Category Archives: International News

The U.S. vs. the world: How major nations are recovering from coronavirus

Poor health outcomes in the U.S. point to a slow economic recovery, and possibly a double-dip recession.

People wearing face masks to protect against the coronavirus gather at a pedestran shopping street in Beijing in June 2020. | Mark Schiefelbein/AP Photo

President Donald Trump’s push to reopen the United States quickly this spring may have saved some short-term economic damage. But indicators both at home and from around the globe suggest that until the U.S. gets its coronavirus outbreak under control, its medium- and long-term economic prospects remain dicey.

As governments release their final figures for the second quarter of the year, it’s become clear that, more than anything else, a country’s success or failure combating the pandemic is what is driving economic performance.

Lockdown measures have taken a toll, which helps explain why parts of Europe and Asia performed far worse than the United States earlier this year. But the approach to reopening, including governments’ willingness to embrace measures like mask mandates, are more predictive of a country’s economic trajectory — whether that be a v-shape, swoosh, bird wing, or one of the many other monikers economists have come up with to describe the course of a recovery after a plunge in output.

The variation in countries’ second quarter GDP numbers — which cover the period between April 1 and June 30 — offer an illustration of how dependent national economies now are on the state of their public’s health. While doubts exist about China’s pandemic death toll and economic statistics, there’s no dispute that the country that was home to the original coronavirus outbreak is already back to growth.

That’s thanks in part to the harsh regional lockdown in Wuhan, where the virus originated, quarantine systems that isolated victims from their families and co-workers, and mask mandates (now lifted) in at-risk cities like Beijing.

Every member of the G7, meanwhile, is now in a deep recession, ranging from Japan’s 7.6 percent contraction in Q2, compared to the previous quarter, to Britain’s 20.1 percent contraction since Q1. The U.S. is about average among the seven countries, contracting by 9.5 percent in the same period compared with the first quarter of 2020.

India just reported the world’s worst recession: losing around a quarter of its output after implementing the world’s biggest lockdown. The Modi government’s severe measures bought valuable time to fortify its fragile health system, allowing the country to maintain a lower death rate than the United States. But India’s reported cases have doubled from around two million to four million over the past month, as it’s struggled to keep its population socially distant. And the country is now on track to overtake the U.S. in total reported cases, just ahead of the November election.

A Goldman Sachs report underscores the direct link between public health and the economy. The June 29 report estimates that a national face mask mandate in the United States “could potentially substitute for renewed lockdowns that would otherwise subtract nearly 5 percent from GDP.” Trump has rejected such a mandate, but Democratic presidential candidate Joe Biden has said he is open to the idea, if health officials recommend it.

Jan Hatzius, a Goldman Sachs analyst who co-authored the report, told POLITICO that U.S. economic results since July bear out the relationship between health and growth. The economy’s improvement, he noted, corresponds to a rising share of the American population subject to state and local mask mandates — from about 40 percent in June to its current 80 percent.

East Asian economies where mask-wearing is a national norm, such as China, Japan and South Korea, have avoided the worst recessions, as have countries like Vietnam and Singapore, which instituted mask mandates early on in the pandemic. Like China, Vietnam is now posting positive economic growth.

After becoming the first coronavirus epicenter outside of China, Italy used a mask mandate to help beat dire second quarter GDP predictions, vastly outperforming the United Kingdom, which resisted mask rules for months.

Masks are not the only medicine: Germany’s rigorous testing and well-prepared health system put its health and economic outcomes consistently ahead of both its large neighbors and the U.S.

Recession before recovery

While national economies are likely to have hit rock bottom back in April, countries that have failed to contain the virus such as the U.S. are on the path to prolonged recession, rather than recovery.

Under the Trump administration, the country started locking down in mid-March — and many states did not do so until April — well behind hard-hit European countries. And the U.S. opened up sooner. That helped achieve better economic numbers in the second quarter than much of Europe, but it also didn’t snuff out the virus.

Unable or unwilling to close state borders, the coronavirus has ricocheted around the U.S., in contrast to EU countries which closed their internal borders for months. Covid-19 case levels have plateaued at a much higher in the U.S. than in other rich countries, and public health officials fear the onset of flu season and cooler weather will cause another spike.

Modeling by the University of Washington’s Institute for Health Metrics and Evaluation projects American Covid-19 deaths to be around 408,000 by December 31 if current policies are maintained, rising to 608,000 if current pandemic restrictions are eased. If a national mask mandate were in place, the death toll could be limited to 286,000.

“In the COVID recession, economic conditions are too closely tied to the pandemic’s trajectory to be able to forecast with confidence the course of recovery,” writes Stanford University’s Michael J. Boskin.

Economists now warn that instead of the “v-shaped” recovery President Donald Trump has been promising — a reference to an economic bounce to match the dip of spring 2020 — it now risks a “double-dip” recession without renewed economic aid.

In the U.S., 80 percent of 235 economists surveyed by the National Association of Business Economics in August see a 1-in-4 chance of such a recession, where the economy would retrench again, as it did in the spring, rather than keep recovering.

The warning signs include mounting bankruptcies as a flood of U.S. government support from April to July turns into a trickle, and the likelihood that falling temperatures will dent outdoor dining and other tourism-related spending.

U.S unemployment numbers are another cause of concern. On Wednesday, United Airlines and Ford announced tens of thousands of layoffs, and the World Travel and Tourism Council estimated just over 12 million out of 16.8 million tourism-related jobs in the U.S. are at risk of being lost in a “worst case” scenario in coming months. The U.S. Travel Association puts the number at 8 million.

Article By RYAN HEATH

Google Defends Its Debt Collection Practices in Travel

Google is feeling the heat over its unwillingness to discount travel advertisers’ unpaid advertising bills that grew out of the Covid-19-induced economic collapse, and its payment-collection practices, which include barring new advertising for nonpayment.

Google believes that German and French companies that publicly called on Google in recent months to give them relief from their first quarter bills, when their advertising spending turned into a mountain of cancelled bookings, are looking for special treatment and one-off deals.

Google issued a new statement about its billing practices Wednesday.

“We fully recognize the enormous challenges facing the travel industry, and we’ve been working in close collaboration with travel advertisers to help them protect their businesses and look toward recovery,” Google stated. “The issue of payments’ collection applies to only a very small number of travel companies, and virtually all of our partners in the industry do not have overdue bills with us.”

Unlike companies such as InterContinental Hotels Group, Facebook, and Amazon, which were reportedly willing to hand out discounts to partners or agree to payment plans for their overdue bills, Google has resolved to maintain a one-size-fits-all debt relief plan — virtually nothing.

“As a matter of fairness, we’re applying the same rules equally to all of our clients asking for relief, across both travel and the many other sectors that’ve been impacted by the pandemic,” Google stated.

LET’S DO THE MATH

When Google said “only a very small number of travel companies” have to deal with its debt-collection efforts, that may be true as a percentage of Google’s travel advertisers — but the bad debt could easily total $50 million to $100 million.

Consider that Google’s parent Alphabet disclosed in its second quarter report that its allowance for credit losses on accounts receivable stood at $788 million on June 30 — and that was an increase of $513 million during the coronavirus-influenced first six months of 2020. The comparable number on December 31 was just $275 million, and Google noted that credit trends can be volatile so these numbers are just estimates.

Skift Research estimated that in 2019 Google generated 12 percent of its $135 billion in total advertising revenue from travel. That would have amounted to some $16.2 billion in travel advertising spend on Google last year.

It would be easy to see then that at least $50 million of Google’s estimated $513 million in bad debt that came on the books in the first six months of 2020 could be tied to distressed travel advertisers.

If you take into account that travel was likely the hardest-hit — or one of the most-beaten-down — sectors among Google’s advertisers, then perhaps that $50 million level of estimated bad debt should be significantly higher by multiples.

These would be very small numbers for Google, but undoubtably would mean a lot of pain for many travel companies, with their existences in peril.

For further context, Expedia Group calculated that its uncollectible debt and estimated future losses from Covid-19-related factors rose $82 million in the first six months of 2020. [See the Accounts Receivable and Allowances section of this document.]

IMPACT ON A SMALL TOUR OPERATOR

While the largest travel companies, such as Booking Holdings and Expedia Group, are likely current with their Google bills, a range of advertisers have seen their advertising cut off, and their accounts handed off to debt collectors.

We previously detailed the case of a well-known travel brand that tried to make payment arrangements for its past due bills with Google, but was rebuffed. The travel firm then saw all of its advertising turned off, despite being a Google client of many years. This hampered the travel advertiser’s recovery efforts, and ability to repay Google, and the debtor got pressure from Accenture on behalf of Google to pay the debt.

Skift was in touch this week with a small tour operator that handles a few thousand customers annually, but saw all of its bookings cancelled when coronavirus shuttered travel.

“They took the full force of Covid disruption — 100 percent cancellations and refunds,” a tour operator representative said. “They asked for some leeway with their Google bill in April, which was flat-out denied and referred to a collection agency.”

Figuring they had enough to deal with to get into recovery mode, the tour operator paid their overdue Google bill.

“The really sick twist is that when Google dropped those paltry $200 ad credits into advertisers’ accounts, it automatically reactivated their suspended ad campaigns, with no notice or warning,” the tour operator associate said. “So they burned through the credit and started racking up fresh charges before they got a bill, and realized they were being charged again.”

Google did provide small- and medium-size businesses — in every sector, not just travel — a total of $340 million in credits toward future advertising.

You can also argue that a debt is an obligation, and that Google deserves to be paid.

But like Expedia Group and Booking Holdings, a deep-pocketed Google didn’t provide any breaks to advertisers for their past due bills. Google did do other things, such as rolling out a tool for airlines on when to restart routes, introducing a commission program for hotels around the world so they could pay Google for stays rather than advertising clicks, and made numerous changes to its search products to help consumers make informed decision about travel planning in the coronavirus era.

One industry observer argued that some of the travel companies in Germany, for example, that were the most vocal about calling for Google to give them a break on past bills, are heavily venture-funded or are owned by large parent companies that are well-positioned to give them relief.

On the other hand, it is the smaller online travel agencies, metasearch firms, independent hotels, and tour operators who find themselves stuck between Google and a hard place.

Medical Debt Collection Firm R1 RCM Hit in Ransomware Attack

R1 RCM Inc. [NASDAQ:RCM], one of the nation’s largest medical debt collection companies, has been hit in a ransomware attack.

Formerly known as Accretive Health Inc., Chicago-based R1 RCM brought in revenues of $1.18 billion in 2019. The company has more than 19,000 employees and contracts with at least 750 healthcare organizations nationwide.

R1 RCM acknowledged taking down its systems in response to a ransomware attack, but otherwise declined to comment for this story.

The “RCM” portion of its name refers to “revenue cycle management,” an industry which tracks profits throughout the life cycle of each patient, including patient registration, insurance and benefit verification, medical treatment documentation, and bill preparation and collection from patients.

The company has access to a wealth of personal, financial and medical information on tens of millions of patients, including names, dates of birth, Social Security numbers, billing information and medical diagnostic data.

It’s unclear when the intruders first breached R1’s networks, but the ransomware was unleashed more than a week ago, right around the time the company was set to release its 2nd quarter financial results for 2020.

R1 RCM declined to discuss the strain of ransomware it is battling or how it was compromised. Sources close to the investigation tell KrebsOnSecurity the malware is known as Defray.

Defray was first spotted in 2017, and its purveyors have a history of specifically targeting companies in the healthcare space. According to Trend Micro, Defray usually is spread via booby-trapped Microsoft Office documents sent via email.

“The phishing emails the authors use are well-crafted,” Trend Micro wrote. For example, in an attack targeting a hospital, the phishing email was made to look like it came from a hospital IT manager, with the malicious files disguised as patient reports.

Email security company Proofpoint says the Defray ransomware is somewhat unusual in that it is typically deployed in small, targeted attacks as opposed to large-scale “spray and pray” email malware campaigns.

“It appears that Defray may be for the personal use of specific threat actors, making its continued distribution in small, targeted attacks more likely,” Proofpoint observed.

A recent report (PDF) from Corvus Insurance notes that ransomware attacks on companies in the healthcare industry have slowed in recent months, with some malware groups even dubiously pledging they would refrain from targeting these firms during the COVID-19 pandemic. But Corvus says that trend is likely to reverse in the second half of 2020 as the United States moves cautiously toward reopening.

Corvus found that while services that scan and filter incoming email for malicious threats can catch many ransomware lures, an estimated 75 percent of healthcare companies do not use this technology.

Article by Brian Krebs

Enhanced oil recovery giant Denbury Resources files for bankruptcy

Another major oil company has buckled under the weight of its debt during the COVID-19 pandemic and fallen into bankruptcy as depressed fuel demand continue to pummel the nation’s energy giants.

Independent energy firm Denbury Resources, Inc. petitioned for Chapter 11 bankruptcy on July 30, with the aim of shedding about $2.1 billion of its bond debt.

The Texas-based company has claimed a unique niche in the oil and gas market with its focus on recovering stranded oil reserves from mature fields using enhanced oil recovery, including in Wyoming.

Denbury has secured lenders for interim funding and anticipates continuing its operations as the bankruptcy process unfolds, according to a news release. It also intends to continue paying employees wages and benefits, the company said.

“Throughout this process, we are committed to continuing to perform at a high level, remaining focused on safe, responsible and efficient operations,” Denbury’s President and CEO Chris Kendall said in a statement.“ I again want to thank our dedicated team for their hard work and unwavering dedication to the Company’s success. We look forward to emerging a financially stronger company, and we are excited about building on the multiple advantages of our unique CO2 EOR (Enhanced Oil Recovery) focused strategy for many years to come.”

Denbury declined to provide the specific number of workers currently employed in Wyoming. But according to a 2019 annual report, the company employed 806 workers across about a half dozen states.

With operations across the Rocky Mountain and Gulf Coast regions, Denbury has led tertiary oil recovery efforts at some fields in Wyoming.

In a process known as enhanced oil recovery, operators inject pressurized carbon dioxide into reservoirs to remove the remaining oil that traditional drilling processes did not extract.

In 2011, Denbury secured a working interest to develop the Grieve field, approximately 45 miles outside of Casper, according to Mark Watson, supervisor of the Wyoming Oil and Gas Conservation Commission. In 2018, the company began injecting carbon dioxide to extract oil at the site. Last year, Denbury produced nearly 93,000 barrels of oil from the Grieve field, according to data collected by the state.

But Denbury’s oil production at the field dramatically slowed down this past April and came to a sudden halt in May around the time prices for oil tanked due to the precipitous drop in fuel demand worldwide.

Denbury also has acquired interest and permits for the Hartzog Draw field in the Powder River Basin. It produced over 409,000 barrels of oil in 2019 at the field, according to Wyoming Oil and Gas Conservation Commission data.

The firm completed construction of the region’s first carbon dioxide pipeline, called the Greencore Pipeline, in 2012. The 232-mile pipeline runs from the Lost Cabin gas plant in Wyoming up into Montana.

The carbon dioxide Denbury typically uses for the process of enhanced oil recovery in Wyoming is supplied from ExxonMobil’s Schutte Creek gas processing plant at the LaBarge field in southwestern Wyoming. Denbury also collects carbon dioxide the Lost Cabin gas plant owned by ConocoPhillips.

The case for EOR

But as the glut of oil worldwide continues to haunt U.S. energy producers, some industry experts questioned the fiscal feasibility of enhanced oil recovery for the foreseeable future.

The Casper-based Enhanced Oil Recovery Institute did not return requests for comment.

But in an April 14 letter, Director Steven Carpenter urged Wyoming’s governor to consider “immediate, outside-the-box survival” actions to increase support for oil and gas operators with a foothold in Wyoming. He recommended implementing several incentives to spur enhanced oil recovery activity in the state. The ideas ranged from amending idle well-bonding rules to creating incentives for operators to focus resources on stranded oil recovery during low-price environments.

“Conventional reservoirs make up over 90 percent of the oil fields in Wyoming and are capable of being economic at much lower oil prices than unconventional ones,” the report stated. The institute estimates about 1 billion barrels of stranded oil could be recovered, if the state amends its regulations for idle wells.

Denbury, along with several other major oil companies, have long lobbied both state and federal lawmakers to support the expansion of tax credits and the rollback of regulatory hurdles for sequestering carbon dioxide through enhanced oil recovery.

In 2018, the U.S. Congress revised Section 45Q of the tax code to provide more favorable tax incentives to companies engaged in carbon capture and sequestration.

The 45Q federal tax credit is given to companies for each ton of carbon dioxide they sequester in the ground. Since then, the program has faced intense criticism after discrepancies were identified between data held by the Internal Revenue Service and the Environmental Protection Agency. The IRS recently proposed rules to regulate the program.

Some critics of the industrial sequestration of carbon dioxide for enhanced oil recovery also say the process does not necessarily guarantee a net climate benefit and more stringent monitoring requirements are needed.

Denbury’s bankruptcy case will be held in the U.S. Bankruptcy Court for the Southern District of Texas.

Article by Camille Erickson

4th Circuit holds FDCPA’s limitation period restarts at each new violation

On July 2, the U.S. Court of Appeals for the Fourth Circuit vacated the dismissal of an action alleging violations of the FDCPA, concluding that each violation of the FDCPA is governed by its own limitation period. According to the opinion, in April 2018, homeowners filed a complaint against a law firm retained by their homeowners’ association for allegedly violating various provisions of the FDCPA for collection actions taken between April 2016 and February 2018. The district court dismissed the action, concluding that the entire complaint was time-barred because the “FDCPA’s limitations period runs from the date of the first violation, and that later violations of the same type do not trigger a new limitations period under the Act.”

On appeal, the 4th Circuit disagreed with the lower court. Specifically, the appellate court noted that “nothing in the FDCPA suggests that ‘similar’ violations should be grouped together and treated as a single claim for purposes of the FDCPA’s statute of limitations.” And, similar to holdings of other circuits, the 4th Circuit stated that the “FDCPA’s limitations period runs anew from the date of each violation.” While the homeowners did not dispute that several alleged violations fall outside of the FDCPA’s one-year limitations period, the appellate court agreed that the district court erred in dismissing the entire complaint, because it contained at least two potential violations occurring within one-year of the April 2018 filing date.