Daily Business Briefing
July 9, 2021Updated
July 9, 2021, 5:42 p.m. ET
July 9, 2021, 5:42 p.m. ETCredit…Michael A. Mccoy/Getty Images
The Transportation Department on Friday proposed expanding consumer protections for airline passengers, acting on a sweeping executive order aimed at promoting competition that President Biden signed earlier in the day.
The new rule would require airlines to refund checked baggage fees for luggage that is delayed more than 12 hours for domestic flights and more than 25 hours for international flights. Carriers are currently required to refund fees only when luggage is lost.
The rule would also generally require airlines to refund other fees, such as those for wireless internet access during flight, for services that aren’t delivered. Under current rules, companies are only required to issue refunds for those fees when flights are canceled or oversold.
“Consumers deserve to receive the services they pay for or to get their money back when they don’t,” the transportation secretary, Pete Buttigieg, said in a statement.
The proposed rule includes exceptions. A passenger who pays for internet access but then changes to a flight without that service would not qualify for a mandatory refund, for example. If the internet access generally works for others who paid, but not on an individual passenger’s electronic device, he or she would also not be entitled to a refund.
The rule also requires that refunds be issued promptly — within seven days for credit card transactions and 20 days for other payment methods.
“This should be good for consumers, I just wish it hadn’t taken so long to get to this point,” said John Breyault, an executive at National Consumers League, a nonprofit advocacy organization.
Stocks rebounded Friday and government bond yields rose a day after Wall Street’s worst decline since mid-June. Investor concerns over the economic recovery had led to a 0.9 percent drop in the S&P 500 on Thursday.
Yields on 10-year Treasury notes, a benchmark for borrowing costs across the economy and a measure of the outlook for growth, also fell sharply on Thursday as investors piled into United States government bonds in a flight to safety.
The S&P 500 rose 1.1 percent to a record.
The yield on 10-year Treasury notes jumped to 1.36 percent.
Markets in Europe were higher. The Stoxx Europe 600 and the FTSE 100 each rose 1.3 percent. The British economy grew 0.8 percent in May as more pandemic restrictions were lifted, official data showed, but the pace of growth has slowed and economists warn that returning to prepandemic levels will be harder.
Oil prices rose. West Texas Intermediate, the U.S. crude benchmark, gained 2.3 percent to $74.61 a barrel.
Shares of Biogen fell 3 percent after the Food and Drug Administration called for a federal investigation of the process that led to the approval of the company’s new drug for Alzheimer’s disease.
In its latest rebuke to the ride-hailing giant Didi, China ordered 25 more of the company’s apps removed from mobile stores on Friday, deepening the regulatory maelstrom that has engulfed the company since it went public on the New York Stock Exchange last week.
The country’s internet regulator said in its 10 p.m. announcement that the apps — which include Didi’s car-pooling app, its finance app and its app for corporate customers — showed problems related to the collection and use of personal data.
The latest announcement was nearly identical to one the same agency issued on Sunday, ordering a halt to downloads of Didi’s main, consumer-facing app for the same reason. That order followed a separate one two days before that told Didi to stop registering new users while officials conducted a checkup of the company’s network security practices.
None of these recent commands offered any detail about the specific data and security problems that aroused officials’ concerns. In a statement that was posted after midnight on Chinese social media, Didi said it would “sincerely accept and resolutely obey” the demands.
Beijing’s sudden moves against Didi, which has been celebrated for years in China as a homegrown innovator and industry pacesetter, have jolted the company’s new Wall Street shareholders. The clampdown has also spooked investors and start-ups in China, who are wary about what seems to be growing hostility by Chinese officials toward domestic companies that list shares on overseas exchanges.
A listing on Wall Street, such as Alibaba’s record-breaking one in 2014, was once seen in China as an ultimate validation of a company’s business achievements.
Read moreCredit…Gilles Sabrie for The New York Times
JINAN, China — Faced with gradually slackening economic growth and a direct order for action from China’s cabinet, China’s central bank said Friday that it was taking steps to help the country’s commercial banks lend more money.
Extra lending could help China’s small and midsize enterprises, particularly retailers. Consumer spending has been slow to recover from the pandemic in China. Many struggling smaller businesses need to be able to borrow money at affordable interest rates to stay open.
When commercial banks accept customers’ deposits, they are typically required to park a small share of the money at their country’s central bank. They are then free to lend the rest.
The People’s Bank of China, the country’s central bank, said on Friday evening that effective next Thursday, it would allow commercial banks to park a slightly smaller share of deposits. Allowing commercial banks to take back some of the money will, at least in theory, free them up to lend more.
But the People’s Bank also cautioned in its announcement that the effect might be somewhat muted, because part of any extra lending is likely to disappear quickly into the government’s coffers as the summer tax collection season starts.
China’s monetary policy has swung sharply over the past 18 months in response to the pandemic. The central bank pushed banks to lend heavily early last year as the virus raced through Wuhan and beyond, to make sure businesses did not run out of cash.
Worried that the extra money might fan inflation, the central bank later tightened policy. But with many companies struggling to pay interest on their debts, and with the economy not quite fully recovered from the pandemic, the central bank then changed policy again on Friday toward further easing.
The new rule allows practically all financial institutions to reduce the required percentage of deposits, the so-called reserve requirement ratio, by half a percentage point. The exact ratio varies with the size of the bank, but the average will be 8.9 percent after next Thursday, the central bank said.
The central bank encouraged commercial banks to lend more to smaller businesses. Lending has been growing less rapidly in the first half of this year. But there have also been some signs that lower lending might signal a wariness among borrowers to take on even more debt, as opposed to any regulatory constraint on how much the banks can lend.
The central bank said it was acting “to support the development of the real economy and promote a steady decline in overall financing costs.”
Li You contributed research.
Read moreCredit…Mark J. Terrill Patrick Semansky/Associated Press
Richard Branson is scheduled to fly into suborbital space on Sunday, nine days ahead of a similar journey by a fellow billionaire, Jeff Bezos. These first flights for the space moguls will also launch without liability insurance, the DealBook newsletter reports.
Brokers say neither Virgin Galactic nor Mr. Branson appears to have bought coverage should the British business mogul be hurt, or worse. (The craft is most likely covered.) The same goes for Mr. Bezos and his company Blue Origin. Virgin, Mr. Branson and Blue Origin declined or did not respond to requests for comment.
“We have talked to those companies about insurance and regulatory issues a lot,” said Sima Adhya, the head of space insurance at Hamilton, a company that offers insurance through Lloyd’s of London. “But there have been no policies specifically written for these flights.”
Liability coverage is required on international flights. But Virgin’s craft, the V.S.S. Unity, launches and lands in the same place in New Mexico, so Mr. Branson’s flight, despite rocketing to the edge of space, is technically considered domestic travel. Virgin has said passengers will eventually be required to sign a contract agreeing to be fully liable for their own safety, but American law makes it nearly impossible to transfer all liability in the case of personal injury or loss of life.
Insurance providers say it’s very likely that regulators will soon require liability policies. Space travel wouldn’t be covered by a typical life insurance policy, industry experts say. And it could also be an issue for corporations if executives decided that they, like Mr. Branson and Mr. Bezos, would like to travel to space. So-called key person policies could theoretically cover the stock market fallout if something happened to a top executive.
There aren’t a lot of options for casual space travelers, but some insurers are interested in developing such policies. Allianz first began designing space tourism policies in 2012, though there is no evidence one has been sold. (Allianz did not return a request for comment.) Space tourism is new, but experts say there is now more than enough data on rocket launches to know how to price these policies.
Lloyd’s of London estimates that the space insurance market has averaged $500 million in annual premium payments over the past decade. But those policies have generally covered satellites and other nonhuman cargo.
“The big question for the insurance industry is whether this is more like aviation insurance or more like current space policies,” said Neil Stevens, a senior vice president of space products at the insurance broker Marsh. “There hasn’t been a situation where insurance markets haven’t stepped up.”
But for now, space travel is launching without an insurance net for passengers. Developing those policies is one more small step that is likely needed before space travel can leap into a fully functioning tourism market.
Read moreCredit…Stefani Reynolds for The New York Times
Just weeks after the Education Department erased half a billion dollars in student debt for borrowers defrauded by their schools, the agency said on Friday that it would discharge another $55.6 million for students at three other institutions.
Roughly 1,800 students — at Westwood College, Marinello Schools of Beauty and the Court Reporting Institute — will have all of their debts discharged as part of the so-called borrower defense program, which allows loan holders to file claims to have their debt forgiven if they believe they have been scammed.
The Biden administration has now canceled more than $1.5 billion in loans for more than 92,000 borrowers under the program, a significant shift from the previous administration, during which relief efforts largely came to a standstill. And the latest approvals widened the scope of relief beyond a small group of schools.
Friday’s approvals were the first since 2017 that wiped out debts at schools other than Corinthian Colleges, ITT Technical Institute and American Career Institute. Those three for-profit institutions are now defunct.
“The department will continue doing its part to review and approve borrower defense claims quickly and fairly so that borrowers receive the relief that they need and deserve,” said Miguel A. Cardona, the education secretary. “We also hope these approvals serve as a warning to any institution engaging in similar conduct that this type of misrepresentation is unacceptable.”
Former Westwood students accounted for the bulk of the relief delivered on Friday. The department approved more than 1,600 claims from them, totaling roughly $53 million, which involved two types of misrepresentation. The agency said that between 2002 and the school’s closure in 2015, Westwood misled students about their ability to transfer credits. A second group of borrowers, in the criminal justice program, were misled about their job prospects in law enforcement in Illinois, the department said. Many agencies would not accept their credits, and borrowers had to accept minimum-wage jobs instead of positions they thought they had trained for.
Another 200 claims approvals wiped out more than $2.2 million in debts tied to Marinello Schools of Beauty. Students who attended from 2009 through the school’s shuttering in 2016 said they were misled about classes and training that were supposed to be offered but never were. The department said that had made it “extremely difficult” for them to pass required state licensing tests.
Education Department officials also found widespread misrepresentations at the Court Reporting Institute, where it approved 18 claims totaling $340,000. From 1998 through its closure in 2006, the school misinformed borrowers about how long it would take to complete the program, the department found. The majority of students never finished.
Read moreCredit…Alberto Pezzali/Associated Press
The British economy grew 0.8 percent in May as more pandemic restrictions were lifted, official data showed, but the pace of growth has slowed and economists warn that returning to prepandemic levels will be harder, especially if consumers react cautiously to rising coronavirus infections.
May was the fourth straight month of growth in Britain, the Office for National Statistics said on Friday, but the rate was nearly half of what economists were expecting. The monthly gross domestic product increased 2 percent in April and 2.4 percent in March.
The British economy was about 3 percent smaller in May than it was in February 2020, before the pandemic.
Other data published by the statistics agency this week that measures the economy in real time by examining retail foot traffic, restaurant reservations and credit card spending also showed signs of activity plateauing in June and early July.
The main propeller of economic growth in May was the hospitality sector as indoor dining reopened across the country. But the sector is still nearly 10 percent smaller than it was before the pandemic. The manufacturing sector was a drag on the economy after a global shortage of chips disrupted the industry, particularly in car production. And the construction sector contracted for the second-consecutive month.
“Growth is moderate outside the sectors being unlocked,” Rory MacQueen, an economist at the National Institute of Economic and Social Research, wrote in a note. It’s still unclear whether the government’s plans to lift all restrictions on July 19 will lead to “strong growth in the third quarter or — if cases of Covid-19 continue to rise — increased caution among consumers and even another national lockdown,” he added.
As coronavirus case numbers have risen, Britain’s National Health Service as warned hundreds of thousands of people through its track-and-trace app that they have come into contact with someone with the virus. There are concerns that millions of people could soon be asked to self-isolate.
That could explain why some of the economic data has leveled off, said James Smith, an economist at ING, adding that he expected the economy to return to its prepandemic size by the end of the year. “We’d still say the outlook beyond the summer looks reasonably good, assuming no significantly vaccine-evasive variants emerge in the near-term,” he wrote in a note.
Read moreCredit…Nathan Papes/The Springfield News-Leader, via Associated Press
The International Monetary Fund’s executive board approved a plan to issue $650 billion worth of reserve funds to help troubled countries buy vaccines, finance health care and pay down debt. If approved by the I.M.F.’s board of governors, as is expected, the reserves could become available by the end of August.
How will the I.M.F. create this fund?
The reserve fund will be created through an allocation of Special Drawing Rights, and it will be the largest such expansion of the asset in the organization’s nearly 80-year history.
Special Drawing Rights, or S.D.R.s, were created in the 1960s and are essentially a line of credit that can be cashed in for hard currency by member countries of the I.M.F. They are intended to help countries bolster their reserves and make the global economy more resilient.
Each of the I.M.F.’s 190 countries receives an allotment of S.D.R.s based on its shares in the fund, which track with the size of a country’s economy. The drawing rights are not a currency, and therefore cannot be used to buy things on their own. But they can be traded among member countries for currencies that can. Their value is based on a basket of international currencies — the U.S. dollar, euro, Chinese renminbi, Japanese yen, and British pound sterling — and is reset every five years.
To use the S.D.R.s, countries can agree to trade this interest-bearing asset with other countries in exchange for cash. The I.M.F. serves as a middleman to help facilitate the transaction. If the United States buys a batch of S.D.R.s from, say, Angola, it will earn interest on those assets. And Angola, which would be paid for the sale in U.S. dollars, could use the money to buy what it needed, such as vaccines to inoculate its population against Covid-19.
The plan approved by the I.M.F. executive board would effectively create $650 billion worth of S.D.R.s. Poor countries could then trade their share of those with wealthier countries to get hard currency to fund vaccines.
Why is the plan controversial?
While the idea of new S.D.R. allocations was introduced last year, the United States, under the Trump administration, prevented it from moving forward. It argued at the time that boosting the emergency reserves was an inefficient way to provide aid to poor countries and that doing so would provide more resources to advanced economies that did not need the help, like China and Russia, which would get a large share of the S.D.R.s that were approved.
Republicans have continued this argument, seizing on the issue as a way to criticize President Biden, who supports the allocation, for not putting “America first.”
At a Senate hearing in March, Senator John Kennedy, Republican of Louisiana, tried to make the case to the Treasury secretary, Janet L. Yellen, that the United States would be subsidizing loans to countries if it bought S.D.R.s, essentially putting taxpayers at risk.
Republicans such as Mr. Kennedy argue that the S.D.R. allocation would do more to benefit American adversaries than the developing countries it is intended to help. He argues that China and Russia would get the equivalent of a combined $40 billion.
Ms. Yellen has dismissed both notions, arguing that any borrowing the United States did to buy a country’s S.D.R.s would be offset by the interest it collected on the asset. The Treasury Department also did not buy the claim that allocating the I.M.F. reserves would benefit China and Russia, as they have shown little use for the S.D.R.s and the United States would not be inclined to cut a deal with such rivals.
Eswar Prasad, a former head of the I.M.F.’s China division, agreed that any benefit to China or Russia from the S.D.R.s would be negligible and that American taxpayers had nothing to lose.
“Any such conversions of S.D.R.s into U.S. dollars would be guaranteed by the I.M.F., so there are no risks to the U.S.,” he said.
Will the new reserves be enough to developing countries fight the pandemic?
Some have said the I.M.F. should be doing more.
The United Nations Conference on Trade and Development called this year for $1 trillion worth of Special Drawing Rights to be made available by the I.M.F. as a “helicopter money drop for those being left behind.”
To address some of these concerns, the I.M.F. is working to develop a new trust fund where wealthier countries can channel their excess S.D.R.s. The goal is to create a $100 billion pot of money that less developed countries can borrow from to use toward expanding their health care systems or addressing climate change in conjunction with existing I.M.F. programs.
Other changes are also in the works to address the political sensitivity over how the reserves are used. At the urging of the United States, the I.M.F. is working to create greater transparency around how the assets are being used so that is clear that American adversaries are not benefiting from the proceeds.
Read moreCredit…Sarahbeth Maney/The New York Times
The world’s top economic leaders are convening on Friday to hash out crucial details of a deal to put an end to global tax havens and force multinational corporations to pay an appropriate share of tax wherever they operate.
Negotiations are entering what officials hope to be the final stretch as finance ministers from the Group of 20 nations meet. Officials hope to complete a deal by October, when the leaders of the G20 countries return to Italy for the last summit of the year, Alan Rappeport reports for The New York Times.
Last week, 130 countries backed a conceptual framework for the new tax plan.
The blueprint includes a global minimum tax of at least 15 percent. The agreement also is intended to put an end to a cascade of digital services taxes that many countries around the world, including Britain, France and Italy, are adopting to capture more tax revenue from American technology companies.
The United States wants European countries to drop their digital services taxes immediately, but policymakers have suggested that they could remain in place until a new agreement is fully enacted, which could take years. The European Union is also pressing ahead with a new digital levy even as the tax talks proceed.
Other outstanding issues remain to be worked out this weekend and in the coming months, including the exact rate that global companies would face.
Read moreVideoCreditCredit…Irene Suosalo
Today in the On Tech newsletter, Shira Ovide writes that digital life reaches far beyond our screens into the real world. That means we must figure out how to live with the impact of technology in our backyards.