Bailout 2020: The Great Bipartisan Bribe

[Brian4Liberty]

By Brian4Liberty - March 26, 2020

(RPF) - Who remembers TARP 2008 and the related bailouts and stimulus? You might not remember, but the government remembers. Politicians remember. And they learned from that experience.

The outrage was nearly universal. The common people of the left and the right were vocally opposed. The phone lines at Congress were flooded. A new movement was started called Occupy Wall Street, which in the beginning included people from across the political spectrum, opposed to crony corporatism, Oligarchy and Plutocracy. “Too big to fail” and “socialism for the rich, rugged capitalism for the masses” were popular war cries.

Fast forward to 2020. It’s time again for bailouts. But this time, there is a bipartisan twist. Democrat and Republican leaders alike support payments to every American. Some find this strange. Many people don't want or need it. Not everyone is one check away from the streets. Why is the establishment pushing this, and in such a bipartisan manner? McConnell and Pelosi agree, this is the most important and urgent action they can take.

The answer is simple. They learned from the past. Call it stimulus. Call it relief to people who have lost income. Call it redistribution of wealth. Call it a step towards Universal Basic Income. Call it the benevolence of McConnell, Schumer, Pelosi, Trump and Mnuchin.

It is being called many things, except for the one thing that it is above all else. It’s a bribe. America is being paid to be silent. Here’s some cash. Don't protest, don't complain, don't say you didn't get anything this time.

Now step aside while trillions of dollars once again flow to special interests and the murky shadows and corners of the crony corporatist world. You took your bribe, now sit down and shut up.

 

[KEEF]

By Brian4Liberty - March 26, 2020

(RPF) - Who remembers TARP 2008 and the related bailouts and stimulus? You might not remember, but the government remembers. Politicians remember. And they learned from that experience.

The outrage was nearly universal. The common people of the left and the right were vocally opposed. The phone lines at Congress were flooded. A new movement was started called Occupy Wall Street, which in the beginning included people from across the political spectrum, opposed to crony corporatism, Oligarchy and Plutocracy. “Too big to fail” and “socialism for the rich, rugged capitalism for the masses” were popular war cries.

Fast forward to 2020. It’s time again for bailouts. But this time, there is a bipartisan twist. Democrats and Republicans alike support payments to every American. Some find this strange. Many people don't want or need it. Not everyone is one check away from the streets. Why is the establishment pushing this, and in such a bipartisan manner? McConnell and Pelosi agree, this is the most important and urgent action they can take.

The answer is simple. They learned from the past. Call it stimulus. Call it relief to people who have lost income. Call it redistribution of wealth. Call it a step towards Universal Basic Income. Call it the benevolence of McConnell, Schumer, Pelosi, Trump and Mnuchin.

It is being called many things, except for the one thing that it is above all else. It’s a bribe. America is being paid to be silent. Here’s some cash. Don't protest, don't complain, don't say you didn't get anything this time.

Now step aside while trillions of dollars once again flow to special interests and the murky shadows and corners of the crony corporatist world. You took your bribe, now sit down and shut up.

Truth +1 rep

 

[Brian4Liberty]

Treasury Secretary Steve Mnuchin reveals the inspiration for his “cash now” program...

 

[AZJoe]

JEFF DEIST: Against the coronavirus corporate bailout

Americans should oppose the nearly $2 trillion corporate bailout bill masquerading as “stimulus” … This profligate spending will do little to help the American economy or average citizens in the long run. But the additional debt added to an already whopping $1 trillion 2020 federal deficit will plague taxpayers for years. …

with vast parts of the U.S. economy shut down … More money and more cheap credit can’t stimulate anything in such an environment, because money and credit aren’t goods and services. It can and will, however, saddle future generations of Americans with more debt misery and entrench a standard of moral hazard for corporations from which free markets may never recover.

The correct response to the current economic crisis is simple and painful. First, get America back to work as soon as possible. …
Second, allow existing bankruptcy and insolvency processes to run their course. Bailouts are not the answer, new owners who can turn companies around are. Corporate assets, contracts and products don’t disappear in bankruptcy. … executives and boards of failing companies should lose their jobs first and foremost, and new shareholders should seek clawbacks of ill-deserved bonuses and stock compensation. … shareholders, not taxpayers, must bear the economic burden when companies fail. …

this proposed bill is lengthy and its details are fuzzy. But today’s Wall Street Journal sums up the whole sordid process nicely: “Lobbyists Pile On to Get Wins for Clients Into Coronavirus Stimulus Package.” …
$500 billion in business “loans” from the U.S. Treasury, which means backed by you and me. Seventy billion dollars is earmarked for airlines and their suppliers, including Boeing, Delta, United and General Electric. Airlines … reportedly spent more than 95 percent of their free cash flow in recent years on stock buybacks. … If they need money now, they have several choices: Borrow, sell stock or sell airplanes. … don’t executives remember the falloff of travel after 9/11? Why don’t they hold more operating cash? …

How do we pay for it all? Congress doesn’t have $2 trillion to spend, and 2020 tax receipts won’t begin to cover the bill. This means the federal government will effectively “print” the money, … by issuing new Treasury debt and using the Federal Reserve Bank as a backstop … what sort of investor wants to loan Uncle Sam money for 10 years at less than 1 percent interest anyway? …

 

[Brian4Liberty]

https://twitter.com/USAB4L/status/1243677247405297665

 

[Krugminator2]

There has been such a massive buildup in private sector corporate debt. If you do nothing, you could have years of 20% unemployment. That situation won't hold. The bolded part in the article below is why I favor the nuclear weapons the Fed and government are using but I think we are in for a lot pain and potential systemic risk. The problem is this is a Faustian bargain. These actions just get us through the short term This whole thing is a massive experiment for high stakes and I am not so sure we are going to come out it as a great country.

The country needs to reduce leverage to survive. This isn't over when the virus abates.

The ultimate policy goal is to stabilize the economy by salvaging industries that will need to provide employment when the pandemic ends. Given the high level of leverage in these companies, any gaps in cashflow will make it impossible for many companies to service their debt. The total debt of U.S. nonfinancial businesses has grown by about $6 trillion since 2007, while cash on hand has only grown by $1.7 trillion. A big driver of that debt growth has been buying back stock.

Lending these companies more money will only compound the long run problem resulting from over-leverage and make the companies even more vulnerable to failure in the long run.

We are experiencing the end game of the great debt super cycle. As the private sector has become increasingly over-levered, the baton is being passed to the public sector where resources are so strained that the printing press has become the last resort

In the normal course, companies reorganize and creditors haircut debts on a case by case basis. This process, however, is time consuming and expensive. Given the systemic nature of the current crisis, the sheer volume of reorganizations would swamp the financial and legal systems and large defaults would be followed by asset liquidations that would depress the value of collateral backing other loans and likely set off a downward spiral.

By quickly turning up the printing presses, global central banks would need to provide reserves at a faster rate than the collapse in the velocity of money. This is a delicate exercise and one that would be difficult to execute successfully.
The risks on both sides is not moving quickly enough and overdoing it. If there is too little money made available, the prices of assets used as collateral backing loans will spiral downward. If there is too much, inflation will spiral out of control.

https://www.guggenheiminvestments.c...utlook&utm_campaign=the+2020+faustian+bargain

 

[Krugminator2]

JEFF DEIST: Against the coronavirus corporate bailout

I basically agree with his analysis. It is a nice critique of the problems with all of this intervention. But the problem is he thinks things will just work themselves out if you do nothing. He thinks the Great Depression was just some accident from tariffs or whatever. If you just let everyone go bankrupt right now, you will have a spiral that will take years if not a decade or more to get through. I heard the stories from grandparents of the Great Depression. That is something that I don't want to experience. There is no good solution to this.

 

[Warlord]

I basically agree with his analysis. It is a nice critique of the problems with all of this intervention. But the problem is he thinks things will just work themselves out if you do nothing. He thinks the Great Depression was just some accident from tariffs or whatever. If you just let everyone go bankrupt right now, you will have a spiral that will take years if not a decade or more to get through. I heard the stories from grandparents of the Great Depression. That is something that I don't want to experience. There is no good solution to this.

Bush stimulus act in 2008 DIDN'T WORK.

Obama's stimulus act in 2009 DIDN'T WORK.

Tthis one won't work... it will make things worse just like Bush and Obama's.

Enjoy your check and spend it soon because they're going to destroy the dollar.

 

[Krugminator2]

Bush stimulus act in 2007 DIDNT WORK.

Obama's stimulus act in 2009 DIDN'T WORK.

Tthis one won't work... it will make things worse just like Bush and Obama's.

Enjoy your check and spend it soon because they're going to destroy the dollar.

Safe to say I won't be getting a check so nothing to spend. The fact that you are comparing this to interventions of Bush and Obama (both of which I would oppose) shows you don't understand the situation at all.

 

[Warlord]

Safe to say I won't be getting a check so nothing to spend. The fact that you are comparing this to interventions of Bush and Obama (both of which I would oppose) shows you don't understand the situation at all.

The point is they did a stimulus under Bush and Obama and all it did was create an even bigger problem.

And all the stimulus does is lead to more debt/deficits/moral hazard/malinvestment/crowding out private finance/more welfare, etc etc etc.

in other words IT DOES NOT WORK.

So why do you insist on supporting this 2 trillion monstrosity ?

It does nothing to help the economy, in fact it makes it worse because now people will figure out they can make more over the next 4 months by claiming unemployment than taking a job when things open again.

How is that sensible ?

 

[Krugminator2]

The point is they did a stimulus under Bush and Obama and all it did was create an even bigger problem.

And all the stimulus does is lead to more debt/deficits/moral hazard/malinvestment/crowding out private finance/more welfare, etc etc etc.

in other words IT DOES NOT WORK.

So why do you insist on supporting this 2 trillion monstrosity ?

It does nothing to help the economy, in fact it makes it worse because now people will figure out they can make more over the next 4 months by claiming unemployment than taking a job when things open again.

How is that sensible ?

This isn't a stimulus like public works projects. Obama's plan was just a bunch of programs like short term tax cuts and programs like cash for clunkers. It was Keynesian stimulus (which has a mixed record) to boost spending. This bill has little to do with stimulus and everything to do with avoiding the systemic risk of bankruptcies. That is why most of it is loans to backstop businesses and the remainder is checks to keep people paying bills.

We had a depression in the 1930's called the Great Depression. It was caused by letting banks fail which caused depositors not to be able to pays debts which caused more bank failures and a money supply collapse which caused people throughout the economy not be able to service debt. It was a never ending spiral. Those bankruptcies took years to settle. How did the let things go to hell method work? The Peter Schiff method was a decade of pain.

What happens if you just let things work themselves out right now? Think hard. If people don't pay rent, the property management companies can't pay their mortgage and they fold. If corporations in vulnerable industries like hospitality start folding, you are talking about tens of millions of people whose jobs are at stake. Bankruptcies mean layoffs and they also mean a complete halt to new investment. What happens if investment halts throughout the entire economy for years while bankruptcies get settled?

 

[Warlord]

This isn't a stimulus like public works projects. Obama's plan was just a bunch of programs like short term tax cuts and programs like cash for clunkers. It was Keynesian stimulus (which has a mixed record) to boost spending. This bill has little to do with stimulus and everything to do with avoiding the systemic risk of bankruptcies. That is why most of it is loans to backstop businesses and the remainder is checks to keep people paying bills.

We had a depression in the 1930's called the Great Depression. It was caused by letting banks fail which caused depositors not to be able to pays debts which caused more bank failures and a money supply collapse which caused people throughout the economy not be able to service debt. It was a never ending spiral. Those bankruptcies took years to settle. How did the let things go to hell method work? A decade of pain.

What happens if you just let things work themselves out right now? Think hard. If people don't pay rent, the property management companies can't pay their mortgage and they fold. If corporations in vulnerable industries like hospitality start folding, you are talking about tens of millions of people whose jobs are at stake. Bankruptcies mean layoffs and they also mean a complete halt to new investment. What happens if investment halts throughout the entire economy for years while bankruptcies get settled?

The point you dont seem to accept is that bankruptcy is a good thing as it gets rid of the incompetent management team who put the firms in peril in the FIRST place!

Bailing them out is not going to FIX the problem..

Do you follow?

Bailouts don't work and neither will going into 2 trillion debt to send everyone a check will not work.

The Great depression was made worse because of government intervention in the economy. I suggest you read and learn.

 

[Warrior_of_Freedom]

if you can't survive 2 weeks without a paycheck, especially with a 50k+ year job idk what to even say to be honest

 

[Krugminator2]

The point you dont seem to accept is that bankruptcy is a good thing as it gets rid of the incompetent management team who put the firms in peril in the FIRST place!

Bailouts don't work and neither will going into 2 trillion debt to send everyone a check will not work.

I am sure telling people in towns of boarded up restaurants and small businesses that a new management team is all that is needed to get things started will be real effective.

The Great depression was made worse because of government intervention in the economy. I suggest you read and learn.

Given that this is the single most interesting topic to me and I have thought about this very topic and debated it for the last decade, I suspect I have read any author you could mention and have considered their opinion. I strongly suspect you have read exactly zero people that I have mentioned. Start with listening to what Milton Friedman said about the depression and then try to refute.

 

[oyarde]

if you can't survive 2 weeks without a paycheck, especially with a 50k+ year job idk what to even say to be honest

I bet I'll end up with 6 weeks and then several months of lost rental income right while I have to pay property tax and I'll survive . Probably won't be having any lobster at any closed restaurants but i'll make it . The real question is will I survive this now that they'll be doing it every year ? I would not even want to try so I'll be doing things differently.

 

[nikcers]

I bet I'll end up with 6 weeks and then several months of lost rental income right while I have to pay property tax and I'll survive . Probably won't be having any lobster at any closed restaurants but i'll make it . The real question is will I survive this now that they'll be doing it every year ? I would not even want to try so I'll be doing things differently.

What about all the illegal immigrants working jobs in closed restaurants. How will people eat?

 

[oyarde]

What about all the illegal immigrants working jobs in closed restaurants. How will people eat?

Ya , I don't know . People are going to be cooking more for themselves . Peoples gross income for this yr will be down.

 

[nikcers]

Ya , I don't know . People are going to be cooking more for themselves . Peoples gross income for this yr will be down.

How long will the illegal immigrants savings last without a federal bailout? Is the state going to bail them out and then the federal government bails out the state?

 

[oyarde]

How long will the illegal immigrants savings last without a federal bailout? Is the state going to bail them out and then the federal government bails out the state?

I do not think they are going to get bailed out . Pretty much only people with social security numbers that file yearly taxes are getting anything best I can tell.

 

[Warlord]

I do not think they are going to get bailed out . Pretty much only people with social security numbers that file yearly taxes are getting anything best I can tell.

I haven't read the bill but as I understand it the Dems got language in there to give the immigrants a check.