A16| Saturday/Sunday, March 28 - 29, 2020 **** THE WALL STREET JOURNAL.
All Those 401(k)s in the Time of Coronavirus
An equally appropriate proposal for
“The Emergency 401(k) Button” (Re-
view and Outlook, March 20) would be
a holiday for IRA required minimum
distributions (RMD) for senior citizens
until the crashing market returns to
its senses.
Being forced to sell into a founder-
ing market to fund an RMD resulting
in a loss of long-term, hard-gained eq-
uity is counterproductive to the pur-
pose of an IRA to fund independent fi-
nancial support in later life. Give
seniors an option of when to fund
RMDs in this bear market.
RALPH (85) ANDKATHY (79)OREY
Oro Valley, Ariz.Before tapping their 401(k)s, work-
ers should consider all sources of
short-term cash. Even if tax and other
penalties on 401(k) cash-outs are
waived, those who cash out forfeit the
additional savings which the sums
they receive would have accrued by
retirement, had they remained incu-
bating in the U.S. retirement system.
Savers need to remember that the
loss to their 401(k) savings from a
cash-out isn’t only the amount they
withdraw today—it’s the loss of years
of compound interest and investment
growth that won’t be there for their
retirement years. A hypothetical 30-
year-old who cashes out $5,000 in
401(k) savings today would lose up to
$52,000 in earnings by age 65 (assum-
ing account growth of 7% a year).
While waiving 401(k) cash-out
penalties is well-intentioned, such a
measure could end up hurting the
very people it is meant to help by
adding to our country’s already se-
vere retirement-savings shortfall (es-
timated by the Employee Benefit Re-
search Institute to be nearly $
trillion for households headed byAmericans aged 35 to 64).
We can borrow now, but we can’t
borrow in retirement. If you are in
need of short-term liquidity, the best
thing you can do is borrow, wait for
the universal basic-income check in
the mail, and try to avoid cashing out
your 401(k). Your 70-year-old self will
thank you for it.
J.SPENCERWILLIAMS
Charlotte, N.C.I cannot think of a much worse idea
than to encourage people, who may al-
ready be saving too little for retire-
ment as it is, to pull up to $10,000 out
of their 401(k) at the bottom of a
stock-market collapse.
OLAVLUND-MIKKELSEN
West Lafayette, Ind.The Worker, Retiree, and Employer
Recovery Act of 2008 suspended all
required minimum distributions from
IRAs, 401(k)s and 403(b)s for 2009. It
was in response to a similar meltdown
in the markets. I think Congress
should do the same thing for 2020.
DALETATUM
Palo Alto, Calif.Tom Denham’s suggestion on capi-
tal gains (Letters, March 23) is excel-
lent. Seniors and retirees are seeing
their savings dwindle, their stock val-
ues plummet, their cash flow depleted
and many are unemployed. We have
lived below our means and have saved
but there are no safe havens. I also
suggest that there be a separate cate-
gory for widows, as we have nearly
the same expenses in running a house-
hold as when married, yet are taxed at
a higher rate. Seniors and widows are
the forgotten segment of our society.
SANDYBELL
Nashville, Tenn.LETTERS TO THE EDITOR
Letters intended for publication should
be addressed to: The Editor, 1211 Avenue
of the Americas, New York, NY 10036,
or emailed to [email protected]. Please
include your city and state. All letters
are subject to editing, and unpublished
letters can be neither acknowledged nor
returned.“You’re the perfect candidate,
but I’m afraid your handshake
was a teensy bit soft.”THE WALL STREET JOURNALBanks Are Stronger Now, but Strong Enough?
Regarding Tom Hoenig’s letter
“Bank Risk System From 2008 Has
Problems” (March 20): Until June
2019 I was the secretary general of the
Basel Committee on Banking Supervi-
sion. In response to the deficiencies
laid bare by the 2008 financial crisis,
the Basel Committee adopted a non-
risk-based leverage ratio, which had
been a feature of the U.S. regulatory
framework before the crisis, though in
a weaker form. It wasn’t, however, a
requirement in virtually all other ju-
risdictions around the world. Today,
the global regulatory framework is
based on multiple metrics: the lever-
age ratio, the risk-based capital ratios
and common liquidity standards.
In the 2008 crisis we learned in a
painful way the perils of placing sole
reliance on a single metric: externalcredit ratings. Why would anyone to-
day take such a narrow approach to
assessing a bank’s soundness by con-
sidering only its risk-based capital ra-
tios? If a bank were to report high-
risk-based capital levels, the next
question one should ask is what the
bank’s leverage ratio is? Continued
focus on a bank’s risk-based ratios
without any consideration of its le-
verage ratio is confounding. This in-
formation is available but not often
highlighted by many large banks
around the world that wish to avoid
scrutiny of their feeble leverage ra-
tios because they don’t stack up fa-
vorably to their competitors. Never-
theless due to the Basel Committee’s
reforms, detailed disclosure of a
bank’s capital adequacy is a global
standard and is readily available.
The financial fitness of big banks is
demonstrably better entering this cri-
sis compared with the 2008 crisis. I
suspect, however, that once the dust
settles the evidence will show that
capital for many should have been
still stronger yet.
WILLIAMCOEN
Arlington, Va.Pepper ...
And SaltHoarding Toilet Paper and
Avoiding the Y2K Horror
“Do We Need So Much Tuna?
Stockpiling Splits Couples” (Page One
March 13) brought back many fond
and interesting Y2K prep memories
and discussions between my late hus-
band, Jude, and myself. I hope every
couple will look back on this stressful
time and laugh someday. I’m proud to
say I lost my temper only once. He
really had been very patient because
we had his elderly mother in our
care, so for the most part the efforts
were appreciated. But ultimately, he
couldn’t take any more and de-
manded indignantly to know why we
needed so much toilet paper. He just
wouldn’t give in to any kind of argu-
ment about comfort or convenience.
So finally I just told him, “OK, you
win. Mom-mom and I have the toilet
paper. You use the newspaper if it
comes.” We didn’t buy toilet paper
for a year, but I wouldn’t trade that
memory for anything.
PATRICIAKOYCEWANNISKI
Morristown, N.J.Real Congregations Start
Embracing Virtual Worship
“Houses of Worship Rush to ‘Online
Only’” (Life & Arts, March 23) covers
what larger churches are doing with
online services or even TV services.
Smaller churches find this more diffi-
cult to do. However, the negatives of
not being able to sing together and
share joys and prayer concerns can be
overcome, especially in smaller
churches, by having worship by confer-
ence call, which our pastor initiated on
the first Sunday that our bishop closed
all United Methodist churches in the
New York Annual Conference. Another
advantage is that members who don’t
have computers can join in. We have
even had members who winter in Flor-
ida and former members who have
moved to retirement in Pennsylvania
worship with us. It works well.
BOBCHRISTIE
Woodbury United Methodist Church
Syosset, N.Y.Lyndon Johnson Proved
Gresham’s Law Is Correct
Regarding James Grant’s review of
John Guy’s “Gresham’s Law” (Books,
March 21): While Sir Thomas
Gresham didn’t say, “Bad money
drives out good money,” we can see
the aphorism’s effect throughout his-
tory. One fairly recent example is
President Lyndon Johnson’s signing
the Coinage Act on July 23, 1965. The
president at the time assured the na-
tion that “we expect our traditional
silver coins to be with us in large
numbers for a long, long time.” Of
course, the old 90% silver coins rap-
idly went out of circulation, and we
are left with today’s pot-metal dimes
and quarters and debased half-dollars
that look as though they were
stamped out of plastic. President
Johnson and the Treasury obviously
hadn’t read their Gresham.
STANLEYSANDLER
Spring Lake, N.C.A Week of Pain and Progress
A
s the number of Americans infected
with the coronavirus surges, and hospi-
tals are besieged, it can appear that
America is losing the pan-
demic war. But in important
ways the U.S. is better off at
the end of March than it was
a week ago, and it’s worth
tracking the progress as well
as the pain.
The most important good news this week is
the ebbing panic in financial markets. The Fed-
eral Reserve unveiled new facilities to provide
liquidity to corners of the market where anxiety
had shut down trades or threatened a run. Think
money-market and municipal-bond funds. The
Senate bill that the House passed Friday adds
$454 billion for Treasury that can backstop fur-
ther Fed actions if they’re needed.
Our market sources say trading has calmed
down and most sellers can find buyers for as-
sets to raise cash when they need it. If you
think this doesn’t matter to the real economy,
imagine a cascade of defaults that become
bankruptcies that become a banking panic. At
least for now the panic toward a deflationary
spiral has stopped. The Fed and the Senate
legislation sparked this week’s modest rally
in equities.
Trouble spots remain in the markets, notably
commercial real estate, oil and gas companies,
and high-yield corporate debt in general. But
the Treasury and Fed should be wary of inter-
vening too far up the risk curve of private as-
sets. Some companies were over-leveraged
even before the shock of $20 oil and the na-
tional economic shutdown.
The Fed’s goal should be to offer liquidity
against good collateral to companies that were
healthy before the virus shock. Fed Chairman
Jerome Powell and Treasury Secretary Steven
Mnuchin can make this distinction clear when
they announce their special-purpose vehicles,
perhaps as early as next week. They’ll get more
bang for their dollar in easing credit conditions
for more of the economy.
None of this will prevent the recession that
the government-ordered lockdown has made
inevitable. This week’s record job losses will
grow by the millions as long as American com-
merce is closed by fiat. The good news on that
front is that a debate has now begun about the
importance of a healthy economy in the fight
against the virus.
President Trump’s choice of Easter as a pos-
sible date for America to return to work trig-
gered the inevitable sneers by his political op-
ponents, but New York Gov. Andrew Cuomo has
made a similar point without the specific date.
Health expert Scott Gottlieb and White House
task force coordinator Deborah Birx have also
talked about balancing public health with eco-
nomic health. The White
House letter to governors sug-
gesting a national map of
counties by virus risk seems a
decent place to start.
iii
There has also been prog-
ress against the direct assault of the virus,
though that is harder to discern amid the rising
infection totals. Those numbers will continue
to increase as testing becomes more widely
available and we get a better grasp on how far
the virus has spread. Tests are becoming easier
to obtain, though we are still paying for the ear-
lier failure by the Centers for Disease Control
and Prevention.
The most urgent need continues to be masks,
gowns, respirators and ventilators for hospitals
in the hardest-hit cities. Mass production of
masks seems well underway but the political
blame-game over ventilators is dispiriting. Mr.
Cuomo blames Mr. Trump, who blamed GM and
Ford Friday for moving too slowly and triggered
the Defense Production Act.
Mr. Trump does himself no favors by ques-
tioning Mr. Cuomo’s estimate that New York
will need 30,000 ventilators. If it doesn’t turn
out that way, great, but the best response is to
say the government is doing its best to get as
many as possible to these cities. Neither man
will escape blame if there are Italy-like scenes
of medical triage.
More broadly, the scope of what we still need
to learn to develop a sustainable anti-virus
strategy is coming into focus. This includes the
number of people who have been exposed to the
virus and now have antibodies that suggest im-
munity, even if they never showed symptoms.
This will give us better insight into the death
rate and who can safely return to work and
where. As Dr. Birx noted this week (see nearby),
the lower estimate of deaths from the Imperial
College London expert means the apocalyptic
fears may not be warranted.
iii
The good news here is that the public seems
to be ignoring the trivial politics and focusing
on what matters. The Beltway press corp’s habit
of playing gotcha with Mr. Trump seems espe-
cially small these days. Most Americans are
looking past it for real news about help on the
economy, the availability of medical equipment,
and the potential of anti-viral therapies. Dam-
age from the virus will continue for months, but
America is now mobilizing against it. Don’t bet
against success.Infections are rising, but
markets are calmer and
medical aid is surging.
Worst-Case Coronavirus Science
G
ive Neil Ferguson a break. Nearly two
weeks ago Mr. Ferguson, an epidemiolo-
gist with Imperial College London, is-
sued a report on Covid-19. Much of the public at-
tention focused on his worst-case projection
that there might as many as 2.2 million Ameri-
can and 510,000 British deaths. Fewer paid at-
tention to the caveat that this was “unlikely,”
and based on the assumption that nothing was
done to control it.
The report was one reason that led Prime
Minister Boris Johnson to change policy and
lock Britain down. Under the Imperial College
model, the projection was that the steps Mr.
Johnson had been taking would cut the number
of projected deaths in half but still leave about
a quarter million British dead.
Now Mr. Ferguson has clarified his estimates.
He told Parliament this week that he now reck-
ons the number of deaths in the U.K. “would be
unlikely to exceed 20,000”—and that many
would be older people who would have died
from other maladies this year. With the mea-
sures now in place, he believes Britain’s health
service won’t be overwhelmed.
Critics are bashing him for the revisions, but
not so fast. Mr. Ferguson didn’t change his
model so much as adjust for new circumstances.
In particular he believes that Covid-19 is more
transmissible than he previously had thought—
but because strong measures had been imple-
mented, deaths would be far lower than his
worst-case scenario.
There’s a warning here about science and
journalism. Surely if we hope to neutralize a
pandemic we don’t fully understand, we need to
encourage a culture in which scientists feel able
to adapt and clarify with new evidence. Scien-
tists would also help themselves if, in explaining
their findings, they would be more candid about
the assumptions and variables.
This goes double for the press. It’s no secret
that the press’s reputation has taken a credibil-
ity hit in this crisis. Nor is it any secret why: In-
stead of a presentation of what we know and
don’t, too often the focus has been political
scapegoating or sensationalizing.
This week on “CBS This Morning,” U.S. Sur-
geon-General Jerome Adams complained about a
press that runs with projections “based on worst-
case scenarios.” He was talking about ventilators,
but his point applies across the board. Deborah
Birx, coordinator for the White House coronavirus
task force, said the same regarding apocalyptic
forecasts not backed by data about hospitals hav-
ing to issue Do Not Resuscitate orders.
In the battle to save lives and address the
scourge of Covid-19, good information is para-
mount. Credit to Neil Ferguson for clarifying his
projections when the situation changed.A Divided Israel’s Unity Government
I
t took three elections and a pandemic, but
Israel finally will have a stable government
after a year of uncertainty. This appears to
mark the beginning of the end
for Prime Minister Benjamin
Netanyahu’s political career,
though that has been pre-
dicted many times before.
On Thursday Mr. Netanyahu
and his main opponent, former
Israeli army chief Benny Gantz, struck a power-
sharing agreement for what amounts to a na-
tional unity government. Mr. Netanyahu will re-
main Prime Minister for another 18 months,
while Mr. Gantz will become Foreign Minister.
In September 2021, Mr. Gantz will take over as
Prime Minister.
Mr. Gantz’s Blue and White party won 33
Knesset seats to the Prime Minister’s 36 in elec-
tions earlier this month, but neither could form
a majority coalition without the other. A similar
unity government could have been reached af-
ter the previous two elections. But Mr. Gantz
said the extraordinary threat of coronavirus
changed his mind: “These are unusual times and
they call for unusual decisions.” Israel currently
has 3,035 confirmed cases and 11 deaths, with
the number of infections rising fast.
This marks another remarkable comeback
for Mr. Netanyahu, who is Israel’s longest serv-
ing Prime Minister at some 14 years in total and
11 years in his current stint. His willingness to
cede power is a rebuttal to
critics who warned he would
use the coronavirus crisis to
remain in the job indefinitely.
Mr. Netanyahu still faces crim-
inal charges over political cor-
ruption that could force him
out of office.
Mr. Netanyahu’s legacy is considerable, even
if he doesn’t survive in office for another 18
months. His free-market reforms have helped Is-
rael become the most dynamic economy in the
region with world-leading technology. The coun-
try’s traditional center-left parties are in sham-
bles. Mr. Gantz gained traction for criticizing Mr.
Netanyahu for alleged corruption (which Mr. Ne-
tanyahu denies), but the centrist military leader
was well within Israel’s consensus on security
policy that the Prime Minister has forged.
Much can happen in 18 months, and once Mr.
Gantz becomes Prime Minister he will have to
manage a balky coalition that will include mem-
bers of his own party who dislike this power-
sharing agreement. Meantime, credit to both
men for recognizing the need for a stable gov-
ernment amid the pandemic.Netanyahu will stay on
for 18 months and thengive way to Gantz.
REVIEW & OUTLOOK
OPINION