COVID Economy

[Skatastrophy]

https://www.politico.com/amp/news/2020/09/23/companies-shed-workers-paid-dividends-after-getting-fed-aid-panel-finds-420537

ELI5?

There were a couple of ways that the federal government intervened to prop up businesses during the beginning of this economic downturn. The most visible way was the SBA loans that were approved by congress via the CARES act: PPP and EIDL funds. PPP and EIDL money came with acceptable use stipulations. At first you could only use PPP money for payroll, but they expanded that to match the EIDL, which is basically "any business purpose is fine."

The CARES act also authorized the Fed to buy corporate & municipal bonds. Big problem, if you care about small business, with buying corporate bonds is that they're only issued by very large up to gigantic corporations. Another big problem with stimulating businesses that way: There are no stipulations if you took the Fed's money.

So... to heck with it. You are running a giant corp, and your success metrics determine your compensation. It is absolutely in your best interest to issue a ton of debt at an ultra low rate to raise a bunch of money. The private market will buy because it's backstopped by the federal gov't now. Then you cut operating costs by firing as much staff as you can stomach. Boom, your stock price pops, you get your bonus, and your shareholders + BoD are happy with the job you did. Business as usual with public companies, honestly.

I'm no economist, and most of this is from memory so I'd appreciate corrections that anyone has. Here's a quote from Nate Tankus that I had to look up:

> Of course, the nature of explicit interventions are changing. Both the Corporate Credit Facilities and the Municipal Liquidity Facility have had very few purchases, but for different reasons. The Corporate Credit Facilities have provided such a strong backstop that private markets have provisioned all the liquidity qualifying corporations need. On the other hand, the Municipal Liquidity Facility is priced so unfavorably that only Chicago has entered the facility's lone transaction. 

Edit: Looks like businesses were doing stock buybacks after having taken PPP money as well. As long as they didn't use PPP money for stock buybacks it isn't against the rules. It does mean, though, that undeserving companies took PPP money. Shocker.

[jesmu84]

Much appreciated

[shoothoops]

There were a couple of ways that the federal government intervened to prop up businesses during the beginning of this economic downturn. The most visible way was the SBA loans that were approved by congress via the CARES act: PPP and EIDL funds. PPP and EIDL money came with acceptable use stipulations. At first you could only use PPP money for payroll, but they expanded that to match the EIDL, which is basically "any business purpose is fine."

The CARES act also authorized the Fed to buy corporate & municipal bonds. Big problem, if you care about small business, with buying corporate bonds is that they're only issued by very large up to gigantic corporations. Another big problem with stimulating businesses that way: There are no stipulations if you took the Fed's money.

So... to heck with it. You are running a giant corp, and your success metrics determine your compensation. It is absolutely in your best interest to issue a ton of debt at an ultra low rate to raise a bunch of money. The private market will buy because it's backstopped by the federal gov't now. Then you cut operating costs by firing as much staff as you can stomach. Boom, your stock price pops, you get your bonus, and your shareholders + BoD are happy with the job you did. Business as usual with public companies, honestly.

I'm no economist, and most of this is from memory so I'd appreciate corrections that anyone has. Here's a quote from Nate Tankus that I had to look up:

> Of course, the nature of explicit interventions are changing. Both the Corporate Credit Facilities and the Municipal Liquidity Facility have had very few purchases, but for different reasons. The Corporate Credit Facilities have provided such a strong backstop that private markets have provisioned all the liquidity qualifying corporations need. On the other hand, the Municipal Liquidity Facility is priced so unfavorably that only Chicago has entered the facility's lone transaction. 

Edit: Looks like businesses were doing stock buybacks after having taken PPP money as well. As long as they didn't use PPP money for stock buybacks it isn't against the rules. It does mean, though, that undeserving companies took PPP money. Shocker.

So, same thing different day, sigh. That is why the bulk money needed to go directly to the people.

And anyone that was concerned about people who took $600 unemployment, perhaps, stay with me here, the real issue is that those people are not paid enough in the first place.

Finally, the stock market is not the economy, the stock market is not the economy.

[Jockey]

Federal Bank: Economy won't recover until virus is under control

The U.S. economy will not recover until the coronavirus is under control, said Neel Kashkari, president of the Federal Reserve Bank of Minneapolis.


"This is not about politics -- it's about confidence," Kashkari said during a Wednesday webinar held by Wisconsin Manufacturers & Commerce, the state's largest business association.

Kashkari's overview of what's ahead was not encouraging, and he called on Congress to provide more support for small businesses and people who have lost their jobs because of the pandemic.

It will be six months to a year before a vaccine is widely available, he said, and until then, people will be wary of going to restaurants, movie theaters and sporting events.


Furloughs are becoming permanent job losses, he said, and bankruptcy filings by businesses are beginning to increase.

"If thousands and thousands of businesses go bankrupt, this recovery is going to be much slower," Kashkari said.

[Frenns Liquor Depot]

The president has at least three risk factors that we know about (weight, age, sex). You have to assume everyone at the debate is at risk based on what we know. 

Has there ever been this much election uncertainty?  Does this get the stimulus through?  I feel like Heisenberg. 

[reinko]

The president has at least three risk factors that we know about (weight, age, sex). You have to assume everyone at the debate is at risk based on what we know. 

Has there ever been this much election uncertainty?  Does this get the stimulus through?  I feel like Heisenberg.

Don't forget a 4th, low-income.

[The Sultan]

The president has at least three risk factors that we know about (weight, age, sex). You have to assume everyone at the debate is at risk based on what we know. 

Has there ever been this much election uncertainty?  Does this get the stimulus through?  I feel like Heisenberg. 

If you were Heisey, you would have posted this on Hangin' at the Al.

[The Sultan]

Don't forget a 4th, low-income.

<hat tip>

[Jockey]

Don't forget a 4th, low-income.

Funniest thing I have read today.

[Billy Hoyle]

Federal Bank: Economy won't recover until virus is under control

The U.S. economy will not recover until the coronavirus is under control, said Neel Kashkari, president of the Federal Reserve Bank of Minneapolis.


"This is not about politics -- it's about confidence," Kashkari said during a Wednesday webinar held by Wisconsin Manufacturers & Commerce, the state's largest business association.

Kashkari's overview of what's ahead was not encouraging, and he called on Congress to provide more support for small businesses and people who have lost their jobs because of the pandemic.

It will be six months to a year before a vaccine is widely available, he said, and until then, people will be wary of going to restaurants, movie theaters and sporting events.


Furloughs are becoming permanent job losses, he said, and bankruptcy filings by businesses are beginning to increase.

"If thousands and thousands of businesses go bankrupt, this recovery is going to be much slower," Kashkari said.

my wife does small business lending and she's as busy as she's ever been. Some of her clients are scaling down (one went from two restaurants to one), others are asking for further money or extensions, others are just shutting down, either temporarily or permanently. In Portland we've lost numerous breweries recently and the restaurant industry has been devastated, especially downtown where a combination of the riots, homelessness and COVID (having) are resulting in some highly renowned restaurants are closing and other businesses sitting it out for now and not reponeing. Commerical real estate is going to take the biggest hit.

[GooooMarquette]

ShopperTrack projects that brick and mortar holiday traffic will be down 22-25% this year.

https://www.cnbc.com/2020/10/06/the-number-of-holiday-shoppers-at-stores-to-drop-25percent-says-shoppertrak.html

Honestly, I'm surprised the number is so low. I will try to get to a few smaller mom-and-pop places to help keep them afloat, but between Covid and the continuing rise of online shopping, I struggle to see a shopping mall or big box store in my near future. Others?

[tower912]

I have been to both.   Christmas shopping will probably be on line.

[Pakuni]

Trump tweets that he will no longer negotiate on a second stimulus until after the election.
His precious stock market immediately collapses.

[The Sultan]

Trump tweets that he will no longer negotiate on a second stimulus until after the election.
His precious stock market immediately collapses.

I don't understand his political calculus here.

[SoCalEagle]

I don't understand his political calculus here.

Crash and burn?

Take everyone down with me?

Take my ball and go home?

[Hards Alumni]

I don't understand his political calculus here.

He is on steroids.  And out of his mind.  Normal people 25th until he is better, but we are all gas no brakes society now.

[JWags85]

Crash and burn?

Take everyone down with me?

Take my ball and go home?

Bingo. If he wins, they agree to something and he's a hero. If he loses, F everyone wait until Biden gives you something in February.

It's pretty gross, even for him.  It could be a bluff, but it feels an awful lot like having his troops start to salt the fields

[Frenns Liquor Depot]

I think the Senate also plays into this too.  This would have to be bi-partisan to pass there and a significant bloc of R's doesn't want a significant stimulus there for fiscal reasons.  If they jam it through McConnell may not be the next Senate leader or minority leader.  I think in his mind the Judge impacts the election and the stimulus doesn't -- which as we know is the best way to influence Mr T.

[Pakuni]

I think the Senate also plays into this too.  This would have to be bi-partisan to pass there and a significant bloc of R's doesn't want a significant stimulus there for fiscal reasons.  If they jam it through McConnell may not be the next Senate leader or minority leader.  I think in his mind the Judge impacts the election and the stimulus doesn't -- which as we know is the best way to influence Mr T.

I'd lean the other way, in that I think McConnell and the Senate Republicans very much want/need a deal. There are incumbent Republicans in some tight races (Ernst, Collins, Tillis, Garnder, McSally) and this would be a huge missed opportunity for them to win over moderates and suburban voters.
McConnell doesn't give a flying you-know-what about Trump. In fact, he likely hates him. McConnell cares very much about retaining control of the Senate, and this wouldn't seem to help that cause.

[GooooMarquette]

I'd lean the other way, in that I think McConnell and the Senate Republicans very much want/need a deal. There are incumbent Republicans in some tight races (Ernst, Collins, Tillis, Garnder, McSally) and this would be a huge missed opportunity for them to win over moderates and suburban voters.

Agree with this. Regardless of what happens with Trump, lots of Rs are fighting for their seats and McConnell's pulpit. If they don't get a plan through because of Trump's petulance, they may go down with him.

Maybe Trump is bluffing, or maybe he's serious because he believes he's gonna lose. If he is serious and holds this position, he will do considerable damage to the Rs' ability to hold the Senate majority.

[Frenns Liquor Depot]

I'd lean the other way, in that I think McConnell and the Senate Republicans very much want/need a deal. There are incumbent Republicans in some tight races (Ernst, Collins, Tillis, Garnder, McSally) and this would be a huge missed opportunity for them to win over moderates and suburban voters.
McConnell doesn't give a flying you-know-what about Trump. In fact, he likely hates him. McConnell cares very much about retaining control of the Senate, and this wouldn't seem to help that cause.

Nothing I said disagrees with your take except that I think they are betting that focusing on the Judge will get them more votes for those senators. Whether or not this is correct is to be seen.  McConnell tried to pass their own version of the stimulus and it was a disaster--that shows you a bit of how important they think it is (i.e. they can't do it alone).

[Pakuni]

Nothing I said disagrees with your take except that I think they are betting that focusing on the Judge will get them more votes for those senators. Whether or not this is correct is to be seen.  McConnell tried to pass their own version of the stimulus and it was a disaster--that shows you a bit of how important they think it is (i.e. they can't do it alone).

Getting their judge through only helps them with their base, which they're getting whether or not she's confirmed. Staunch pro-lifers and evangenicals aren't voting Democratic if ACB's nomination gets delayed.
Moderates, on the other hand, will continue to turn on Republicans is they're perceived as killing hopes for a second stimulus deal and further tanking the economy.

Case in point, a poll just released shows that 74 percent of voters  - including 77 percent of independents and 55 percent of Republicans - believe a second stimulus should be prioritized over ACB.
https://thehill.com/hilltv/what-americas-thinking/519650-poll-74-percent-of-voters-want-senate-to-take-on-covid-relief

[Frenns Liquor Depot]

Edit: sorry that is getting off track. 

[MU82]

Nothing I said disagrees with your take except that I think they are betting that focusing on the Judge will get them more votes for those senators. Whether or not this is correct is to be seen.  McConnell tried to pass their own version of the stimulus and it was a disaster--that shows you a bit of how important they think it is (i.e. they can't do it alone).

There is absolutely no reason they couldn't have passed a stimulus bill and seated a new SCOTUS justice. They are not mutually exclusive activities.

I agree with Pak and others that this hurts several GOP senators who hope to keep their jobs.

[GooooMarquette]

There is absolutely no reason they couldn't have passed a stimulus bill and seated a new SCOTUS justice. They are not mutually exclusive activities.

I agree with Pak and others that this hurts several GOP senators who hope to keep their jobs.

Agreed. The SCOTUS approval process is mostly a matter of scheduling, and specifically making sure they have enough people there for the votes (in committee and the full Senate). The stimulus is mostly Pelosi and Mnuchin negotiating, since the Rs in Congress will almost certainly approve anything Mnuchin and Trump want.