David Dayen writes a daily report on COVID-19 for The American Prospect.
Today’s post is very disturbing, and it has so many links included that you will have to open the post to read the source of his data and assertions. Bear in mind that the Fed is giving away OUR money, not theirs and certainly not Trump’s.
Who is getting it? That’s a secret.
Dayen writes:
Yesterday we found out that two luxury hotel companies made off with $46 million in PPP forgivable small business loans, for such high-end brand locations as Ritz-Carlton, Marriott and Sofitel. The companies paid a combined $13 million to top executives last year. We know this because Braemar Hotels and Ashford Hospitalty Trust were required to disclose the loans in SEC filings.
Disclosure, in other words, brought these distortions in PPP lending to light. But those are relatively small sums compared to what the Federal Reserve’s money cannon is about to shoot out. And if the Fed gets its way, there won’t be any way to discover hundreds of billions if not trillions of dollars put into the hands of companies.
The Fed has not committed to releasing detailed, transaction-level information about its lending. It has interpreted the CARES Act disclosure requirements to mean that they only need to give aggregate disclosure of the terms and rules of the various lending facilities they set up, not the names of the individual companies getting the loans. And then every 30 days, they have to supply the total amount lent out and the interest received.
This is being driven by the business community, which doesn’t want “bailout stigma” after receiving support from the Fed. I’m not sure why they think it won’t arouse suspicions if a travel company or some other large firm suddenly starts expanding out of nowhere after months without revenue.
The airline bailout in the CARES Act had very different disclosure rules: the Treasury Secretary had to post the amounts, interest rate, conditions, and even the term sheet for each recipient. But when it came to the Fed, the disclosure reverted back to the central bank’s Section 13(3) emergency lending authority. Somebody changed the rules, a mystery that ought to be unraveled. It may have come from the Fed writing the language itself, along with the CARES Act provision freeing it from open meetings laws.
Austan Goolsbee, of all people, explained pretty clearly to Politico why the Fed doesn’t want to disclose company names. “The reason they’re not releasing the list… people will start holding them accountable for who’s getting the money,” Goolsbee said. [I]t’s kind of the flashbacks of 2008 2009 that it’s going to matter for the credibility of this program and whether we the American people think it is working and want to keep engaging in it.”
Bharat Ramamurti, one of four members of the bailout oversight panel, has been among the few calling for detailed transparency around who is getting a piece of what could be as much as $4.5 trillion in loans. For all we know, some of that money has already been released, without any information about who got what. After pressure from Bharat and Americans for Financial Reform, the Fed has only committed to “information regarding participants” in the corporate credit facilities, without any details about what that information will be (will it even be the identity of the participants?), or what they will do in its numerous other lending facilities. It could mean industry-level aggregates, or a raw number of borrowers, or anything.
It’s true that, like with the hotel chains, public companies might have to file something with the SEC. But the beneficiaries of Fed lending may not all be public companies. Private equity portfolio companies could use Fed resources, for example. The press will be vital, and have already ferreted out some information. But there’s no substitute for systematic, transaction-level transparency.
There aren’t many conditions being placed on this money to begin with, to ensure it stabilizes the real economy, rather than flowing up to executives and investors. But transparency can help raise the pressure. Once you see that Company X received several billion in low-cost loans, you can tie it to what we already know about Company X: its executive compensation, use of financial engineering to reward investors, average worker pay. If conditions will ever be placed, they will happen because of the “name and shame” possibilities that accompany disclosure.
Relying on the Fed so heavily to save the economy already will shuttle the relief through large corporations and Wall Street banks. That’s how the Fed operates as an institution, and it colors our pandemic response. Operating in the dark is even worse.
We’ve already had this fight during the last bailout. The Fed claimed they were only giving banks “liquidity assistance” in the short-term to deal with a credit crunch. But this bailout will go to companies throughout the economy, with loans up to four years. Knowing this information is vital to knowing whether the taxpayer has been ripped off, on a galactic scale compared to the penny-ante small business loan schemes.
Eventually, Bloomberg sued the Fed and got some information about the 2008-2009 bailout. It may take that again. But career staff inside the Fed making the decision on what to disclose should know: they will lose credibility as an institution if they once again opt for secrecy. The public has a right to learn what’s being done in their name.
Funny, I had this antiquated idea that with public money goes public accountability. Apparently, the deal here is that our money to “save the economy” is going to unknown recipients. What, wait?
“The reason they’re not releasing the list… people will start holding them accountable for who’s getting the money,” Goolsbee said.
I guess bootstraps are only for poor people. Oh, . . .and that “antiquated idea” about public funding requiring public accountability”? Uh . . . where would corporations be without “accountants”?
Me thinks that corporations speak with forked tongue: They say they want public services and government to be run more like businesses, . . . EXCEPT where accountability is concerned? I’m sorry . . . as a citizen and former businessperson, that doesn’t work for me . . . I’m feeling hoodwinked . . . .again. CBK
A friend of mine who lives in Miami told me that a small airport in Miami that has charter planes AND a small airport in Palm Beach, that caters to wealthy people who own their own planes, each got some stimulus money.
Obviously the wealthy need this money SO much more than the rest of us. I’m still waiting for that ONE TIME check for $1200 that is supposed to last for months.
Privatize the profits but socialize the losses. I thought that in Capitalism and the free market, it was “dog eat dog” and survival of the fittest? Funny how the wealthy want the social sector (via taxes) to bail them out when they are on the brink of losing. What we have is Capitalism for only those who can afford it.
Many of these companies are those that make enormous profits. When they sink too much money into buying back their own stock to provide a larger return to stockholders, and the executives get enormous bonuses, we should not be bailing them out. It is their own questionable practices that put the company in this vulnerable position. Robert Reich has said corporations should have to borrow money using their holdings as collateral. Maybe if there are consequences, they will learn from their poor business practice. Otherwise, they will become “corporate welfare queens.” https://tribunecontentagency.com/article/robert-b-reich-bail-out-people-not-corporations/
” . . . in the meantime, in-between time, ain’t we got fun.” CBK
This is how bad this country is doing. We can’t afford to continue to help the wealthy.
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The U.S. government announced this morning that an additional 4.4 million people applied for unemployment benefits in the last week. That means unemployment in the U.S. has now reached 26 million. When the final accounting is done, the total share of Americans to file for unemployment for the month of April could reach 20%, according to the Associated Press, citing economists.
Once all the small businesses go under and everyone is either sweating in Amazon warehouses or unemployed and starving, there will be massive social unrest. It’s already happening in parts of the world, Kenya and India for example. The billionaires will get theirs. Unlimited greed always has consequences.
There’s a great documentary about unrestrained greed, free on YouTube for a month, produced by Michael Moore, “PLanet of the Humans”. Gripping. Shocking.
I saw this earlier today. It was depressing, yet very thought provoking, considering we are in the middle of a pandemic.
Well said, as usual.
I feel that I should point out that the Fed does not spend any tax money so it is not spending “our money” in that sense. The Fed is spending money that it has created. The concerns are that the Fed will pick winners and losers with its bailout policy and that the increased money supply will increase inflation rates in the future. The link between the money supply and inflation rates has become increasingly unclear, however.
The Fed prints money, so the taxes we pay are not being used to bail out corporations?
Teachingeconomist: It doesn’t matter. The Fed works for “The People.”
CBK
The Fed is spending “our“ money because “we” go into debt owing the Fed the money they circulate—with interest. And that’s right, it very much is a concern that much of the money has gone to publicly traded, multimillion dollar companies instead of struggling Americans employed by truly small and medium sized businesses. Also, the link between currency circulation and inflation rates has been weakened by low wages, not exactly a win-win. Add it all up, and the working class pays for far too much, especially during disasters both of human and natural origin.
TE says the Fed has its own money but he didn’t say where the Fed got it.
Left Coast Teacher at el,
Let me take these one at a time.
The taxes you pay go to the Federal Treasury, not the Federal Reserve Board. Any expenditure of tax revenue from the Federal Treasury must be made with the approval of Congress. The Federal Reserve has no authority to raise or spend a dollar of tax money.
The Fed does not issue bonds, so we are not responsible for any debt they have created. They do buy bonds issued by the Treasury so the when the Federal Government pays interest to bondholders the Fed gets substantial interest payments. They return most of those payments back to the Treasury.
Finally we have a fiat money system. The Fed does not get the money from anywhere, the Fed, along with the banking system, creates the money.
The Fed is right now creating fiat currency by loaning it to banks and other businesses. (You’re right, the Fed has no money; it creates currency on a computer, out of thin air, when it loans out the currency. Money is usually based on precious metals, not on decree. There is relatively little actual money left in the world.) The banks and other businesses that take the loans will owe currency to the Fed.
Businesses will not owe the currency to the Treasury. The Treasury will lose tax revenue as opportunity cost. The Treasury will have less revenue to pay for schools, infrastructure, the military, etc. Corporate executives will get paid, and hide the currency in various tax shelters. Taxpayers will foot the bill for all the many things the Treasury pays for when Congress legislates them. If the Fed were lending the money directly to employees and the unemployed, it would help people get through the crisis without ripping them off, in my humble opinion.
The study and predictability of Economics is about as reliable as that of a $5 palm reader or crystal ball gazer. In our current situation, I would trust the palm reader before an economist.
Here is a comment emailed to me [form letter] from Senator Todd Young [R-IN]. It is sad but I always feel that there is some sneaky way to sound good and screw everyone. I’ve heard too many time about how he ‘will keep your thoughts in mind should relevant legislation come before the Senate for consideration”.
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Dear Ms. Ring,
Sincerely,
Todd Young
United States Senator
NWI Times] Indiana meat plant closing after workers contract virus
Apr 23, 2020 Updated 2 hrs ago
LOGANSPORT, Ind. (AP) — Tyson Foods Inc. announced Wednesday that it will temporarily close its meatpacking plant in north-central Indiana after 146 employees tested positive for coronavirus.
The Tyson Fresh Meats plant in Logansport produced 3 million pounds of pork daily. Tyson suspended production Monday to allow for cleaning and sanitizing. The plant reopened Tuesday and is running at limited capacity because of decreased worker attendance. The company will stop all production by Saturday.
“The combination of worker absenteeism, COVID-19 cases and community concerns has resulted in a collective decision to close,” said Steve Stouffer, of Tyson’s beef-and-pork subsidiary…
https://www.nwitimes.com/news/state-and-regional/indiana-meat-plant-closing-after-workers-contract-virus/article_4b990835-7ccb-53a8-8052-e027981fb96b.html?utm_medium=social&utm_source=email&utm_campaign=user-share
Someone mentioned this documentary but didn’t give the details on how to access it. It’s worth watching. Humans are destroying the planet for profits.
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Michael Moore Presents: Planet of the Humans | Full Documentary | Directed by Jeff Gibbs
Apr 21, 2020
Michael Moore presents Planet of the Humans, a documentary that dares to say what no one else will this Earth Day — that we are losing the battle to stop climate change on planet earth because we are following leaders who have taken us down the wrong road — selling out the green movement to wealthy interests and corporate America. This film is the wake-up call to the reality we are afraid to face: that in the midst of a human-caused extinction event, the environmental movement’s answer is to push for techno-fixes and band-aids. It’s too little, too late.
Removed from the debate is the only thing that MIGHT save us: getting a grip on our out-of-control human presence and consumption…