The Wall Street Journal - 13.03.2020

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U.S. WATCH

Insome editionsThursday,

a Page One article about

homes with faux Oval Offices

incorrectly described a rug

and a throw pillow that bear

the Great Seal of the United

States as bearing the presi-

dential seal.

CORRECTIONS

AMPLIFICATIONS

Readerscan alert The Wall Street

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by calling 888-410-2667.

late with the public’s money,”

said Jonathan Chambers, a for-

mer FCC official and partner at

Conexon LLC, which contracts

with rural electric companies to

build fiber-optic cable broad-

band networks.

The pushback has reached

Capitol Hill, where congressio-

nal aides and lobbyists have

been discussing how to pres-

sure the FCC to keep SpaceX

out of the auction, according to

emails reviewed by The Wall

Street Journal.

“This will be a political di-

saster if Elon F’ing Musk gob-

bles up billions of dollars of the

public’s money,” a congressio-

nal aide told industry lobbyists

last week in one of the emails.

In its letter to the FCC,

SpaceX said its technology

would expand choices for rural

consumers.

“A prohibition on SpaceX

from participating in the auc-

tion at the levels that match the

true capabilities of its system

could have the unintended con-

sequence of denying consumers

in rural areas the best possible

service and choices,” wrote Da-

vid Goldman, SpaceX’s director

of satellite policy.

The FCC subsequently asked

for public input on SpaceX’s

idea as part of a notice about

proposed rules for the distrib-

uting the funds.

An FCC spokesman said in a

statement the agency looks for-

ward to receiving public com-

ments on its proposal.

“The goal of Chairman [Ajit]

Pai’s Rural Digital Opportunity

Fund is to use the agency’s lim-

ited universal service dollars to

bring the fastest broadband

networks possible to as many

Americans as we can,” the

statement said.

SpaceX’s pitch is based on

Starlink, a system of low-Earth-

orbiting satellites it is launch-

ing to deliver internet service

around the globe.

Because the Starlink satel-

lites are closer to Earth than

traditional satellites, the signal

doesn’t have to travel as far.

SpaceX has said this will allow

it to lower the latency, or lag

time, of satellite transmissions

and offer service on par with fi-

ber-based networks.

A public draft version of the

FCC’s proposed auction proce-

dures, dated Feb. 7, contained

language prohibiting satellite

companies from qualifying as

low-latency services, making

their bids less attractive than

bidders with land-based net-

works.

SpaceX met with FCC staff on

Feb. 18 and 19, it said in the let-

ter to the FCC, arguing that low-

Earth-orbiting satellites generate

low-latency signals.

“Low-latency service is not an

aspirational feature of a pro-

posed system—it results from

the laws of physics,” Mr. Gold-

man wrote in the Feb. 20 letter.

In the version of the proposal

the FCC approved on Feb. 28, the

agency left open the possibility

that low-Earth-orbit satellite

services could qualify as low-la-

tency and asked for public com-

ments on SpaceX’s assertions.

The agency could ultimately

decide that SpaceX’s technology

isn’t proven enough to qualify

for public funds.

Besides latency, the FCC is

proposing other criteria to

judge bidders, including net-

work capacity. It also has pro-

posed a case-by-case review of

firms with nascent technolo-

gies.

On the other hand, if the FCC

were to adopt SpaceX’s sugges-

tions, that could allow the com-

pany to bid in the auction on

equal footing with more estab-

lished technologies, such as fi-

ber-optic cable.

A trade group called NTCA-

the Rural Broadband Associa-

tion, and the National Rural

Electric Cooperative Association,

whose members sometimes offer

internet service along with elec-

tricity, said they are lobbying

congressional offices and the

FCC against SpaceX’s proposals.

“While this is just a pro-

posal, if adopted, it literally

could allow satellite providers

to win the entire auction,” an

NTCA lobbyist wrote in an

email to congressional offices

reviewed by the Journal.

by fees on Americans’ phone

bills, is set to be doled out in

an October auction to low bid-

ders offering the best service in

locations across the country.

For SpaceX, federal subsi-

dies could support the closely

held firm’s plan to deliver high-

speed internet by satellite

across the globe—a venture

considered crucial to its bot-

tom line.

In meetings with FCC staff

last month, representatives of

SpaceX said it should qualify for

the money alongside companies

that already provide broadband

in remote areas through fiber-

optic cable, according to a lobby-

ing disclosure filed by SpaceX

with the FCC.

Rural phone and electric

companies that provide broad-

band via fiber-optic cable have

said granting funds for SpaceX’s

satellite technology is a gamble

because the company doesn’t

have a record of providing

broadband to consumers.

“We don’t let people specu-

Continued from Page One

Musk Seeks

Broadband

Subsidies

VIRGINIA

ChelseaManning

Ordered to Be Freed

ChelseaManning, the former

U.S. Army intelligence analyst

convicted of leaking government

secrets to WikiLeaks, must be

released from a jail where she

has been held for refusing to

testify before a grand jury inves-

tigating its founder, Julian As-

sange, a federal judge said.

The grand jury investigating

the organization is no longer ac-

tive, U.S. District Judge Anthony

Trenga said in an order Thurs-

day, a day after Ms. Manning’s

lawyers said she had been hos-

pitalized after trying to kill her-

self. Her legal team anticipated

she would be released later

Thursday or Friday. “Her deten-

tion no longer serves any coer-

cive purpose,” the judge wrote.

Ms. Manning had been held

in a jail in Alexandria, Va., for 11

months in civil contempt for re-

fusing to testify about the web-

site WikiLeaks and Mr. Assange.

She still must pay $256,

in fines for defying the sub-

poena, the judge said.

A spokesman for the U.S. at-

torney’s office in the Eastern

District of Virginia didn’t imme-

diately respond to requests for

comment.

—Sadie Gurman

CALIFORNIA

Parched State

Gets Heavy Rainfall

Rainfell heavily on parts of

Southern California on Thursday

as a low-pressure system drew

subtropical moisture into the re-

gion at the tail-end of an ex-

tremely dry winter.

Flood advisories were issued

for western parts of San Diego,

Riverside and Orange counties,

and flood watches were in ef-

fect for mountains and deserts

to the east.

Some high elevation moun-

tains could get “substantial””

snow by Friday, forecasters said.

The next weather system is

expected to begin bringing rain

and snow to Northern California

during the weekend and reach

the southern half of the state

by Monday.

With spring just a week

away, California is way below

normal winter rain and snowfall

levels.

The U.S. Drought Monitor re-

port issued Thursday showed

more than 48% of California

was in moderate drought and an

additional 30% was character-

ized as abnormally dry after

January and February passed

with precipitation far below nor-

mal.

—Associated Press

KANSAS

Father Drives Into

River With Toddler

Crews are searching for the

body of a 2-year-old southeast

Kansas girl after her father

drove them both off a 30-foot

embankment and into a river,

authorities said Thursday.

Butler County Sheriff Kelly

Herzet said the father drove into

the Walnut River near Leon

Wednesday evening after offi-

cers tried to take his daughter

from him because he had been

drinking. The father’s body was

recovered from his truck.

—Associated Press

Thebid by Elon Musk’s company for funds to provide rural internet service has led to pushback in Washington. A SpaceX launch last month of a rocket carrying broadband satellites.

PAUL HENNESSY/SOPA IMAGES/ZUMA PRESS

WASHINGTON—The Trump

administration added another

subsidiary of Russian state oil

giant Rosneft to its financial

blacklist for allegedly helping

Venezuela sell its oil in viola-

tion of U.S. sanctions.

The U.S. Treasury Depart-

ment said Thursday that it

took action against Geneva-

based TNK Trading Interna-

tional SA, or TTI, for allegedly

handling Venezuelan oil car-

goes originally under the man-

agement of the Rosneft trading

unit blacklisted by Washington

last month.

The administration is trying

to stem the revenue from oil,

gold and other sanctioned sec-

tors helping keep Nicolás Ma-

duro in power as Venezuela’s

head of state. Russia, along

with other nations opposed to

U.S. policies, has helped the

Maduro regime fend off the po-

litical opposition led by parlia-

mentary leader Juan Guáido

and backed by Washington as

the only legitimate govern-

ment.

Moscow’s efforts not only

give Russia access to cheap oil

and some of the largest crude

reserves in the world, but they

also frustrate U.S. plans to turn

Latin America into an allied

economic power.

Officials with the Russian

Embassy in Washington and

Rosneft didn’t respond to a re-

quest for comment. No one an-

swered the phone at TTI’s of-

fice in Geneva.

“The Trump administration

remains committed to target-

ing those who support the cor-

rupt regime’s exploitation of

Venezuela’s oil assets,” Trea-

sury Secretary Steven Mnuchin

said.

With Venezuela in the

throes of an economic depres-

sion, the U.S. has indicted a

number of former top Maduro

officials and wealthy business-

men on charges of stealing

from the state’s resources and

using national companies to

launder billions of dollars for

drug cartels, terrorists, corrupt

officials and their associates.

The U.S. hopes that by step-

ping up enforcement of its

two-year sanctions campaign,

it can force Mr. Maduro out of

office and seat a Guáido gov-

ernment.

BYIANTALLEY

Sanctions

PutonUnit

Of Russia

Oil Giant

Inthe past

week the cor-

onavirus

shock has

sharply raised

the probabil-

ity that the U.S., and the

world at large, will suffer a

recession. The main chal-

lenge for the world now is

limiting its severity and pre-

venting a health crisis from

becoming a financial crisis.

Hard data has yet to show

a downturn, but it is out of

date. Meanwhile, airlines, the-

aters and others report wide-

spread cancellations. Just this

week equity prices have tum-

bled, oil prices have plunged,

and there are signs of growing

stress in financial markets.

Restrictions on activity

and travel have broadened

and intensified, which will

force exposed companies to

lay off workers, curtail spend-

ing, and in some cases strug-

gle to service debts. Econo-

mists surveyed before the

latest travel restrictions were

announced put the probabil-

ity of recession at 49%.

The hard reality is that as

governments take more steps

to limit the spread of the vi-

rus, that will amplify the

near-term hits to their econo-

mies. “Virus economics [is]

not ... the same as regular

business cycle economics,”

University of Chicago econo-

mist Austan Goolsbee said on

Twitter. The best government

policy response is “anything

that slows the spread of the

virus, even if in the immediate

sense it ‘hurts’ the economy.”

M

onetary policy, the

first line of defense

against recession, is

of limited use because inter-

est rates are near or below

zero around the world and

many businesses and individ-

uals can’t or don’t want to

spend because of the virus

and related restrictions.

But central banks, the Trea-

sury and Congress still have

lots of tools to soften these

initial shocks by ensuring that

viable companies can get ac-

cess to credit, and putting

cash into the hands of people

who are willing to spend.

Congress has already ap-

proved modest new spend-

ing. There are plans in the

works for other benefits,

such as sick pay to workers.

But economists say broader

stimulus is needed as work-

ers are laid off and anxious

consumers pull back. Jared

Bernstein, an economist at

the left-leaning Center on

Budget and Policy Priorities,

said stimulus should equal

1% to 2% of gross domestic

product over 12 months, or

$220 billion to $440 billion.

That will “probably not

prevent a recession, but

surely soften its blow,” he

said. “Its purpose is what

countercyclical policy always

is: to offset as much of the

demand contraction as we

realistically can.”

President Trump is push-

ing for a payroll tax cut. But

other economists note that

won’t benefit the unem-

ployed, will trickle out

slowly and skew toward the

affluent. Jason Furman, for-

mer chairman of President

Obama’s Council of Economic

Advisers, has proposed Con-

gress immediately send ev-

ery adult $1,000 and each

child $500, similar to what

President Bush did in 2008.

A

nalysts worry that po-

litical squabbling and

the complexity of cre-

ating brand new programs

such as paid sick leave costs

valuable time.

“D.C. is running a full

week behind reality,” said

Marc Sumerlin, head of pol-

icy research firm Evenflow

Macro who served in the

White House of President

George W. Bush. “There will

be fiscal stimulus in two

weeks, and the Fed will

likely cut rates to zero in a

week, but the delays are sim-

ply increasing the pain.”

While central banks are al-

most out of regular monetary

ammunition, they can still

ease stressed markets and

the flow of credit—if they

step up. The Fed announced

significant new injections of

cash to relieve worrisome

stresses in the market for su-

persafe Treasury bonds.

Still, Andrew Metrick, of

the Yale School of Manage-

ment, said this isn’t 2008,

when banks and other finan-

cial intermediaries were at

risk of failure and experienc-

ing a run on their short-term

funds. Banks, he said, are

well-capitalized. The prob-

lem is elsewhere: the compa-

nies that borrow from banks,

or from investors via bonds

and leveraged loans.

A recession will send reg-

ular businesses flocking to

banks in search of credit to

tide them over in a cash-

flow crunch. Mr. Metrick

said the Fed can lend those

banks the necessary cash

through its discount window,

accepting the business loans

as collateral. If nonbank

sources of funds such as

commercial paper dry up,

the Fed has the emergency

powers it used during the fi-

nancial crisis to step in.

These tools help busi-

nesses that are solvent but

illiquid—or short of cash to

meet short-term bills.

Lending to companies that

may be insolvent is the do-

main of fiscal policy. Con-

gress and the White House

will have to decide which in-

dustries deserve taxpayer as-

sistance because they are vi-

tal for the functioning of the

economy, and which should

be restructured by the pri-

vate sector, Mr. Metrick said.

There are precedents.

Shortly after the Sept. 11,

2001 attacks, Congress ap-

proved $5 billion in cash as-

sistance to airlines and up to

$10 billion in loan guarantees.

In 2008, the Troubled Asset

Relief Program injected funds

into banks, financial institu-

tions and car companies.

But taxpayers should not

support “bad business mod-

els” like some shale oil com-

panies that were “going to go

under anyway,” said Jona-

than Tepper, head of Variant

Perception, a financial re-

search firm. Many shale com-

panies survived only thanks

to investors “chasing yield in

a low-rate environment.”

A2|Friday,March 13 , 2020 ** THEWALLSTREETJOURNAL.

U.S. NEWS

CAPITALACCOUNT|ByGregIp

Fed, Congress Have Tools to Limit Slump