The elements of an agreement have been obvious for some time: a price tag somewhere around $2 trillion, including extended aid of around $400 a week for the unemployed, additional support for small businesses and direct payments to low- and medium-income households, liability protections for businesses and workers, and more money for schools, state and local governments and coronavirus testing.

Democrats had started negotiations north of $3 trillion, with a bill that passed the House in May. Senator Mitch McConnell, Republican of Kentucky and the majority leader, waited until midsummer to present his party’s $1 trillion plan, but has since scaled down his offer considerably, to $350 billion, even as the Trump administration was reaching for a much larger package. Mr. Trump has been a disruptive force in the negotiations, never making clear what he wanted and by turns cheering on the talks and moving to blow them up.

As recently as Saturday, he had called for an agreement, tweeting that, “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE.”

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Credit…Anna Moneymaker for The New York Times

Along the way, deep divisions were exposed in both parties. Vulnerable Senate Republicans desperate to show voters they can work across party lines to address urgent needs have pressed for a deal. But most Republicans made it plain that they had bailout fatigue and would not be willing to embrace a large aid package.

“It became very obvious over the last couple of days that a comprehensive bill was just going to get to a point where it didn’t have really much Republican support at all,” said Mark Meadows, the White House chief of staff. “It was more of a Democrat-led bill, which would have been problematic, more so in the Senate than in the House.”

Jason Furman, a former top economist for President Barack Obama, had recently begun pushing for Democrats to accept an offer by Treasury Secretary Steven Mnuchin, the lead White House negotiator, of a $1.6 trillion package, stressing the potential harm to people and businesses if the economy went months without more stimulus.

“I’m disappointed that policymakers haven’t come together more quickly, because time really matters here,” Mr. Furman said in an interview. “It matters for schools. It matters for families. It matters for testing to control the spread of the virus.”

Business groups pressured congressional leaders on both sides to compromise, to little avail.

Several analysts blamed the relative stability of stock markets in recent months for undermining urgency for another package, a sentiment Mr. Trump seemed to reflect in his Twitter posts on Tuesday. “Our Economy is doing very well,” he wrote. “The Stock Market is at record levels.”

After Mr. Trump’s posts withdrawing from negotiations, the S&P 500 dropped. On Wednesday morning, it rose again, on what analysts speculated was hope that Mr. Trump’s latest Twitter posts might revive the stimulus talks.

Carl Hulse and Luke Broadwater contributed reporting.

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Jerome Powell, Fed Chair, Says Economy Has ‘a Long Way to Go’ as Trump Calls Off Stimulus Talks

WASHINGTON — Hours after the Federal Reserve chair, Jerome H. Powell, warned that the economy could see “tragic” results without robust government support, President Trump abruptly cut off stimulus talks, sending the stock market sliding and delivering a final blow to any chance of getting additional pandemic aid to struggling Americans before the election.

Mr. Trump, in his first full day back at the White House after being hospitalized with Covid-19, said in a series of conflicting messages on Twitter that the economy was “doing very well” and “coming back in record numbers,” suggesting that no additional help was needed. But he also tweeted that “immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”

The prospects for enacting another trillion-dollar package before the election had already been dim. But Mr. Trump’s directive carried heavy stakes both for himself and for members of his party, making clear that it was the president himself who was unwilling to continue seeking an agreement. Some Republicans rushed to condemn the move, as they prepared to face voters in less than a month.

Markets fell as the reality sank in that the economic recovery, which is slowing, would not get another jolt anytime soon. The S&P 500, which had begun to climb before Mr. Trump’s announcement, slid more than 1 percent soon afterward, and ended the day 1.4 percent lower.

The president’s political calculation in calling off talks while negotiations were underway — and while financial markets were open — remained unclear, though Mr. Trump said he wanted the Senate to focus on Judge Amy Coney Barrett’s confirmation to the Supreme Court.

His tweets came less than an hour before his Treasury secretary, Steven Mnuchin, and Speaker Nancy Pelosi were to resume talks on the phone aimed at hammering out a compromise. Instead, when they did speak, Mr. Mnuchin confirmed that Mr. Trump had withdrawn from the negotiations, and Ms. Pelosi, according to a spokesman, “expressed her disappointment.”

In a letter to her caucus on Tuesday, Ms. Pelosi called Mr. Trump’s decision to pull the plug on the talks “an act of desperation.”

“Today, once again, President Trump showed his true colors: putting himself first at the expense of the country, with the full complicity of the G.O.P. members of Congress,” Ms. Pelosi wrote.

Republican leaders said the president’s move was merely a bow to reality. Senator Mitch McConnell, Republican of Kentucky and the majority leader, told reporters on Capitol Hill that Mr. Trump’s view of the talks “was that they were not going to produce a result, and we need to concentrate on what’s achievable.”

In deciding to forgo any more immediate relief, the president could be setting the economy up for the type of painful outcome that Mr. Powell warned of on Tuesday. The Fed chair, who has increasingly called for more government help, said policymakers should err on the side of injecting too much money into the economy rather than too little given how much work remains.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Mr. Powell said in remarks before the National Association for Business Economics.

“Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth,” he said. “By contrast, the risks of overdoing it seem, for now, to be smaller.”

In multiple tweets later Tuesday night, Mr. Trump appeared to backtrack his assertion that an agreement would wait until after Nov. 3, at one point urging both chambers to “IMMEDIATELY Approve” reviving a lapsed loan program for small businesses, funds to prevent airlines from furloughing or laying off workers and another round of stimulus checks. It remained unclear if his tweets, which came after stocks plummeted, reflected a willingness to restart negotiations with Ms. Pelosi. Both provisions have bipartisan support, but several lawmakers have pushed for them to be included in a broader package.

Nearly seven months into the pandemic, millions of Americans remain unemployed as the coronavirus keeps many service industries operating below capacity. The unemployment rate has fallen more rapidly than many economists expected, dropping to 7.9 percent in September, and consumer spending is holding up. But the economy’s resilience owes substantially to strong government assistance that has been provided to households and businesses.

That included direct payments to families, forgivable loans to small businesses and an extra $600 per week in unemployment benefits, which Mr. Powell said had “muted the normal recessionary dynamics that occur in a downturn,” like lower consumer spending that leads to additional layoffs.

But that assistance has since run dry, putting what Mr. Powell called an “incomplete recovery” at risk at a time when he said additional help was likely to be needed. “There is still a long way to go,” he said regarding the labor market, adding that “many will undergo extended periods of unemployment.”

Economists said Mr. Trump’s decision could set back the recovery by ensuring that millions of unemployed Americans and thousands of struggling small businesses are forced to go months without additional help from the federal government. That could produce a spiral in which weak demand hurts businesses and leads to bankruptcies and foreclosures, prompting more layoffs.

“You are pulling the rug out from underneath this economy at a point where we’re still in the infant stages of this recovery,” said Ryan Sweet, a senior director of economic research at Moody’s Analytics.

Mr. Powell’s comments were a clear signal that the Fed remained worried about the economy’s ability to continue its rebound without more government spending. One big risk, he noted, was that prolonged economic weakness could perpetuate job losses that have weighed most heavily on women, people of color and low-wage workers.

“A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy,” he said. “That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.”

Ernie Tedeschi, a policy economist at Evercore ISI, said that while Mr. Powell had made similar statements in the past, “this was more urgent.”

“I get the sense that he is getting worried that if we don’t have another fiscal package, that the recovery we’ve had may be in jeopardy,” Mr. Tedeschi said.

Negotiators had resumed talks in recent days, but they were still far from an agreement, reflecting months of political incentives that pushed all sides away from a deal. Ms. Pelosi and Mr. Mnuchin again engaged in hourlong phone calls and were exchanging documents and paperwork in an effort to reach an agreement. But a number of critical issues remained, including how much aid to provide to state and local governments, extra unemployment benefits and the overall size of the package.

The failure to reach a deal had already infuriated rank-and-file lawmakers, who were largely excluded from talks and faced with the prospect of going home to campaign without the promise of relief. Mr. Trump’s decision to withdraw from negotiations prompted immediate, bipartisan backlash.

“Waiting until after the election to reach an agreement on the next Covid-19 relief package is a huge mistake,” Senator Susan Collins of Maine, who is facing her toughest re-election bid, said in a statement.

“I disagree with the President,” Representative John Katko, a moderate Republican from New York, said on Twitter. “With lives at stake, we cannot afford to stop negotiations on a relief package.”

Representative Elissa Slotkin of Michigan, a moderate Democrat who joined a bipartisan group of lawmakers in pushing for an agreement, said in a statement that “I cannot understand why the president would halt negotiations until after the election except in a cynical move to secure votes.”

“Doing so does not serve the needs of the Michigan families and our small businesses,” she added. “It places himself above the needs of the country, and it’s out of step with the mission of government, which is to help in moments of crisis.”

Republicans had argued that Ms. Pelosi, who pushed a $3.4 trillion package through the House in May and then muscled through a $2.2 trillion package last week, had pushed for unrelated “poison pills” that she knew Republicans could not support. But it was never clear that Republicans would have supported any deal. In recent days, as Mr. Mnuchin proposed a $1.6 trillion plan, lawmakers and aides in the Senate warned that a majority of Republicans would not support such a large price tag.

Top Trump administration officials have played down the need for another big fiscal package by pointing to the falling unemployment rate as a sign that the economy is experiencing a rapid rebound. And many Republican lawmakers have begun publicly fretting about the ballooning federal deficit, which is expected to top $3 trillion this year.

The Fed chair did not weigh in on what type or amount of aid was appropriate. But Mr. Powell, who has a long track record of worrying about the federal debt, has tried to convince lawmakers that “this is not the time to give priority to those concerns.”

Instead, he has reiterated time and again the importance of returning the economy to full strength, and that both the Fed and Congress need to continue to provide help.

“This will be the work of all of government,” Mr. 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 itself has gone to great lengths to support the economy, cutting interest rates to near-zero in March, rolling out a large bond-buying program and setting up emergency lending efforts, many of them backed by Treasury Department funding.

While the Fed invoked its emergency powers in the 2008 recession, it has gone even further this time, buying municipal debt and corporate bonds to shore up key markets.

But Mr. Powell, along with many of his Fed colleagues, have made clear that monetary and fiscal policy can do only so much to buttress the economy and that the recovery will be determined in large part by the path of the virus.

Mr. Powell, whose institution is set up to operate independently of the White House, was unambiguous in recommending a solution, one that contrasts with the message and example that have at times been held out by the Trump administration.

He said the Fed should continue doing what it can “to manage downside risks to the outlook,” adding that doing so required “following medical experts’ guidance, including using masks and social-distancing measures.”

Nicholas Fandos and Luke Broadwater contributed reporting.

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Lumberjack, Tailor, Counselor, Host: A Hotel Owner Does It All During the Pandemic

Since the pandemic began, Montu Patel has learned how to sew masks and fight with Wall Street lenders. He has helped draft pleas for relief to state and local officials on behalf of small business owners. He knows how to fashion plexiglass.

As the head of a small business, Mr. Patel, whose family owns eight budget hotel franchises, was used to wearing multiple hats. But since March, when the long-haul drivers, families on road trips and business travelers who made up most of his clientele stopped checking in, forcing him to lay off workers and hunt for cash, Mr. Patel has become a one-man army battling for the survival of his business. Its death would be no less than the extinguishing of an American dream.

One August morning, before meeting with a loan officer who he had to convince that the hotel industry had a rosy future, Mr. Patel had to hack down a tree that had fallen across the parking lot of one of his properties.

The hotels are Mr. Patel’s whole life. The son of Indian immigrants, he grew up in and around an Econolodge hotel that his family owned and operated in Bordentown, N.J. He studied real estate in graduate school, knowing he would eventually take over the business from his father.

“My parents came to this country with nothing in their pockets,” Mr. Patel, 43, said. “Everything that we’ve accumulated since then has been gravy.”

Mr. Patel has managed his hotels through tragedy and growth. Two years ago, his sister, who was the business’s finance chief, died of a brain tumor. Last year, Mr. Patel bought four new properties, and now the family runs three Hamptons Inns, two Comfort Inns, two Holiday Inn Expresses and one Days Inn, licensing the popular names from big hotel companies.

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Credit…Hannah Yoon for The New York Times
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Credit…Hannah Yoon for The New York Times

The pandemic has forced thousands of small business owners to close shop permanently. Those that have survived, like Mr. Patel’s, have had to readjust and recalibrate constantly, as their owners cling to the hope that things will improve. But a widely available vaccine is at least a year away, there is no guarantee of fresh federal aid weeks before the presidential election and the virus still spreading.

“As long as the pandemic subsides next year, we will be in good shape to start replenishing our savings, digging ourselves out of the hole we’re in,” Mr. Patel said.

Soon after the coronavirus outbreak began, Maryland, Virginia, Pennsylvania and New Jersey — the states where Mr. Patel has his hotels — instituted lockdowns. Mr. Patel watched helplessly as business plummeted. Occupancy fell by 90 percent. But he and his staff were kept busy by new types of guests.

In Maryland, the state’s health department took over a floor of Mr. Patel’s Hampton Inn in Salisbury and put up homeless people who had contracted the virus. One May morning, the state police came to the hotel, followed by funeral home workers. A guest had died.

At Mr. Patel’s Holiday Inn Express near the Baltimore/Washington Thurgood Marshall Airport, crews from a Russian air cargo company, Volga-Dnepr Airlines, began checking in at regular intervals. They were flying masks, gloves and other protective gear from Russia to help overcome a sudden shortage in the United States.

In Hershey, Pa., where the Patel family owns another Hampton Inn, an emergency room doctor brought in to help handle Covid-19 cases at Hershey Medical Center was, for a time, the only guest. The doctor asked that hotel staff stay away from his room.

Operating the hotels required adjustments. Elevator buttons had to be cleaned hourly, and electronic key cards had to be sanitized each time they were returned. Front desks required plexiglass screens. Trays and equipment for meals served buffet-style — a common feature of budget hotels — were removed. Gyms were shut; pools were closed.

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Credit…Hannah Yoon for The New York Times

Any time Mr. Patel had a particularly good idea for how to do something, he shared it on one of several WhatsApp groups that hotel owners had formed to commiserate and swap advice. “I feel like we are driving down the interstate trying to avoid one fiery crash after another,” a group member wrote. “If you lost money in 2018, 2019 or 2020, carry back those losses up to five years,” wrote another, describing ways to lower federal tax bills. “More little-known benefits coming.”

Mr. Patel shored up his hotels’ finances. Between April and August, he drew roughly $500,000 from a pool of cash contributions made by friends and family. He secured forgivable loans of about $150,000 per hotel through the federal government’s $650 billion Paycheck Protection Program for small businesses, which he used to pay employees through the early stretch of the lockdowns.

With few guests, Mr. Patel assigned some of his staff to deep-cleaning jobs. Still, he furloughed around 225 people, or about 75 percent of his work force. (He has now asked almost everyone to come back, but some have chosen not to, he said.) He tried to upgrade the properties, but it became harder to do as supply chains faltered. LED vanity mirrors and faucets were back-ordered. He also struggled in the spring to find a reliable supply of masks and hand sanitizer, which the hotel chains overseeing his properties required him to provide free to every guest. Supplies were easier to get as the summer progressed, but it was still hard to pay for them.

“When you’re renting rooms at a steeply discounted rate and still trying to offer all of these additional things, it’s either a very thin profit or not profitable at all,” Mr. Patel said. He added that some of the hotel companies’ requirements had started to seem unreasonable. “They can come up with any rules for the franchisee that they want, and they don’t have to worry about fulfilling them,” he said. “They’re not part of our hardship at all.”

Mr. Patel has pleaded with government officials for help, especially for his property in Hershey, a town once popular with tourists. In late August, he attended a county commissioners’ meeting in Harrisburg, Pa., seeking relief for himself and other local businesses on property taxes. The commissioners said there was nothing they could do.

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Credit…Hannah Yoon for The New York Times
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Credit…Hannah Yoon for The New York Times

Over time, having fewer guests created fresh peril with lenders. Rather than take out a traditional bank loan for his Hershey property, Mr. Patel had borrowed from Wall Street, attracted by terms that did not allow for the seizure of his personal assets in case of a default. It turned into a nightmare. The commercial mortgage-backed securities loan was controlled by a contract with onerous terms that were almost impossible to change.

Mr. Patel worried that if he fell behind on payments, the property could be seized by investors who held the bonds that his loan was packaged into. In June, desperate for help, he visited the Federal Reserve’s website and read about a program that the central bank had revived — the Term Asset-Backed Securities Loan Facility, or TALF — to prop up the financial markets.

When he saw that the program, created during the 2008 financial crisis, was meant “to support the flow of credit to consumers and businesses,” he wondered: Could that help him get short-term relief on the Hershey loan? No, as it turned out; TALF was designed to help bondholders by lending them money in exchange for bonds like the one linked to the Hershey property as collateral, but it offered no relief to the actual borrowers.

Mr. Patel worries that he may lose the Hershey property. He has set aside $200,000, taken from his company’s other holdings, to pay the $60,000 monthly shortfall he expects to face starting in November, for four months. After that, only another round of aid from the government could keep the property afloat. He is also finding it harder to deal with traditional banks, which typically have more straightforward loan terms but became stricter during the pandemic about negotiating changes to existing loans and even with disbursing what they have already agreed to lend.

In early August, Mr. Patel’s biggest lender asked him for a 12-month “pro forma,” a detailed estimate for how his business would perform over the next year, a monumental request considering how uncertain the future remains. On the morning he had to make a bullish case to the loan officer about the hotel business, the dissipating winds of hurricane Isaias had knocked down the tree in his Hampton Inn parking lot in New Jersey, forcing him to grab a chain saw.

His daily routine has changed, too. He used to reach for his phone while still in bed each morning and scroll through spreadsheets that showed the daily activity at each hotel. But there was little point in doing so after the lockdowns slashed occupancy.

“If I were to calculate all the money that we’re losing, I think I would become unable to just do and see the strategy ahead,” he said.

These days, he often spends hours every day on the phone talking to employees who can’t make it back to work because of child care conflicts or transportation problems. He strategizes about how to help them pay for transportation and their families’ care. He has also found more time to spend with his wife and three children, his parents and members of his extended family who help run the business.

When a vice president in the company started sewing masks in April, Mr. Patel, his wife and his parents joined her in the effort. They kept some of the masks they made for personal use and donated the rest to a hospital. And Mr. Patel picked up a new skill: “I learned how to sew.”

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