Saving the Rich First
Updated: Apr 24, 2020
By: Donald V. Watkins
Copyrighted and Published on April 22, 2020
The closing scene of the blockbuster Hollywood movie "Titanic" is a real tearjerker. Actor Leonardo DiCaprio's character bravely rescues actress Kate Winslet's character and places her in a lifeboat after the unsinkable Titanic started sinking from a tear in its hull caused by the ship hitting an iceberg. After Winslet's character is placed in the life boat, DiCaprio's character tragically dies in the cold dark sea. As we wipe away our tears, we are reminded of the days when men saved women and children from tragedy before attempting to save themselves. That day is gone.
Fast-Forward to January 2020. The American economy hit an iceberg called the "novel coronavirus." The unsinkable American economy began to sink, quickly. Congress created lifeboats for major corporations, small businesses, individual taxpayers, state and local governments, and others. This is what happened:
Big Corporations Raided the $350 billion Fund Earmarked for Small Businesses
The $350 billion lifeboat created in the $2.3 trillion CARES Act for traditional small businesses with 500 or less employees was raided within two weeks by large national restaurant, hotel, and business chains worth tens of billions of dollars. The money ran dry last Thursday and left thousands of traditional small businesses stranded and unable to get funding.
For example, Ruth's Chris, a restaurant chain with 150 locations and 5,740 employees snagged $20 million in Paycheck Protection Program (PPP) money. Potbelly Corp., a national chain of sandwich shops with 400 locations got $10 million in PPP. Brazilian steakhouse chain Fogo de Chao, Inc., which is privately owned, got $20 million. Casual dining company J. Alexander's Holding, Inc., received $15.1 million. Shake Shack, a chain of hamburger restaurants with 8,000 employees and a Wall Street valuation of $1.6 billion, received $10 million, which it intends to return in the face of a growing public outrage at how this money was disbursed to big corporations.
In all, more than 80 publicly traded companies with tens of thousands of employees were the first in line to receive PPP money that was intended for genuine small businesses. They secured a total of more than $330 million in PPP money. The PPP money allows the CEOs of these big corporations to keep drawing their multi-million dollar salaries for the next few months.
Many of these large publicly trade companies were also eligible to participate in the Federal Reserve's $600 billion Main Street Lending Program. In effect, they were positioned to raid two separate sources of federal funding, and many of them did so.
Wall Street banking giant JPMorgan Chase bragged that its commercial banking unit secured more than $115 million from the loan program for small businesses, which is more than anyone else in the banking industry. The bank also claimed that 80% of its PPP went to businesses with less than $5 million in revenue.
Small Business Administration data released late Friday shows that loans for more than $1 million accounted for nearly 45% of the approved dollars under the program. This suggests that larger companies received a disproportionate share of the PPP money that was intended for truly small businesses, which explains why the fund ran dry in just two weeks.
Treasury Secretary Steven Mnuchin said PPP provided funding to 1.6 million small businesses and that 74% of them were loans under $150,000. Mnuchin is seeking another $300 billion for thousands of traditional small businesses that were left out of the first round of funding.
In America, the Rich Are Always the First Ones Escorted to the Lifeboat
One truism we learned from the Great Depression of 1933 and the Great Recession of 2008 is this undeniable fact: In America, the rich are always the first ones escorted to the lifeboats. This pattern and practice of preferential treatment happens every time.
The first $500 billion in CARES Act money was immediately disbursed to a handpicked group of big corporations to help them clean up their balance sheets. For example, Boeing was awarded billions of dollars to offset losses the company sustained from building a defective and unsafe 737 MAX airplane that has already killed 346 passengers and crew members in two plane crashes. These losses had nothing to do with the novel coronavirus. Boeing's money amounts to corporate welfare for incompetent and careless job performance on the 737 MAX airplane.
President Donald Trump and Secretary Mnuchin have refused to disclose the full list of recipients of money from the $500 billion earmarked for major corporations. They have also refused to publish the list of the large corporations that raided the $350 billion earmarked for traditional small business loans. Trump also removed the Inspector General who is responsible for monitoring the payments and compliance with the CARES Act.
Both Trump and Mnuchin say they support $300 billion in additional funding for traditional small businesses, if these businesses are still around to apply for it. Lawmakers in Washington are working on a new round of funding for small businesses this week.
Who Represents the Political Interests of the "99 Percenters"?
The distribution of CARES Act money raises a serious political question: Who in Washington represents the political interests of the "99 Percenters"? Who is the Leonardo DiCaprio figure rushing to save ordinary Americans and genuine small businesses after their financial "Titanic" struck the iceberg?
In times of great economic crisis, the "99 Percenters," always get left behind or left out of timely rescues. Politicians in both political parties want their votes, but not their voices on economic issues. Every special interest group in Washington has a cadre of lobbyists to rescue them, except the "99 Percenters."
Republican leaders in Washington have long pacified their struggling base of "rural," "blue collar," and "trailer park" voters by leading them in political chants like "build the Wall," "right to life," "lock'em up," and "Make America Great Again," while they dole out trillions of taxpayer’s dollars to big corporation and Wall Street banks during good and bad economic times, including the companies and banks that have acknowledged their participation in nationwide crime sprees. Republican politicians have always ushered the "1 Percenters" to the financial lifeboats on a priority basis during every modern-day economic recession.
Democrats in Washington don't really understand economic policies well enough to help the "99 Percenters." This was apparent when President Barack Obama provided more than $800 billion in bailout money to Wall Street banks and major corporations during the 2008 recession, while the "99 Percenters" languished in misery. The recipients of Obama's bailout money promptly used a substantial portion of this money to award bonuses to their CEOs and senior management executives and to buy back their corporate stock. Some of the recipients like insurance giant AIG actually sued the government over restrictions placed on the bailout money.
To date, neither political party has cared enough about the courageous first responders in the coronavirus outbreak to include special compensation for them in the CARES Act for hazardous duty pay and bonuses for exceptional performance in the line of duty. These responders put their lives on the line to save COVID-19 patients knowing that their hospitals did not have adequate personal protective equipment for them. They saved tens of thousands of patient lives.
These brave healthcare professionals should receive big bonuses for working on the frontlines under conditions that imperiled their own health, safety and welfare. The government should also waive the repayment of educational loans awarded to the professional school costs incurred by doctors, nurses, respiratory therapists, and other frontline health professionals who worked to flatten the curve of the coronavirus without adequate personal protective equipment. They deserve nothing less.
Money for first responders, including the families of the deceased ones, should be included in the same economic stimulus bill that will provide an additional $300 billion in funding for traditional small businesses. Public applause and certificates of appreciation for these responders are welcomed, but tangible financial support sends a more appropriate message to them for a job well done.
Finally, all Americans need to gear-up for a second wave of the coronavirus. It is coming soon, and it will be more deadly than the original eruption. We have time to adequately prepare for the second wave of the virus. The burning question is whether we will do so.