2 ★ FT Weekend 4 April/5 April 2020
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[email protected]CORONAVIRUSK I R A N STAC E Y— WASHINGTON
R O B E RT A R M ST R O N G— NEW YORK
Fannie Mae and Freddie Mac, the gov-
ernment-controlled companies that
guarantee nearly half of US mortgages,
could require their second bailout in
just over a decade if the US economy
remains in a lockdown for several
months, their regulator has warned.
The two groups, which collectively
underpin the $10tn US housing market,
have sufficient resources to last through
a lockdown of about 12 weeks, but
would then need funds from Congress or
the Federal Reserve, said Mark Calab-
ria, director of the Federal Housing
Finance Agency, which regulates Fannie
and Freddie.“If we start to go more than two or
three months, then there is going to be
real stress in the mortgage market;
we’re talking in terms of what happened
during the great recession,” he told the
Financial Times. “If we are talking
about a drawn-out period where people
are not in a position to pay their mort-
gages, if we are talking about 25 per cent
of people having to ask for forbearance,
the system doesn’t have that kind of
liquidity. That would require Congress
to step in, or the Fed.”
Mr Calabria’s warning underlines the
risks to the US economy if the Covid-19-
related shutdowns persist beyond sum-
mer, as many health experts warn.
Donald Trump, US president, has said
national social distancing guidelines
would remain in place until the end of
April. But many epidemiologists say
they will have to be extended.
Almost 10m Americans have claimedunemployment benefits in the past two
weeks, and Congress passed a bill allow-
ing homeowners to forgo mortgage pay-
ments for up to a year.
About 300,000 borrowers had asked
for forbearance on loans backed by Fan-
nie and Freddie as of April 1, Mr Calab-
ria said. As the agencies make up about
40 per cent of the mortgage market,
that implied a total of perhaps 700,
homeowners seeking forbearance.
He added: “A lot of people got paid for
half of March, so a lot of people who
were able to make their payments in
March won’t be able to make their May
payment.”
Mr Calabria said: “So far, forbearance
is going to borrowers who have always
paid on time. This is someone who has
hit a short-term hardship but has an
intention to stay in that house.”
Homeowners do not have to prove
that they have lost income before beinggranted a mortgage holiday. That would
speed up help, Mr Calabria said, but
could lead to fraud.
“We are operating on an honour sys-
tem here,” he said.
One focus of concern is the mortgage
servicers, often banks and non-bank
lenders, which collect payments from
borrowers and pass them on to inves-
tors. They still have to make the pay-
ments when borrowers have sought for-
bearance, and are not compensated by
Fannie and Freddie for six months, leav-
ing many facing a liquidity crunch.
Mr Calabria said additional funds for
the servicers would not be coming from
Fannie and Freddie, which were placed
in a “conservatorship” during the finan-
cial crisis of 2008.
“I’m not the Fed,” he said. “Fannie and
Freddie are still in conservatorship and
levered 240 to 1. We need all the capital
we can muster for ourselves.”Home ownership
US mortgage groups at risk of bailout
Fannie Mae and Freddie
Mac face struggle iflockdown is extended
VA L E R I E H O P K I N S— BUDAPEST
B E N H A L L— LONDONPeter Marki Zay was confused when he
heard on Wednesday that he might be
stripped of his executive authority as
the mayor of Hodmezovasarhely, a city
in south-eastern Hungary.
Local officials had earlier been told
that to fight a rapidly spreading corona-
virus pandemic they should dispense
with council meetings and make speedy
decisions themselves.
But then the nationalist government
of Prime Minister Viktor Orban tabled a
bill in parliament to subject every may-
oral decision to review and approval by
county panels, mostly appointees from
the ruling Fidesz party.
To opposition politicians such as Mr
Marki Zay as well as civil rights cam-
paigners and Mr Orban’s many critics
across Europe, the move was proof that
Hungary’s self-styled “illiberal demo-
crat” leader was using the cover of a
public health crisis to stifle any remain-
ing opposition to his rule rather than
fight a health emergency. “It shows they
use this power and this opportunity but
it has nothing to do with defending the
population against the virus,” said Mr
Marki Zay, an independent. “It is really
about dictatorship.”
Since returning to power in 2010, Mr
Orban has systematically dismantled
constitutional checks and balances. He
has stuffed the constitutional court with
loyalists, asserted indirect control over
much of the independent media
through takeovers by business cronies
or the public sector.
He has pushed out from Budapest the
Central European University, the insti-
tution endowed by billionaire philan-
thropist George Soros, and threatened
non-government agencies with fines if
they offered support to asylum seekers.
But even with this record, the Hun-
garian leader’s power grab this week has
been extraordinary. On Monday, parlia-
ment, where Mr Orban’s Fidesz partyhas a two-thirds supermajority, voted to
give the government the right to rule by
decree, with no time limit, to help fight
coronavirus, which has killed 26 Hun-
garians and infected 623. There is no
parliamentary review mechanism or
sunset clause.
The government says the emergency
powers can only be used to fight the epi-
demic and are not indefinite since par-
liament can rescind them at its choos-
ing. But nobody expects Fidesz MPs to
defy their prime minister.
“It seems it is really [giving] almost
unlimited power to an already very
strong and centralised government with
a history of notoriously abusing any
opportunities to weaken democratic
institutions,” said Peter Kreko of Politi-
cal Capital, a Budapest think-tank.
Following criticism, ministers
dropped the attempt to downgrade the
mayors but local officials fear the meas-
ure could be reintroduced at any time.
On Thursday, a bill was introduced toclassify information about a $2.3bn rail
project connecting Budapest with the
Serbian capital Belgrade, a large chunk
of which has been awarded to Mr
Orban’s childhood friend, billion-
aire Lorinc Meszaros.
Mr Marki Zay said he was most con-
cerned about a provision in the emer-
gency law making it an offence with up
to three years’ jail to “claim or spread a
falsehood or... a distorted truth” that
could alarm or agitate people.
Agnes Benke, a healthcare reporter
for the independent outlet 24.hu, said
the law was “scary and frightening, but
it doesn’t change my motivation or my
working methods”. Since the bill was
passed it had become harder to per-
suade doctors or medical professionals
to speak because they feared reprisals.
“We don’t know what is happening in
the hospitals. We still don’t know how
many doctors and nurses are infected
with coronavirus,” she said.
“It is possible that they don’t reallywant to use it to jail journalists,” said
Agnes Urban of Mertek Media Monitor,
an independent press watchdog. “The
chilling effect and the self-censorship is
enough for them [the government].”
“They talk of everyone as an enemy.
Enough is enough,” said Tomas Tobe, a
member of the European Parliament for
Sweden’s Moderate party, one of a dozen
to have redoubled efforts this week to
expel Fidesz from the mainstream
European People’s party.
But yesterday the chances of expul-
sion receded after Germany’s conserva-
tive parties called for a thorough legal
examination of Budapest’s law by a
party panel and the commission.
Mr Orban meanwhile thumbed his
nose at his European political family.
“I can hardly imagine any of us having
time for fantasies about the intentions
of other countries,” he wrote to party
officials. “This seems to me a costly
luxury these days. With all due respect,
I have no time for this!”Rule by decree.Democracy fears
Hungary on edge after Orban power grab
Emergency law viewed as
attempt to silence opposition
rather than fight health crisis
Vote: Viktor
Orban arrives
on Monday for a
parliamentary
session at which
MPs approved
legislation that
gives the
government the
right to rule
by decree to
help tackle
coronavirus
Zoltan Mathe/MTI/APG U Y C H A Z A N— BERLINThe coronavirus shutdown has
brought swaths of the global economy
to a standstill, but for producers and
purveyors of condoms and sex toys,
business is booming.Ritex, Germany’s largest domestic pro-
ducer of prophylactics, saw sales nearly
double in March. The company, which is
based in the north-western town of
Bielefeld and is still operating, said its
sales of condoms last month doubled
compared with the same period a year
ago, to 12.7m.
The same trend is happening in other
countries. Ann Summers, the British
lingerie chain, said sex toy sales last
week were up 27 per cent over last year.
Its best-selling item was the Whisper
Rabbit, which it markets as its quietest
vibrator.
“Customers are placing increasing
importance on noise while they have a
full household,” the company said.
Around the world, the coronavirus
pandemic has halted social life. Shops
have been closed, football matches post-
poned, and bars and clubs shut. Strict
social distancing rules in Germany andelsewhere mean gatherings of more
than two people are banned.
Axel-Jürg Potempa, a German sexual
health specialist, said he predicted a
coronavirus-related baby-boom by
Christmas.
“The crisis creates new, additional
bonds,” he said. Fear of Covid-19 was
prompting a flood of adrenalin and a
subsequent “dopamine rush” in many,
which “increases desire and libido”, he
told the Berliner Kurier.
Robert Richter, Ritex’s managing
director, said the rise in condom sales
was partly explained by panic buying
after curbs on social contact were intro-
duced last month, with Germans hoard-
ing essentials such as toilet paper and
hand sanitiser, as well as prophylactics.
But there was also an emotional rea-
son, he added. “In a crisis, when you’re
isolated, you seek more emotional inti-
macy with your partner and sex is part
of that,” he said. “And that might well
lead to more condom use.”
Dildo King, a Berlin accessory sup-
plier, said it had seen an 87 per cent
increase in sales of sex toys year on year
since the restrictions were announced.
Fetish article sales were up 94 per centand sales of one particular product had
increased more than eightfold com-
pared with last year.
“We are doing incredibly well out of
this crisis, but I’m not exactly jumping
for joy,” said Raiko Spörck, managing
director. “People are dying and no one’s
happy.”
The company was having trouble pro-
curing stock, he said: “The producers
w e re n’t p re p a re d f o r s u c h a n
onslaught.”
Eis.de, another leading German
online retailer of sexual accessories, said
orders had doubled since Germanyintroduced social restrictions: on March
23 it saw the biggest sales volume in its
history.
There had been a 300 per cent
increase in sales of aids for men and
women in the southern state of Bavaria,
and a 3,000 per cent increase in demand
for fantasy nurse costumes, the com-
pany said. Sales of jumbo packs of con-
doms, each containing 100, had risen
fivefold.
However, as in all areas of business,
Covid-19 has interrupted supply chains.
Karex, which makes one in five con-
doms globally, had to shut down its
three factories in Malaysia for 10 days
last month as authorities imposed strict
curbs. The company was able to win an
exemption from the lockdown rule late
last week, arguing that it was a producer
of essential medical goods, and restart
the plants. But they are still only run-
ning at 50 per cent capacity.
“We are going to be facing a global
shortage of condoms,” Goh Miah Kiat,
Karex’s chief executive, told the Finan-
cial Times. “Karex alone has produced
200m fewer units as a result of the
restrictions; it’s really impacting our
production.”Free time
Condoms and sex toys fan flames of desire for social isolators
Lust for life: a cyclist passes a Beate
Uhse sex shop in central Berlin‘If we start
to go morethan two
or threemonths,
then thereis going to
be realstress in the
mortgagemarket’
Cases so far
EU foreign policy chief raises concerns
over Africa’s ability to control diseaseJosep Borrell, EU foreign policy chief, has warned of the
impact of the Covid-19 crisis on African countries and
the potential knock-on effect for Europe.
“Africa is of particular concern to us,” he said yester-
day after a teleconference of EU foreign ministers.
“They are our neighbours and the pandemic there
could get out of control very rapidly.” While European
countries had an average of 37 doctors per 10,
inhabitants, the figure in Africa was just one, he said.Ukraine sends medical experts to Italy
López Obrador announces Mexico
will wind up state trusts to pay off debtMexico will wind up hundreds of state trusts to plough
some 250bn pesos ($10bn) into paying off debt, sup-
porting the state oil company Pemex, boosting social
programmes and reactivating the economy, President
Andrés Manuel López Obrador said.
The decree, published on Thursday, affects trusts
that span a variety of sectors, the president said. Mexico
has public trusts that cover areas from boosting invest-
ment to protecting against natural disasters.Ukraine president Volodymyr Zelensky, pictured this
week in parliament, said he was sending medical teams
and industrial alcohol to Italy after receiving a request for
assistance. “Ukrainian specialists will gain invaluable
experience before we face a peak of the disease,” he said.1,056,
and 55,781 deaths by 18:15 BST, April 3
Source: Johns Hopkins University, CSSE
Read more at ft.com/coronavirusCORONAVIRUS
ROUND-UP
New York governor orders National
Guard to find unused ventilatorsNew York suffered its deadliest coronavirus day as Gov-
ernor Andrew Cuomo said he would deploy the
National Guard to claim ventilators and other equip-
ment from institutions not using them. “I’m not going
to let people die because we didn’t redistribute ventila-
tors,” he declared. In the past 24 hours New York state
suffered 562 deaths, its highest one-day total, bringing
its fatalities to 2,935. Total cases stand at 102,863.
Person in the Newspage 9Iranian health minister warns
on premature return to workIran’s health minister has complained about what he
sees as a premature return to work in the country and
urged President Hassan Rouhani to prevent the reopen-
ing of businesses. Saeed Namaki said: “Unfortunately,
the ministry of industries, mines and trade has sud-
denly and without any co-ordination ordered resump-
tion of work in all businesses.”
The government is poised to make a decision on the
partial lifting of quarantine restrictions tomorrow.MAKE A SMART INVESTMENT
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