By: Donald V. Watkins
Copyrighted and Published on April 8, 2020
Because of the nationwide spread of the novel coronavirus, most Americans are on the brink of economic ruin as America's economy experiences a shutdown of epic proportions. The COVID-19 pandemic is making the Great Recession of 2008 look like a hiccup. Many respected economists are predicting that the nation's economy will be shut down for the rest of the year. I agree.
As a lawyer, bank owner, businessman in the world of international energy, and taxpayer who successfully navigated the 2008 recession, I offer this annotated survival guide for ordinary Americans -- the "99 percenters" -- who want to survive the current economic depression. Here are my survival tips.
1. Stop worrying about the mega-Wall Street corporations and their super-rich executives and institutional shareholders. These are the "1 percenters." America's entire financial, political, and legal infrastructure is designed to advance and protect their business interests, from top to bottom. This is the business oligarchy that runs America. The Republican Party and Washington lobbyists have always taken great care of them. Please notice how quickly $500 billion in economic stimulus money was wired directly to these corporations by Secretary of the Treasury Steve Mnuchin immediately after President Donald Trump signed the economic stimulus legislation (the "CARES Act") on March 27, 2020. None of these companies had to wait in line for their stimulus money. They knew in advance exactly how much each company was getting and planned accordingly.
2. Immediately halt all non-essential personal spending. In a down economy, cash is king. Only spend money on food, medicines, utilities, shelter, cell phones, health insurance, and Internet service. Everything else is non-essential spending and can wait until you experience better days.
3. Prioritize your debts. Reduce or suspend your payments on unsecured debts like credit cards and signature loans from banks or private lenders. Request a loan modification to your existing home mortgage and/or car loan that allows you to make "interest only" payments for 24 months. If and when the economy bounces back during this period, you can resume your regular monthly payments to all lenders.
4. If your lenders refuse to cooperate with you during this economic crisis, don't be surprised. They are also under a lot of financial pressure themselves, especially lenders who are regulated by state and federal bank regulatory agencies. However, the laws governing the lender-borrower relationship in each state are heavily weighted in favor of creditors and against debtors. The one leverage tool you have as a debtor is the ability to file a Chapter 13 petition for wage earners' debt restructuring, or a Chapter 11 plan for corporate debt restructuring, or a Chapter 7 bankruptcy liquidation plan. You should not hesitate to use the federal bankruptcy laws to your advantage if your creditors are jamming you. Delta Airlines used them. Ronald Reagan used them before he became president. President Donald Trump used them six times as a businessman. These laws exist for challenging times like the one we are experiencing today, and you should not hesitate to use them.
5. If you own a small business, as defined by the U.S. Small Business Administration (SBA), and you seek to participate in the $350 billion in economic stimulus money that Congress appropriated to help small businesses, you should apply for this money at a bank that specializes in SBA loans. Only a small number of banks in America have SBA loans as their core business. These banks are well-versed in the SBA lending guidelines and documentation procedures. I know of only one in Georgia -- TouchMark National Bank in Alpharetta -- that specializes in SBA lending, and they excel at it. Unlike the preferential treatment accorded to Wall Street corporations under the CARES Act, the line for the SBA-guaranteed stimulus loan money is very long, painfully slow, and frustrating most of the time. Applicants who are seeking millions of dollars will get a preference over those seeking a hundred thousand dollars or less. Remember, the SBA lending program was originally established to help struggling minority-owned and women-owned businesses by guaranteeing up to 80% of their business loans from banks. As such, the SBA's treatment of loan applicants from these targeted minority groups has always been second-class, shabby, slow, and very frustrating. Prior to the economic stimulus money, the SBA's entire allocation of loan guarantee money for a federal fiscal year was $25 billion. Whether the SBA loan guarantee program is ready to quickly inject $350 billion into the banking system as loan guarantees for mainstream American business with employees of 500 or less is an open question. I sincerely doubt it.
6. Cash-in or sell your "Whole Life" or "Term Life" insurance policies. Companies like Coventry routinely buy them, and still do. These insurance products were originally purchased for your named beneficiaries, but you may need the money now.
7. Avoid "hard money" and "payday" lenders, as well as title pawn shops. These are predatory lenders who thrive on desperate borrowers. State laws allow these lenders to rip-off borrowers with impunity, especially in Republican-controlled states.
8. Fire-sale all non-essential items in your home or business that you have not used in three years. They can always be replaced in better times.
9. Maintain some form of healthcare insurance, whether with a private insurance company, Medicare, or Medicaid. The poor and working poor in America are treated very badly in our country's healthcare system. You do not want to experience the level of indifference that poor citizens receive in healthcare systems across the nation as a matter of course.
10. Do not become discouraged by the slow, inefficient, and inept performance of the many government agencies that must "qualify" or "reject" you for stimulus money or other government benefits (i.e., unemployment benefits, stimulus checks, SBA officials handling stimulus loans, etc.). If you experienced poor customer service at the Postal Service, I guarantee that you will experience similar treatment by other government agencies in this economic depression.
Most Americans have never experienced hard economic times like these, nor have they been dependent on the delivery of government services that is usually reserved for the poor or working poor. Due to COVID-19 pandemic, most of the "99 percenters" will be entering a new paradigm of daily life. It is a difficult existence that poor people navigate everyday. Patience, focus, and endurance are required attributes in this new paradigm.
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