The New York Times - USA (2020-07-28)

THE NEW YORK TIMES BUSINESSTUESDAY, JULY 28, 2020 Y B3

VIRUS FALLOUT | POLICY

RETAIL

Target to Close Stores

On Thanksgiving Day

Thanksgiving Day is being re-

turned to the workers at major re-

tail chains, fueled by concerns for

worker and customer safety amid

the coronavirus outbreak.

Target said Monday that it

would close its stores on Thanks-

giving this year as part of safety

measures it has rolled out during

the pandemic, following a similar

announcement from Walmart last

week, which cited appreciation for

its staff.

“Let’s face it: Historically, deal

hunting and holiday shopping can

mean crowded events, and this

isn’t a year for crowds,” Target,

which is based in Minneapolis,

said in a statement. Target said

that it would start offering deals in

October this year as well as after

the holiday.

The pandemic has given retail-

ers the chance to reverse the

creep of Black Friday sales into

Thanksgiving, something that

had increased in popularity over

the past decade. The sales have

received widespread criticism for

forcing workers into stores on a

holiday often spent with family.

TECHNOLOGY

Google Employees Are Directed

To Stay Home Until July 2021

Sundar Pichai, chief executive of

Google’s parent company Alpha-

bet, told employees Monday that

they would not be expected back

in the office until mid-2021.

The company’s work force,

which has been working remotely

since March, had previously been

told to expect a return to the office

in January 2021.

A Google spokesman said: “To

give employees the ability to plan

ahead, we are extending our

global voluntary work-from-home

option through June 30, 2021, for

roles that don’t need to be in the

office.”

Technology companies moved

quickly with work-from-home

policies from the beginning of the

coronavirus outbreak, and have

been reluctant to bring workers

back too early. In May, Facebook

said it would allow many employ-

ees to work from home perma-

nently.

ECONOMY

Germany’s Businesses

Optimistic About Rebound

Germany is bouncing back

quickly from the pandemic, ac-

cording to a survey of businesses

that is a reliable weather vane of

the direction of Europe’s largest

economy. But economists cau-

tioned that a return to normal is

still a long way off.

The business climate index

compiled by the Ifo Institute in

Munich, which measures levels of

optimism among business execu-

tives, rose more than expected in

July after suffering record de-

clines earlier in the year. There

was a particularly strong rebound

in services, a category that in-

cludes professions such as house-

cleaning, brain surgery and man-

agement consulting. The manu-

facturing, construction and retail

sectors also recovered.

“Businesses believe that the

worst is over,” Holger Schmied-

ing, chief economist at Berenberg

Bank, said in a note to clients.

Several factors continue to

weigh on growth. Consumers are

likely to be cautious about spend-

ing because they are worried

about keeping their jobs. Busi-

nesses have taken on debt to get

through the crisis, and may cut

back on investment.

Virus Briefing

Big banks may get a big gift in the
stimulus bill being drafted by Sen-
ate Republicans.
Lawmakers are expected to in-
clude language that would give
the Federal Reserve authority to
relax a requirement surrounding
capital levels at the biggest banks,
essentially allowing firms to load
up on riskier assets, according to
three people familiar with the ef-
fort.
The push is the culmination of a
monthslong effort by industry lob-
byists and a top Federal Reserve
official to change a restriction put
in place in the wake of the 2008 fi-
nancial crisis to prevent banks
from engaging in risky behavior.
Right now, banks must count all
assets — including relatively safe
ones like customer deposits that
banks choose to park at the Fed-
eral Reserve and Treasury securi-
ties — when calculating the level
of capital they must hold against
the overall amount of those assets.
That so-called leverage ratio is
supposed to constrain risk taking
by ensuring banks have enough
capital on hand in the event of a
severe downturn, when even the
safest kinds of assets may carry
unanticipated risks.
Senator Mike Crapo, Republi-
can of Idaho and chairman of the

Senate Banking Committee, is

working on legislation that would

give regulators the discretion to

let banks exclude certain items on

their balance sheets when calcu-

lating how much capital they are

required to hold.

The change could allow banks

to be less conservative in their

risk taking than in recent years. It

could be particularly useful for

banks with large Wall Street trad-

ing operations, because it would

let them increase their holdings of

certain kinds of financial assets,

like government bonds, without

requiring a corresponding in-

crease in capital reserves.

Critics say the leverage ratio is

blunt, because it in effect views

United States government bonds

as risky as, say, credit card loans.

But backers of the leverage ratio

say there are times when even the

safest assets can be risky for

banks to own. There was evidence

for this during the turmoil in the

markets in March, when Treasur-

ies were sold off, a major reason

the Fed stepped in to support mar-

kets.

The plan to slip the change into

a pandemic relief package has not

been made public, but the overall

effort to loosen the rule is far from

secret. Mr. Crapo has been en-

gaged for months in a public dis-

cussion of the issue with Randal K.

Quarles, a Federal Reserve vice

chair who has said that the change

would help banks and regulators

better respond to financial market

stresses.

A spokeswoman for Mr. Crapo

declined to comment. A Fed

spokesman declined to comment.

Sean Oblack, a spokesman for

the Bank Policy Institute, a trade

group that has been pushing for

the change, said relaxing the re-

quirement would “enable banks to

increase lending and support the

economic recovery.”

But critics, including Senate

Democrats, say it will give big

banks freer rein to engage in the

kinds of behaviors that led to the

last financial crisis.

“Republicans and regulators

are taking advantage of this

health crisis to roll back bank cap-

ital standards so big bank C.E.O.s

can line their pockets while

putting our financial system at

risk,” said Senator Sherrod Brown

of Ohio, the Senate Banking Com-

mittee’s highest-ranking Demo-

crat. “Senate Republicans are

more interested in helping Wall

Street than they are in helping

Main Street and the workers who

keep our economy running.”

Banks have made huge profits

in recent years and had no diffi-

culty in meeting their capital re-

quirements, allowing them to pay

out billions of dollars in excess

capital to their shareholders

through stock buybacks and divi-

dend payments.

But banks say that leverage re-

quirements can cause them to

stop accepting new deposits and

other securities during times of

stress. The Fed temporarily ex-

empted Treasuries and reserves

from one important leverage ratio

— the supplemental leverage ra-

tio — in early April, saying that

the move would help to “ease

strains in the Treasury market.”

The Fed cannot relax the lever-

age ratio under discussion —

known as the so-called Tier 1

leverage ratio — because of re-

strictions written into the Dodd-

Frank law. Mr. Quarles, who over-

sees the Fed’s bank supervision,

has flagged that limitation as a po-

tential problem.

“Congress should consider

modifying” the amendment “to al-

low regulators to provide flexibil-

ity under Tier 1 leverage require-

ments as banks respond to in-

creased credit demands,” he

wrote in an April 22 letter to Mr.

Crapo. He said that as deposits

flowed in, “the ability of these

banking organizations to continue

accepting significant deposits

may become constrained due to

Tier 1 leverage requirements.”

If the Fed does gain authority to

reduce the leverage ratio, it is not

clear whether the change would

be permanent — so far, the Fed

has only temporarily eased re-

strictions. But former regulators

worry it could open the door to

permanent changes that could

chip away at banks’ protections.

“It would give the agencies dis-

cretion to lower capital ratios be-

yond where they were in 2008,”

said Jeremy Kress, a former mem-

ber of the Fed’s regulatory staff

who now teaches at the University

of Michigan. “That can’t be good.”

Mr. Kress said that it would be

better to consider a more tailored

fix, like temporarily exempting

new customer deposits from the

leverage ratio, rather than paving

the way for blanket exemptions.

“The downside risks of toying

with the Tier 1 leverage ratio is a

much greater risk to financial sta-

bility,” he said.

Republican Stimulus Package May Ease Capital Requirements

This article is by Emily Flitter,
Jeanna Smialekand Peter Eavis.

Senator Mike Crapo, Republican of Idaho and chairman of the Senate

Banking Committee, is working on legislation that could benefit big banks.

POOL PHOTO BY GREG NASH

The leverage ratio

ensures banks have

enough on hand in

case of a downturn.

“It’s not traditional lobbying,”
Steve Case, the America Online
co-founder, said of how Mr. Bezos,
whom he considers an old friend,
had approached Washington until
now. “It is much more of a longer-
term relationship-building — a lit-
tle bit of a reputation-building —
effort that has to be sustained
over decades.”
Amazon declined to comment
on Mr. Bezos.
He arrived in Washington with
a splash in 2013, when he bought
The Washington Post from its
longtime owners for $250 million
and gave the paper new life. In
2016, Mr. Bezos bought the biggest
home in the city, a 27,000-square-
foot manse that used to be a mu-
seum in the Kalorama neighbor-
hood, where former President
Barack Obama and other political
leaders live.
While Mr. Bezos’ presence in
the city grew, so did Amazon’s, as
it began pouring money into the
traditional modes of influencing
policymakers. It spent $16.8 mil-
lion on federal lobbying in 2019, up
from less than $10 million in 2015,
according to the Center for Re-
sponsive Politics. Last year, it
gave $11.1 million to think tanks
and associations, more than twice
as much as the previous year, ac-
cording to its disclosures. In 2018,
it selected Crystal City, Va., a
Metro ride away from Washing-
ton, as the site of its second head-
quarters.
Mr. Bezos occasionally ap-
peared in support of the compa-
ny’s efforts. In 2017, for example,
he was interviewed by the head of
the Internet Association, a lobby-
ing group that represents Amazon
and other tech giants, at its annual
gala.
But as he does with many parts
of Amazon, Mr. Bezos took a
hands-off approach with its policy
and communications group,
which has grown to more than 800
employees globally. He’d come
through Washington for the annu-
al Amazon board meeting, with a
few quiet visits sprinkled through-
out the year.
He has avoided high-profile
meetings with his company’s
sharpest critics, like the one Mark
Zuckerberg, Facebook’s chief ex-
ecutive, held a few weeks ago with
organizers of an ad boycott of his
company. Mr. Bezos has not made
a habit of glad-handing worried
lawmakers, the way Sundar
Pichai, who runs Alphabet,
Google’s parent company, did in

2018. And unlike Tim Cook of Ap-
      ple, Mr. Bezos has not developed a
      close relationship with President
      Trump.
      The work of Amazon’s political
      relations was left to other execu-
      tives. In 2013, when Mr. Obama
      toured an Amazon warehouse, it
      was Dave Clark, a rising star at
      the company, who showed him
      around. In more recent years, Jay
      Carney, Mr. Obama’s former press
      secretary, has become the face of
      Amazon’s interactions with law-
      makers.
      Mr. Carney was the one who
      called Gov. Andrew M. Cuomo of
      New York to say Amazon was
      backing out on its commitment to
      place a second headquarters in
      the state after facing a backlash
      from local activists and poli-
      ticians. And he managed the crisis
      when Senator Bernie Sanders, the
      progressive independent from
      Vermont, pushed the company to
      raise its minimum wage.
      When Mr. Trump was still a
      long-shot candidate, Mr. Bezos
      tweeted that he wanted to “#send-

Donaldtospace.” But since Mr.

Trump’s election, Mr. Bezos has

remained quiet even as the presi-

dent attacked The Washington

Post, stating, without providing

evidence, that the paper was do-

ing Amazon’s bidding. The news-

paper is owned privately by Mr.

Bezos, not Amazon.

“Jeff kind of shrugs his shoul-

ders and says it kind of goes with

the territory,” Mr. Case said. “I’m

sure he doesn’t like it, but he takes

it.”

By 2018, Washingtonian maga-

zine reported that Mr. Bezos had

“quietly become a freewheeling

D.C. socialite” alongside a photo il-

lustration that showed him tower-

ing over the Washington Monu-

ment. Washington Life — which

breathlessly tracks the area’s

wealthy residents — named him

one of the 100 most powerful peo-

ple in the city. In November, he re-

ceived an award at the Smithsoni-

an Institution’s National Portrait

Gallery gala, which had commis-

sioned his portrait for its col-

lection.

Mr. Bezos’ celebrity has also in-

creased in recent years. Last year,

he announced that he and his wife,

MacKenzie Bezos, were divorc-

ing, which was followed days later

by a National Enquirer exposé of

an extramarital affair with Lau-

ren Sanchez, a former television

host. Then he accused the tabloid

of “extortion and blackmail,” say-

ing it had threatened to publish

lewd photos unless he said the

outlet, which is close to the White

House, was not politically moti-

vated in reporting on his relation-

ships.

In January, he finally debuted

his mansion, hosting prominent

figures in politics and business.

The invitations, sent from an

email address at The Post, were

signed simply “Jeff.”

Mingling in the home’s down-

stairs area and terraced back-

yard, the guests included adminis-

tration figures like Ivanka Trump

and her husband, Jared Kushner;

corporate titans like Jamie Di-

mon, the chief executive of JP-

Morgan Chase; and cultural ce-

lebrities like the actor Ben Stiller.

Senator Mitt Romney, a Repub-

lican from Utah, was there as well.

“It’s very much consistent with its

original design and is tastefully

done,” he said of the house a few

weeks later.

Mr. Romney said he had spoken

only briefly with Mr. Bezos at the

party to thank him for his hospital-

ity but said he had gotten to talk

with another notable guest, Bill

Gates, about climate change and

nuclear power.

“So it was most enjoyable,” Mr.

Romney said.

The environment on the Hill

this week is likely to be far less

hospitable. Mr. Bezos’ wealth has

grown by more than $50 billion in

recent months, just as unemploy-

ment has skyrocketed during the

pandemic, making him an avatar

for inequality. Questions about

Amazon’s dominance have also

grown louder, as more Americans

have been forced to shop online

because of the coronavirus. Ware-

house workers have said that Am-

azon is putting them at risk of con-

tracting the virus in the compa-

ny’s pursuit of speedy deliveries.

Even as the concerns of poli-

ticians became more pronounced,

Amazon resisted sending Mr. Be-

zos before Congress. The com-

pany agreed to send him after law-

makers threatened to subpoena

his testimony.

“No one is above the law, no

matter how rich or powerful,”

Representative David Cicilline,

the Rhode Island Democrat who

leads the Judiciary Committee’s

antitrust subcommittee, said in a

May tweet.

Mr. Case said lawmakers

should not expect Mr. Bezos to get

rattled. He recalled when Mr. Be-

zos appeared onstage two years

ago at the Economic Club of Wash-

ington, D.C., with David Ru-

benstein, a private equity mag-

nate. Mr. Bezos expounded on a

variety of topics, including his

just-announced $2 billion fund to

support education and the home-

less.

Mr. Case, who shared a table at

the event with Mr. Bezos’ parents,

said that many people in the room

did not know Mr. Bezos, but that

they had left impressed. Mr. Bezos

bounced between clearly pre-

pared talking points and “un-

plugged Jeff just being Jeff,” Mr.

Case said. “His best ambassador

is himself.”

In 2016, Jeff Bezos bought the biggest home in Washington, D.C., a 27,000-square-foot manse. Guests at a party there in January included Ivanka Trump.

ANNA MONEYMAKER FOR THE NEW YORK TIMES

David McCabe reported from Wash-

ington, and Karen Weise from Se-

attle.

After Years Avoiding the Hot Seat, Bezos Gets His Turn

FROM FIRST BUSINESS PAGE

Mr. Bezos speaking at the National Press Club in Washington, D.C., last year.

He has typically met the press and potential critics on his own terms.

EMMA HOWELLS FOR THE NEW YORK TIMES

Mr. Bezos bought The Washington Post for $250 million in 2013. President

Trump has accused him of using the paper to do Amazon’s bidding.

JUSTIN T. GELLERSON FOR THE NEW YORK TIMES

Amazon’s market

power and labor

conditions are among

the topics on the table.