At the end of 2019, before the coronavirus pandemic started, the two best-known faces of the pharmaceutical business were the imprisoned Martin Shkreli and the lawsuit-laden opioid makers at Purdue Pharma LP. The rest of the industry was perhaps best known for the skyrocketing prices of its medicines. In a Gallup Poll of the public’s view of various business sectors, pharma was ranked at the bottom, behind the oil industry, advertising and public relations, and lawyers. Who’d have guessed that a year later pharma would be getting credit for saving the world? (Bloomberg Businessweek | Dec 23)
A high-powered group of U.S. regulators cited money market mutual funds as a key source of stress during March’s pandemic-fueled market turmoil, while making a number of recommendations on how to make the investments more resilient during the next crisis. The group said a top concern is that investors expect the funds to be highly liquid but that’s not always the case when markets go haywire. (Bloomberg Law | Dec 22)
One category of bonds that has yet to receive federal support is Single Asset/Single Borrower Commercial Mortgage Backed Securities (SASB CMBS). Like the Residential Mortgage Backed Securities instrumental in the financial crisis, CMBS are serviced from principal and interest payments on a pool of real-estate loans. But the underlying mortgages are liens on large, income-producing properties such as office buildings, apartment complexes, hotels, and shopping malls. (National Review - Capital Matters | Dec 22)
The Securities and Exchange Commission approved a new kind of direct listing, opening the door to an alternative to the traditional initial public offering — which could help startups save on bank fees and capture more of the gains in their share price when they go public. The decision was a victory for the New York Stock Exchange, which sought to change its rulebook to make the new process available to companies going public. (The Wall Street Journal | Dec 22)
The Federal Reserve said last Friday that the largest U.S. banks remain strong enough to survive the coronavirus crisis but warned that a prolonged economic downturn could saddle them with hundreds of billions of dollars in losses on soured loans. The Fed also said it would allow the banks to restart share buybacks but that it would, at least in the first quarter, restrict the amount. It said it would continue to restrict dividend payouts. (The Wall Street Journal | Dec 18)
