Because the legislative sausage-making is still underway, it might seem premature to declare the bailout bill underway a massive exercise in corporate welfare, but it sure has all the hallmarks.
As Public Citizen warned by e-mail early Sunday evening (emphasis theirs):
Senate Republicans just announced their long-awaited plan to help people and businesses weather the impending economic storm.
Their scheme — burped up by Mitch McConnell in league with Donald Trump’s sycophantic Treasury Secretary, Steve Mnuchin — would be a dream come true for Big Business but a nightmare for everyday Americans.
Here’s just some of what’s in the Republicans’ disastrous proposal:
• Mnuchin gets to dole out hundreds of billions to Corporate America — without revealing which companies got bailed out for half a year.
• Businesses are not required to keep workers on their payrolls
.
• There are NO meaningful oversight mechanisms to prevent fraud and waste by the companies that get bailed out.And on and on.
Thankfully, Senate Democrats have — for the moment — forced Republicans back to the drawing board.
But a new plan, which may well be no better, could come up for a vote as early as tomorrow.
So stay tuned, and be ready to spring to action on short notice.
Associated Press has a later account, depicting the talks over the $2 trillion bill as “churning”. Maybe “circling the drain” would be more accurate:
Democrats say the largely GOP-led effort did not go far enough to provide health care and worker aid, and fails to put restraints on a proposed $500 billion “slush fund” for corporations. They voted to block its advance.
Democrats won a concession — to provide four months of expanded unemployment benefits, rather than just three as proposed, according to an official granted anonymity to discuss the private talks. The jobless pay also extends to self-employed and so-called “gig” workers.
While the congressional leaders worked into the night, alarms were being sounded from coast to coast about the wave of coronavirus cases about to crash onto the nation’s health system.
New York City Mayor Bill de Blasio had dire, urgent news from the pandemic’s U.S. epicenter: “April and May are going to be a lot worse,” he said on NBC’s “Meet the Press.”
De Blasio all but begged Washington to help procure ventilators and other medical supplies. He accused the president of “not lifting a finger” to help.
Lambert correctly described the concession to the Democrats as “pissant”. And right now, all a family of four is slotted to get is a one-time, $3000 payment. This ought to be a joke but it is deadly serious.
What is going down is disturbingly reminiscent of the 2008 bailouts, except with much higher stakes for ordinary people. particularly the first draft of the TARP. There, Treasury Secretary Hank Paulson not only demanded a blank check of $700 billion but insisted on being above the law.
How familiar this seems. This Administration has learned to be a tad less brazen, but the spirit is awfully similar.From a September 2008 post:
This is a financial coup d’etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.
The great unwashed public is already being softened up with messaging along the lines of, “Oh, this may be unseemly and unpopular, but look how successful the financial crisis rescues were!” The belief it was a success depends very much on where you sit. Was the greatest looting of the public purse in history a success? For the beneficiaries, most assuredly yes. Boston College professor Ed Kane estimates that super low interest rates amount to a $300 billion a year transfer from savers to banks. Pull out a calculator and see how much that adds to the cost of the salvage operation.
How about the second bailout, of the waiver of massive chain of title liability which would have wiped out banks? The cost of the failure to take advantage of the tremendous leverage was 9 million largely avoidable foreclosures. And how about the tremendous loss of wealth by blacks versus the increased concentration of wealth at the top, and the fact that most of the jobs created were low end McJobs or gigs?
And what about Obama shilling for the creation of the precariat by depicting sweatshop Amazon warehouse jobs as “middle class”? The weak recovery which benefitted the top 10% and particularly the 1% disproportionately was the direct result of the “Go all in for the banks, throw a few bones to workers” philosophy of the bailout.
This is from a September 2012 post. The fact that the Administration was still having to message its claims that the crisis bailouts were a success is proof that there were plenty of nay-sayers after the dust had settled:
I’ll be doing a longer form treatment later on the recent, clearly Administration-driven “the TARP worked” PR campaign. As far as the [Andrew Ross} Sorkin contribution to this initiative is concerned, it’s an example of how the Treasury and bank defenders will try all sorts of creative accounting and will conveniently ignore their own past work to pass off Big Lies deemed to be important.
Sorkin (and one has to assume the Administration) is now trying a new angle on “the TARP made money” canard by arguing that the way to look at the investment is by treating the Fed/Treasury “investment” jointly, as opposed to looking at the TARP (Treasury program) in isolation. That is just another exercise in three card monte. If you are going to include Fed actions, you need to look at them in aggregate, and not cherry pick the ones that suit your case. The Fed’s apparent recouping of its “investment” in garbage barges like Maiden Lane 2 and 3 results from its extraordinary interventions to goose the prices of financial assets, including the alphabet soup of special facilities during the crisis, ZIRP, and QE and QE2. These represent a considerable transfer of wealth away from savers to financial institutions, by design. The most colorful account of how this worked comes from Steve Waldman:
Suppose my kid’s meth habit got the best of him. He’s needs to come up with $100K quick or his dealer’s gonna whack him. But he’s a good kid, really! Coulda happened to anyone. So I “lend” him the money, even though he has no visible means of support and the sketchiest loan sharks in town wouldn’t give him the time of day. Now I believe in bootstraps and hard work, individualism and self-reliance. So I tell my son. “Son, you are going to pay me back every penny of that loan. You are going to work it off. I have arranged with one of my golf buddies, a guy who owes me a favor or three, a job that pays $200K a year. You’d better show up every day at 9 a.m. and sit behind that desk, and get me back my money!” And he does! After a year, he’s made me whole. What a good kid.
No bail out, right? He paid me back every penny! Worked it off!
Bullshit. The opportunity I provided him, the $200K job that he would not have received without my intercession, was a huge grant. On the open market, if I were to accept bribes from the highest bidder to wangle the job from my friend, that opportunity would be worth more than the $100K advanced. I paid my son’s loan with my own money. I just obscured the cash flows, so my son and I can pretend and sustain our mutual self-regard and our righteous disdain for the moochers and the hippies and the riff-raff.
In the Sorkin article, the article revolves around a MEGO (My Eyes Glaze Over) inducing argument of which share price for AIG is the right one to use for determining whether the government got the dough it put at risk in TARP back (never mind the point that Waldman, your truly, and numerous others have made: that merely paying the money back is also a big gimmie, given that the banks wrecked the global economy and no private party would have given them funds at anything other than extremely tough terms when the financiers were on death’s door).
You get the drift of the gist.
The best guess for what comes next, via The Hill:
If they aren’t able to reach a deal in the morning, McConnell has vowed to hold a vote after the Senate comes in at noon to try for a second time to advance the stimulus package. Democrats blocked the bill — technically a shell that the coronavirus legislation will be swapped into — arguing that they had not made enough progress.
With Rand Paul now diagnosed as having coronavirus, it’s a safe bet that the Senate is particularly eager to get this bill wrapped up.
So a suggestion and a request:
1. Since many of you are anxiously idled at home, please put good use to your time. Contact your Senators, best calling their district offices or by e-mail. If you call, be polite but pointed; if you e-mail, you can give them a piece of your mind. Decry the corporate welfare and the lack of accountability. Explain why the only way to save the economy is to save worker earnings. If they can do it in Denmark, why can’t we? If tens of millions of American households go bankrupt, and the ones who didn’t are hanging on by their fingernails, who will fill those planes and hotel rooms?
It did make a difference during the TARP that the initial calls were 99% against, and only by dint of companies telling their workers to shill for the bill did it shift to a mere 80% against.
2. I will be off the grid while this story develops. Could you help make this post more like a live blog, filling in links, tweets, and observations?
Not only is the #COVID-19 situation overly dynamic, both on the health and medical fronts, but I am deeply involved in elder care – making masks, arranging for care-giving coverage, getting screens on the doors for fresh air – and do not have time to write a definitive post, even if one could be written. So let’s see the NC commentariat will bring its legendary information gathering and critical thinking skills to bear!
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This amounts to nothing less than criminal insanity on the part of US leadership.
and it’s gone
March 25, 2009
https://www.youtube.com/watch?v=TGwZVGKG30s
Stan (son) and Stan (dad) are waiting in line at their local bank.
Stan, “Do I really have to do this Dad?”
Randy, “Stan, now more than ever, you need to understand the importance of saving money.”
Stan, “But grandma said I could use this money to buy whatever I want.”
Banker, “OK, next please……”
I sent e-mails to my Senators and Representative requesting:
1. No stock buybacks allowed for 10 years
2. No options repricing until share value above Dec 31, 2019 price
3. Exec pay limited to $5 million for 5 years
4. 100% payroll unemployment benefits starting immediately up to some reasonable maximum (at least $500/week)
5. Tax breaks for landlords that waive rent for small businesses like restaurants, retail stores, small manufacturers, offices etc. Makes it more likely there will be a business to go back to.
6. Immediately provide Medicaid for anybody not covered by a health insurance plan.
For a start, how about any bailout amount being capped at less than a prospective recipient company has paid in tax, share buybacks, executive bonuses and dividends?
I think you missed a verb: “… any bailout amount being capped at less than a prospective recipient company has paid in tax, minus any share buybacks, executive bonuses, and dividends” for the last ten years. I could approve my congresscritters voting for that.
I am not sure this is the correct way to think about the problem.
It would seem that the government should get a large chunk of equity in any company getting a bailout (either directly or indirectly).
So perhaps the government should get preferred shares with a 10% dividend in any company it invests in. The government will accept no less than 300% of the share price they purchased the preferred at, and the company must have repurchased all the governments preferred within 5 years.
Failure to repurchase the shares will cause the governments shares within 5 years, will cause the government shares to covert into a prorated 90% equity in the underlying corporation.
No other share buybacks or dividends are permitted on any other class of shares until the governments preferred shares have been repurchased or converted to equity.
All executives of the company will be capped at $1M in salary and bonuses until the government shares are repurchased. All stock grants, stock options, are nullified if any of the governments preferred convert to common shares. No executives or employees may exercise any options or sell any stock until the government shares have been repurchased.
All companies that accept government money must change and maintain there corporations as American corporations. That is no foreign holdings for tax avoidance. In addition all existing overseas funds must be brought back to the US corporation. Failure to do so is felony that carries a 10 year minimum jail term for the CEO and CFO regardless of what they know.
If a company enters any form of bankruptcy while the government still owns preferred shares, the corporate veil is pierced. All C level executives and Board of Directors who have served at any time during the period the government has owned the preferred shares, are personally liable for the debts of the company. Their entire personal assets come the “COCO” bonds for the company, including trusts and other attempts to shield assets. That is, their assets are the first to be liquidated. In addition any insurance is nullified for board or executive members.
A special tax rule applies to C level executives and board members. Any asset transferred to someone or something else will be taxed at the 95% rate until the government bonds are repaid, with an exception in the case of death.
Finally labor needs board representation while the government owns the bonds.
The bottom line is, if a corporation wants money, it needs to
1) Start paying taxes
2) Focus on paying back the tax payer
3) Pay at a risk level commensurate with the risk the tax payer is taking
4) Make failure very painful, so executives are conservative
5) Ensure labor has a place at the table, both to protect employees, but also call out BS when it is happening
We are ruled by servants of the corporatist cartels. They care not for the citizenry. They care only for their own privilege. And if you think Joe Biden will be any different, sorry, you’re deluded.
Boy Howdy.
Have we heard from Joe Biden about any of this or have his handlers (very wisely) told him to keep his mouth shut until after the convention? I’m wondering if that’s not a big part of why Sanders is hanging in there?
P.S. Any moves afoot to tackle the corporate virus afflicting the West’s political system?
I’m watching CSPAN. They played a clip of Moscow Mitch blaming democrats for not voting for his package. One caller just called and he was very mad about the bill not being passed. He also blamed democrats. I suspect the caller didn’t have a clue what the bill contained. The only thing he knew was what he was told. The bill didn’t pass because democrats wouldn’t support it. I’m not defending democrats but just pointing out how ill informed people are. Too many are not capable of logical thinking. The only ting they are capable of is repeating what they have been told. It saddens me that our country has become what it now is.
“Too many are not capable of logical thinking.” I think you are right but I do have deep sympathy for these people. It is a sign of our times as to how desperate people are becoming. They want that $1000-$3000 that Trump has promised them and they don’t care what they have to give up to get it. In the end that money will never compensate for what they will loose, but all they can see is that they need that money now. I think that we can expect more rancor from the general public over the failure of the bill to pass.
Kudos to Yves for her clear explanation of what this bill was about! I dug out my “Shock Doctrine” and am reading again. Apparently history is rhyming in a big way!
This isn’t a new phenomenon. It has been happening for decades. Nonstop propaganda from many sources has destroyed peoples reasoning ability. People themselves are also to blame. They have become so wrapped up in themselves , that they don’t have time or care about what is happening right in front of them. Things like consumer goods and social activities have become the most important concern for many. They are oblivious to the important happings that will effect them for many years.
I agree with you. The non stop propaganda has made them think that if large corporations are bailed out, the people will benefit. Many people want instant gratification – $1,000 or more payment right away. They’re already planning to spend it on material goods. Besides, all this they believe the “red team” vs. “blue team” myth and forget that they’ll be the ones that’ll be screwed.
The “playbook” we have all been infected with for the entirety of the last two decades, since the days when the “value-voter” republicans railed against clinton’s marital infidelities.(while bin laden declared war on the US, in ’96).. has been one of” all propaganda , all the time”.
Before gingrich and the reagan army…. spearheaded by the bush clan and nixon era newbies like cheney and rumsfeld.. important things were kept secret, like sabotaging the paris peace talks in 68′ by the kissinger and associate cabal headed by the nixon era scum… like ghw bush and the rest of the blue blood, wall street ,security state spooks conducting illegal wars abroad, creating a drug war at home, paving the way to the incarceration state….rotting out the US from within… who learned from thier parents and grandparents who supported the rise of the bolshevics first…. then the nazi’s…. that all” good business “, should be strictly NOT talked about…. while they were profiting from their crimes…. over the last century……..
They knew to make things up….. like a communist menace… a red scare to keep the people scared of something.. to keep them from using their heads…
Now we are the population who has been educated from the cradle with lies about our very existence. Now… All anyone in both parties knows is garbage… It is what we eat for breakfast ,lunch and dinner.
Now everyone lies about everything… and everyone seems to expect no less. and won’t stand for the “troublemakers” who rehash history… as if the revisionist history everyone is given isn’t good enough for them. The arrogance of people who still think there is a “truth” out there…. Nobody cares who ” wired and blew up the trade towers in 2001, while pretending it was another “black swan event”
But the evidence of this situation shows how far we have been conditioned into these pre-determined “sides” . This “hegelian dialect”, that traps us….
While people’s opinion of what reality is varies all over the map…. one thing that can’t be used is a basic lesson in civics… in relation to public health.
This bug could have been approached as a national exercise in respect… with those experts in disease control being allowed to ASK for the public’s cooperation….which it most likely would have done… because we all learned in school the responsibilities of being a free citizenry, who can decide for themselves to help each other out of this mess wrought upon us by nature…. Knowing that the treasury( which in that sane world would be where money is created without debt;and the federal reserve private money creation scheme, would not be in effect) is a safe backstop to economic problems for the good of society as a whole…..
But because history is as it was, and not how it should have been… we are here…
Our overlords were instructed in “the big lie” and the big lie only….
The only way to tell the truth , is to lie… and when that doesn’t work… make a bigger lie…
The msm ,on my watching time,have tended to help the president and the republicans look “decisive” in getting somrthing/anything done quickly,and i think allot of people are losing any memory of the past bank bailouts.
There is [out there] what I have started referring to as ‘Putin Puppets’. Some are that way knowingly and some are not.
Not completely on topic, but relevant to corporate shenanigans…
So as of last week I’m like millions working from home. I find it easier to virtually meet if I can see my colleagues so I use a webcam. That said I’ve got 3 kids at home trying to virtually learn and stay connected with friends so Friday I decided to see if I couldn’t get a second webcam. I couldn’t find anything locally and even had some BestBuy employees LOL at the idea saying they couldn’t even order any from Logitec. In hind sight it makes sense they’d be one of the items in shortage right now. Anyhow, since I was interested still but didn’t have a pressing need I decided to see what I could find online and have shipped. Now I was looking for an inexpensive one and the Logitec 270 normally runs for about $25. I was amazed at the price gouging going on. Anyone with the item still in inventory was charging well over $50. In 10 minutes I saw it go from $75 on Amazon to $85!!!
Let’s party like it’s 2008!
Mnuchin and other Trumpsters, with Obama administration collusion, have priors from that time.
Why Home Ownership Has Kept Declining
In Homewreckers, Aaron Glantz revisits the scenes of the crime.
By Lou Fancher
“Go all in for the banks, throw a few bones to workers”
At least bones will be in plentiful supply, and their distribution would create jobs for those in need. I hope it doesn’t come to it, but we are talking USA here. Hurricanes Katrina and Maria don’t bode well.
Yes, but look closely. They are human bones.
Bone Marrow Soup Recipes
304 RECIPES
https://www.yummly.com/recipes/bone-marrow-soup
The futures market shows that the indexes will get slammed another 3+% at opening, so more carnage for what remains of 401k and other ‘investments’ that people were encouraged to buy. That is one way to get people to call their bettors in Washington.
Conservation of idiocy. Only thing is the clock is ticking. CMBS will implode in a few days. The whole US monetary system is deleveraging. Amusingly it makes perfect sense. So would you like to extend credit for 3 months at Libor+200 say, with the risk that you lose par? After all, what value is CMBS if we are all working from home?
The proposals are for the fed to have a facility which allows them to lose 400bn as a first loss. Understandable.
Anyway, I agree, a dreadful first package. And the second package will not be much better. But whatever package is proposed just before the financial system detonates will be accepted regardless, just like in 2008.
Remember, CLOs are heavy users of FX Swaps. If Agency mortgages are spilling into the street in this volume, what price non-Agency paper?
You are gonna need a bigger boat.
Yes, CMBSes are going to implode – and the US ones are actually better than the European ones (at least in the US you usually have some diversification, in Europe the CMBS could very well be just one tranche of a single loan on a single property).
CLO market was growing quite a bit in the last two years based on what I heard from guys providing the infrastucture. Don’t have any data on sizes, but it could turn ugly.
MBSes everyehwere, not just the US, are going to turn ugly with the payment holidays – I’m sure there are hosts of lawyers running phone calls on the implications already.
And, in the curent environment, there will not be anyone but the governments to provide equity. I’d not want to hold any bank stock (I probably do via some ETF, but..)
We will see who ends up holding the can.
I was told we have till Wednesday. Im sure there is some wiggle room but not much. Consider the position of the servicers for CMBS who are currently operating with minimal official guidance. The servicer owes a duty of care to the owners of the equity and mezz tranches among others. Most hospitality-based CMBS will now be in breach of revenue covenants. Technical default is default too. But a reasonable observer might be concerned that the equity tranche is kaput. After all, there is a loss associated with leaving a hotel empty for 2-x months. So the servicer is currently failing in their fiduciary duty to the equity tranche holder. Does that put them at risk of being sued when that loss is eventually revealed? You betcha!
And I totally take your point re payment holidays. Take x cashflows from the next few months and apply the appropriate discount factor. Now tack them on the end of the mortgage and call it “forbearance”. What do you think the NPV loss is? On 10y I would guess about 3-4 points. Add that up here or there across an entire economy, and pretty soon you are talking big money.
FUBAR
Not to quibble much but I think you’ll find tiny violins playing here. Institutional investors with longer dated liabilities, aren’t they the primary investors of the higher grade CMBS tranches ?
I mean I think it was the case 10-12 years ago; that market struck me as much better ordered than what passed for supposed order in Non Prime, Non Agency MBS. Again, ancient history but still history.
If the point is that it couldn’t happen to a nicer bunch, I totally take that point.I was more thinking about how the world will look the day after a forced unwind takes place. Still, its probably a good thing if real estate markets cheapen dramatically.
One might ask whether that commercial real estate will ever be worth as much again? In which case its not the owners problem but our pensions.
Not a finance guy but one thing that I am wondering about. You have literal torrents of money being made at the same time you have far, far fewer goods made and services done due to whole countries having to shut down their economies through Coronavirus. This strikes me as a major dislocation as you are having more money chasing fewer goods and assets. That has got to have an effect. Already all the money made after 2008 was having difficulty finding profitable ventures to invest in which lead to fantastic prices being paid for artwork, bottles of wine, etc. and now you have even more mountains of money coming into existence. So will it be inflation or deflation?
It depends on where the money lands. With the 2008 bailouts, very little of the money landed in the hands of the public, which is why inflation for consumer goods rose relatively little. If companies tried to charge higher prices, people wouldn’t buy their goods, simply because they didn’t have the money. Instead, the money mostly landed in Wall Street, where prices for instruments of speculative investment rose enormously. Investors threw increased amounts of money into relatively fix amounts of stocks, Bitcoin, housing, etc., and prices went through the roof. The general rule became this: If it was bought by consumers using their existing money, prices remained fairly flat. It it was purchased by credit, prices exploded.
What will happen this time? Depends on where the money lands. I fully expect to see investment prices rise again. But if major subsidies to consumers are also incorporated into this bill, we’ll likely see price hikes on consumer goods as well.
The money always ends up as Taxes or ” instruments of speculative investment ,” does it not? It may pass through the hands of the public, by little remains in their hands.
In addition to such a stimulus, we need taxes to recapture the money from the hands holding the “instruments of speculative investment.”
We need a tax on “instruments of speculative investment” to recapture the money. The money will pass through the hands of the public, but little will be “saved” by the public.
The investors who own the “instruments of speculative investment” will capture the money.
Or stagflation? I can see that happening with high unemployment and goods costing more because of the increased money in the market has to go somewhere.
Money in the hands of the public will go for necessities like food, medical care and housing. No need to fear “inflation,” but lots of well grounded reasons to fear price-gouging.
Or paying down debts.
I’ve been wondering about inflation too. If the government were to give too much cash to laid off workers (highly unlikely) that could be inflationary. It might be wise to reduce the cash benefit and substitute food stamps, and overall seek to cover only the bare necessities (housing, food, utilities, healthcare).
In the US so many consumer and durable goods are imported from China and elsewhere, shortages could develop due to economic disruptions caused by the coronavirus, which could be inflationary, depending on what people are willing and able to spend. In a comment above Adam1 mentions seeing sharp price increases while shopping online for a new webcam.
As for financial assets, since something like 90% of these are held by the richest 10%, I say let them tank, as long as there is a safety net for laid off workers and retirees. Deflation would be healthy here.
I’m not a finance guy either though.
I haven’t seen very much mention of this, but it seems to me that quite a large number of corporations have quite a large pot of cash squirreled away in various tax havens around the world. Any corporate bailouts should take this into consideration.
Republicans are always so concerned that economic aid might flow to those they consider unworthy. The corporations have the wherewithal to do a lot for the public good and we really don’t need to fund another round of executive bonuses and stock buybacks on the taxpayer’s dime.
Good point! So how do we track that off-shore money? Maybe the best way is to deny corporations any money unless Switzerland, the Cayman Islands, Panama, etc., open up their books to public viewing.
I won’t hold my breath.
If the money is US Dollars, they are all, except for paper FRNs and coins, in Federal Reserve accounts where negative interest can readily be applied without knowing the details of those accounts – only that they are not individual US citizen accounts* below a certain account limit, since those should be exempt from negative interest.
*which are currently forbidden by law but should be allowed for the purpose of shielding US citizens from negative interest to a reasonable degree.
I’d peg the allowable spending limit to 10% of GDP. For the next three years. And then I’d ship the money directly into the pertinent bank accounts, personal and business. Without issuing any debt whatsoever.
Between the politicians needing to earn their campaign contributions by rewarding their benefactors with some more corporate welfare and then, on the side, making sure the deplorable’s are appropriately means tested I highly doubt that the end result this time around will be significantly different than it was in 2008.
It is not possible to fix the problems we have short of a revolution – and we are some ways from that still. Not that it is not coming.
Keep as safe as possible. I found out my son has Covid 19 this weekend and maybe the wife of my best friend. It is creeping along.
All the best to you and your family!
The bailouts are just the first shot. There will be de facto nationalization of all critical enterprises by the time this war is over. It’s just a question of whether this is broadly recognized or they attempt to paper it over like 2008. It is hard to imagine how the current rentier/financialization structure could hold through the Great Reset, but the unimaginable is happening at a faster and faster rate.
I have a feeling that the US and the world will be unrecognizable by the end of this war against the virus. This is total war, or should be, and the sooner we recognize it the better.
I don’t think the virus is the only target
It has been and is a travesty thay corporate share buybacks are not taxed at the same rate as corporate dividends. They have become a back-door tax-free mechanism in replacement of dividend payments which are taxed to the recipient. They should be capped and taxed.
As to the six month secrecy rule – WTF? I mean is there any (even BS) justification for that?
And why is there still a cap on FICA wage withholding, and no Wall Street transaction tax?
Here is what I sent my two plutocratic Senators, in Minnesota.
With regards,
The 2008 TARP bailout, plus QE at 4.5 trillion, aka the estimated 29 trillion in liquidity central banks led by the Fed injected into the markets through 2014, amounted to the greatest transfer of wealth from the poor to the rich in the history of the world. It lead to epidemics of drug addiction, homelessness and suicide. It led to widespread economic despair. It led to the election of Trump.
It looks like the Senate is about to save the elite and let the people sink. A couple of $1000 dollar checks will mean nothing if the 1% come out of this corona business owning 99% of assets. Now is the time for debt jubilee – a true bailout for Americans in a state of debt servitude – not bailouts for elite to buy up the wreckage of the economy for pennies on the dollar.
William Hunter Duncan
I wrote this to Doris Matsui, Diane Feinstein and Kamala Harris:
Staying at home or sheltering in place will save lives but many, many workers will lose their paychecks and health insurance with this response. The federal government is the only entity that can provide these people the food stamps + cash + healthcare they need until they can go back to work. Many of them will otherwise run out of money very quickly and face losing housing and everything else. The consequences of not saving the unemployed may be worse than the threat of the virus itself.
Please do not bail out Boeing. They were in deep trouble before the pandemic due to mismanagement, e.g., the 737 Max. Stock buybacks gravely weakened the corporation financially; this was looting. The company needs to go through bankruptcy. Protect the workers not the shareholders and top executives.
Boeing is an integral part of the US military procurement process. It will be cumbersome to operate in bankruptcy. Much easier to keep it alive. But I agree, sticks in the throat to reward failure so.
Most of the money will be siphoned off by the largest most well connected corporate behemoths like Boeing and GE. Boeing will use it to pump the stock price and let executives cash out on now underwater options, and build more 737 MAX planes that no airline wants anymore.
Meanwhile the real economy will be destroyed.
Nice work Mitch!
I already contacted one of my GA Senators (Purdue) and House Rep. Lucy McBath and let them have a piece of my mind about this in email. I did not bother with the new one (Loeffler) because she already got caught insider trading and dumping stocks before the crisis really hit, so I just assume she’s dirty and beyond hope.
Is picking winners and losers the role of the Fed and US govt, cause thats exactly what became the new normal after 2008 – 2009. I don’t have an issue with stimulus programs if it’s an effective response.
I like to quote film, in such times film imitates what we observe. “I’m a politician Dr Ryan, so when I’m not kissing babies I’m stealing their lollipop”. Hunt for Red October
Fear the politician bearing bail-out gifts. True on both sides of the aisle.
Aye. This concerns me also. If the Fed starts buying corporate bonds, then there will be corporations out there that are essentially having money printed for them to fund their ongoing operations. How are their smaller competitors (especially those who don’t participate in corporate bond markets) supposed to compete with that? How do you compete with a money-losing operation (like Tesla, Uber, or numerous fracking operations) that will simply roll their unpayable loans into the newer and larger loans that the Fed will never stop giving them?
The “Japanification” of the US economy is nearly complete. All that remains is for the Fed to directly buy stocks. Large corporations will always have enough cash to underbid (or outright buy) their smaller competitors who aren’t backed by the Fed’s unlimited printing press. An even more concentrated oligarchy awaits.
I’m now reminded as well, how certain smaller banks qualified for TARP funds based more on whose district their HQ was based as opposed to being a “SIFI” for national payments or such.
5 yrs ago a wise man remarked how we could end up like Japan. Not a national person just a Texas banker.
I suspect that it’s inevitable that US government is going to take equity stakes in public companies as a way of propping up the markets to reduce panic among the significant fraction of the population that owns such assets. Perhaps it will be called something pretty, like a “sovereign wealth fund”.
Perhaps this could lead, in time, to “in the public interest” governance of these powerful entities, and perhaps even to worker ownership.
We’re all socialists now.
But to avoid harming USA crony capitalism, all publicly owned shares could be proclaimed non-voting.
In this way the market could be propped up WITHOUT any effect on corporate governance.
Free markets are good until the wrong people are harmed.
Robert Reich has a good Opinion piece on the inequities of the bill in today’s Guardian.
The airlines apparently will get their very own tailor-made $58 billion “loan” – without having to guarantee they won’t engage in layoffs; Reich suspects the money will be used to keep investor-shareholders happy and execs well-reimbursed.
Re: that $500 billion “slush fund” for the big corporations: Mnuchin will apparently be given full discretion as to who gets how much, and the American public will not have the right to learn about the distribution of funds for 6 months.
I mean, really? How can they even put that in an actual, well, bill?
Also: for those wondering why the DPA (Defense Production Act) has been signed but not implemented, the Admin was hoping for private businesses to step up voluntarily to produce desperately-needed PPE/ventilators/respirators – and to donate same if they have them in stock. But the result is total confusion and chaos – companies, while willing, hesitate to move to massively geared-up production in absence of a guaranteed purchaser – which of course is what the DPA would ensure. The current logistics are a total nightmare without central planning.
The Mnuchin “slush fund” has a bit of the feel of the first TARP bill, which IIRC was basically a 3 page term sheet, with one of the terms being a “hold harmless” clause for then Treasury Secretary Paulson. That bill was voted down by a large margin, and the Dow fell a great deal. A couple of days later a very similar bill passed with large margins.
If the Fed can prop the markets up (not much use to much of the population, but it’s what the powerful notice, it seems) while Congress haggles, perhaps we’ll avoid a similar embarrassing volte-face .
This is what you get when you have a bunch of unscrupulous few (senators front-running the selling of stocks and their ilk) running the show for another bunch of unscrupulous few (United, Boeing) in cohorts with a powerful unscrupulous few (the Fed, which has the printing press and your welfare at heart) instead of a system for the people and by the people. Unless there is a way to break this cabal it will be a case of rinse repeat of 2008, only worse. Because the largesse on the corporate criminals in mind-boggling. Crumbs for ordinary citizens. Go eat cake, you American peasants!
We will be out of crumbs in a few weeks. What then? The prospect of a hungry, homeless, jobless, and reasonably well-armed populace should give pause for thought. As Mark Blythe has pointed out, the Hamptons are not a defensible position.
The economy is shutting down as the Populace stops leaving their homes and income streams for most have stopped. What and who will a stimulus package stimulate? The problem of cash flows is being handled piecemeal in proposals offering but not delivering pocket change to the Populace and now discussions shift to opening the U.S. Government bailout window to Corporate Cartels. The cash flow problems resulting from a shutdown of the U.S. economy could be handled by stopping the flow of payments and the accrual of payments and penalties owed to rentiers — at least until the economy is ready to start up again. This economy is not closed down because financial flows jammed. It is closed down by a pandemic. Dumping money on the Corporate Cartels that have so badly structured and managed the economy creating many of the instabilities threatening devastation of the Populace will only fatten executive bonus checks. While the Government occupies itself with this pointless exercise the Populace, Small and Medium business, what remains of Mainstreet, State and Local Governments, even public order face Collapse. At least Nero occupied himself by practicing his music … rather than crafting new ways to enrich and further empower the rich and powerful and spread new harm.
You said it Jeremy it’s a pandemic. America is till in the ‘ denial ‘ phase . I’m in the UK. It was like that here two weeks ago . And despite tabloid pics of idiots taking off into the country or dancing on beaches we get it now. I have a small , high-end niche business in the hospitality sector ( weddings ) with bookings two years ahead . So whilst we are not in any way insulated from any of this ( and both my wife and I are in our seventies ) we have been working hard to rebook our couples into late this year ( who knows ? ) or next year.
But lo and behold today I find that my business qualifies for more than one forms of financial assistance , and in one case a grant of £10,000 I don’t have to make any sort of application ; the tax system has been used to identify my business and the authority delegated to administer the grant will be in touch . No hurdles to jump over. A second piece applies to any of my staff that I retain. The government will pay up to £2500 per month per employee . Frankly that’s more than the average wage in this country . Some siren voices have got the ears of our politicians from Boris down.
And in the private sector. Well interestingly one or two billionaires have stepped up to the plate and offered their hotels for our National Health Service staff ( Roman Abramovitch ) but a home-grown one ( Richard Branson ) has been called out for failing to make an offer from his considerable fortune to those less fortunate , despite asking for a 7.5bn bailout for the airline that bears his brand and been called out as a result from one of our parliamentarians from the floor of the House of Commons. This virus sure knows how to divide and rule !
I have a daughter living in Seattle, married to an American with two lovely kids . I cannot believe the sheer viciousness of the American plutocracy, well documented on this blog , to the catastrophe that is about to overtake the US . To judge by the numbers you are about two weeks behind us ( and we were behind the Italians ) and only in the last week have we really got the message in terms of people on the streets, but the likely financial fall out was already being tackled.
You are nowhere near where we were on either count – health or finance – at the stage you are. Andrew Cuomo ( who’d have thought it ? ) is like an Old Testament prophet railing and railing .
Otherwise the corporate lackeys who pose as politicians in your Houses ……sorry I don’t have a word for them ( writing this at speed ), but the very best of luck America because you are going to need it and then some because this virus doesn’t recognise the Stars and Stripes , border walls, or any other signifier of ‘ protection ‘ . It just doesn’t care. It has a mission to accomplish and it’s going to accomplish it. We can hiker down as we most definitely should , but it means to wake us all up as it is already doing .
re:”Contact your Senators, best calling their district offices or by e-mail. If you call, be polite but pointed; if you e-mail, you can give them a piece of your mind. Decry the corporate welfare and the lack of accountability.”
My Senators are Dianne Feinstein (husband Richard Blum of Blum Capital investments) and Kamala Harris.
Feinstein’s term ends January 3, 2025 (2024 re-election campaign)
Kamala Harris’s term ends January 3, 2023. (2022 re-election campaign)
I suspect their bias for corporate welfare over average citizens welfare and the relatively long time before they have to answer to voters makes writing an e-mail an exercise in futility.
And these are “liberal” California’s senators.
I can already imagine the press-releases from both as they position the upcoming bailouts as “Good and necessary for America”.
I still remember some local liberals defending the Obama bailouts as “necessary to avoid a new Great Depression”..
I expect the same playbook this time.
The one time I wrote Feinstein’s office was definitely an exercise in futility, as the reply I got pretty much read as if I’d written the exact opposite of what I did. “Don’t do this” got “yes, I’m proud to be able to implement that”.
In addition, I’ve got the despair from having Pelosi as my rep. Will these people never go away?
In the Feinstein and Pelosi cases, I suspect the term limiting will be done by the grim reaper.
They both have an ability to survive at the ballot box.
With calls to Congress going 200:1 to not pass TARP, the only thing that was learned by EVERYONE is our collective desires aren’t worth MUCH. Although a whole lot of turnover happened in the next 2elections, so perhaps the Congress folk could be better listeners this time around.
Gilens/Page study. Confirmed as always by events…
The Fed is going to start buying investment grade corporate debt.
WASHINGTON (AP) — The Federal Reserve is unleashing its boldest effort yet to protect the U.S. economy from the coronavirus by helping companies and governments pay their bills and survive a devastating crisis.
With lending in Treasury and mortgage markets threatening to shut down, the Fed announced an aggressive set of programs Monday to try to smooth out those markets. To do so, it committed to buy as much government-backed debt as it deems necessary. And for the first time ever, the Fed said it plans to buy corporate debt, too.
Its intervention is intended to ensure that households, companies, banks and governments can get the loans they need at a time when their own revenue is fast drying up as the economy stalls.
The Fed’s all-out effort to support the flow of credit through an economy ravaged by the viral outbreak has now gone beyond even the extraordinary drive it made to rescue the economy from the 2008 financial crisis.
https://apnews.com/eac219fdb053191bceb521b0fe6b654d
*******
Here is a link to one of several Fed press releases today.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm
Ted Cruz today said Democrats inserted provisions for increasing board diversity and for stronger aircraft emission standards. If true, I have to wonder if that is good, even though I support those policies. Shouldn’t the focus be on economic issues? Seems like something a fake opposition would do.
The people are very angry this time around.
Will it be enough to stop us from being looted again by Congress for the corporations?
Where’s Joe?
Begging his handlers to let him go back to retirement.
Still recovering from the massive dose of Aricept, Adderall and crystal meth his handlers gave him before the last debate.
No worries:
” ‘I’ll be the oversight’: Trump vows he will personally oversee $500 billion coronavirus slush fund”
https://www.rawstory.com/2020/03/ill-be-the-oversight-trump-vows-he-will-personally-oversee-500-billion-coronavirus-slush-fund/
(For me that article came with an for toilet bowl cleaner with before-and-after illustrations.)