Month: April 2020 Page 6 of 7

• You want to save and preserve small and local businesses in your community or town.
• You don’t want a local economy that consists almost entirely of chain restaurants and big box stores and a central business district full of empty storefronts.
• You value the diversity, creativity, idiosyncratic character, and friendliness that thriving small business owners bring to your community or town.

In a phoned-in interview on CNBC, Wilfred Frost urgently reported that Bank of America has received 177,000 applications for some $32.6 billion in emergency liquidity, but so far, only 100 of these loans have been disbursed.
The bank hopes to get most of the stack processed by mid-week, but it’s unclear what they’re basing these hopes on.

So why the reticence from the banking sector? I think liability is a red herring; are they really afraid of the heavy regulatory hand of Steve Mnuchin (or any law enforcer involved in the financial crisis)? It looks to me like they don’t want to do the work. Every expectation is for an absolute crush of applications. Thirty million small businesses could be on the line here. The compliance requirements are minimal but banks always whine about the expense of that; that’s why BofA is restricting to already-vetted customers. And the guidelines, which have been “changing by the minute,” could change again. So why bother with the hassle? The money’s good, but it’s marginal, and the big banks think in billions, not millions….

…I’ve talked to dozens of small business owners who are confused by this program, but who are also desperate to participate. There’s not going to be enough money — Congress gave $350 billion — to begin with. If lenders are slow to open the spigot, a lot of these businesses will go down. They don’t have any cash reserves. There’s a lot of concern. Maybe SBA should have found someone more willing to act quickly.

Germany Announces “Limitless” Aid Program for Small Business: SBA Are You Listening? [Zerohedge, 4-6-20]

…Angela Merkel’s government announced a new “limitless” aid program for small- and medium-sized companies (Ed. Note: not a bailout of Germany’s mega corporations) as part of an effort to support Europe’s largest economy in the coronavirus pandemic.
Merkel’s government will provide guarantees of as much as 100 percent, German Finance Minister Olaf Scholz announced at a joint press conference with Economy Minister Peter Altmaier Monday, Bloomberg reports, adding that loans of up to 800,000 euros ($862,000) that will pay out very quickly will be available.

The existing program only provides for an 80 percent to 90 percent loan guarantee and banks have been reluctant to take on new risk as the economy falters. Private lenders have thus pressed the government to expand the existing program by guaranteeing 100 percent of the loans, which it now appears to be doing.

Over the past week, it has come into focus for policymakers just how much strain state and local government budgets are under. They have to make emergency healthcare expenditures among other emergency expenditures, expand unemployment insurance with very low levels of reserves in unemployment insurance funds and do this while tax revenues fall off a cliff since incomes and sales have collapsed. The CARES act provides $340 billion all together with 80 percent or so going to financing  Coronavirus-related expenditures. 150 billion of which is direct aid to state and local governments. Given the scale of the crisis, this is far from adequate….

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by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Economic Armageddon

Coronavirus batters US economy as 6.65 million file for unemployment last week
[The Guardian April 2, 2020]

Some 3.3 million had filed for unemployment the previous week, bringing total claims to 9.95 million for the two weeks.

US Labor Market Update
Len Kiefer April 3-2020
Click through to his animated gif graph, which helps visualize the catastrophic economic convulsion we are in. It takes a few seconds to get to the stunning, shocking end.
http://lenkiefer.com/img/charts_2020_04_03/claimsSA_2020_04_03.gif

Jobs Aren’t Being Destroyed This Fast Elsewhere. Why Is That?

This dramatic spike in jobless claims is an American peculiarity. In almost no other country are jobs being destroyed so fast. Why? Because throughout the world, governments are protecting employment. Workers keep their jobs, even in industries that are shut down. The government covers most of their wage through direct payments to employers. Wages are, in effect, socialized for the duration of the crisis.

Instead of safeguarding employment, America is relying on beefed-up unemployment benefits to shield laid-off workers from economic hardship. To give just one example, in both the United States and Britain, the government is asking restaurant workers to stay home. But in Britain, workers are receiving 80 percent of their pay (up to £2,500 a month, or $3,125) and are guaranteed to get their job back once the shutdown is over. In America, the workers are laid off; they must then file for unemployment insurance and wait for the economy to start up again before they can apply for a new job, and if all goes well, sign a new contract and resume working….

This situation for laid-off workers would be bad enough if it were not aggravated by a second American peculiarity. As they are losing their jobs, many workers are also losing their employer-provided health insurance — and now find themselves faced with the Kafkaesque task of obtaining coverage on their own.

One option involves continuing to be covered by one’s former employer, a program known as COBRA. It is prohibitively expensive: Participants have to bear the full cost of insurance, $20,500 per year on average. Another option is to go shopping for a plan on the Affordable Care Act insurance exchange, where one is faced with a bewildering choice between plans like Blue Shield’s Bronze 60 PPO (with a deductible of up to $12,600 per year) and Aetna’s Silver Copay HNOnly (with a $7,000 deductible and up to $14,000 in annual out-of-pocket expenses). The last option is to join the ranks of the uninsured, a catastrophic solution during a pandemic. There are reports that people have already died of Covid-19 because they refused to go to the hospital, worried about bills, or because they were denied treatment for lack of insurance.

Red April: What happens on the first of the month when residents, restaurants, and retail stores don’t pay rent?
Henry Grabar [Slate, March 27, 2020]

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