Senior White House figures privately briefed powerful financiers about their concerns over the looming coronavirus pandemic, while continuing to insist in public that there was little to worry about, it has been reported.
The behind-the-scenes briefings gave traders immensely valuable insight into the impending catastrophe.
‘Short everything,’ was the reaction of one investor, using the Wall Street term for betting on the idea that the stock prices of companies would soon fall.
The New York Times obtained a memo written by William Callanan, a hedge fund veteran and member of the board of the Hoover Institution.
Callanan summarized a series of private sessions the Hoover Institution held in February with senior members of the president’s economic team.
His memo, the New York Times said, was circulated among the financial elite.
In one session at the White House on February 24, for Hoover Institute board members, Tomas J. Philipson, a senior economic adviser to the president, told the group he could not yet estimate the effects of the virus on the American economy.
Larry Kudlow on February 24 told CNBC there was little cause for concern about COVID
Privately the White House economic officials were giving a far more pessimistic picture
Those with access to the information were able to manage their money amid the crisis
That morning, he had told the National Association for Business Economics in a public gathering that the potential economic effects had ‘been exaggerated.’
The following day Larry Kudlow, the director of the National Economic Council, told the board that the virus was ‘contained in the U.S., to date, but now we just don’t know’.
Hours before, Kudlow had appeared on CNBC to say the virus was being blocked in a way that was ‘pretty close to airtight’, and there was no cause for alarm.
‘We have contained this,’ he said.
‘I won’t say airtight, but it’s pretty close to airtight.’
He added that, while the outbreak is a ‘human tragedy,’ it will likely not be an ‘economic tragedy.’
‘There will be some stumbles. We’re looking at numbers; it’s a little iffy,’ Kudlow said.
‘But at the moment – there’s no supply disruptions out there yet.’
The Hoover Institution board members were briefed at the White House in February
Kudlow confirmed to the New York Times that he had made the remarks at the Hoover meeting, adding that in his mind, they were essentially the same as his remarks on CNBC.
‘There was never any intent on my part to misinform,’ he said, noting that the number of cases in the United States at the time was no more than 20, and that he had expected travel restrictions to limit further spread.
At the end of the three-day gathering of Hoover Institution’s board, however, Callanan’s memo showed a private level of concern which did not match the public declarations.
‘What struck me,’ the consultant wrote, according to a copy of the memo obtained by the paper, was that nearly every official raised the virus ‘as a point of concern, totally unprovoked.’
The impact of Callanan’s memo was swift.
By late afternoon on February 26, the day the email bounced from Appaloosa to other trading firms, the U.S. stock markets had fallen close to 300 points from their high the previous week.
Donald Trump also knew more than he was letting on.
In his book, Bob Woodward revealed that Trump told him on February 7 that the coronavirus ‘goes through the air’ and is ‘more deadly than even your strenuous flus’.
At the time, he was telling the public that it was no worse than the flu.