Wall Street always wins

The American Economic Liberties Project explains (PDF) why Wall Street loves the CARES Act, the galactic economic bailout signed into law at the end of March. In short, while it’s not an explicit bank bailout, the benefits are massively lopsided in favor of big business and big finance… again:

The Treasury and Federal Reserve programs — more commonly referred to as bailouts — were a controversial part of the legislation that the American Economic Liberties Project opposed as part of the immediate legislative response. While much of the discussion of the legislation focused on the $1,200 payout to workers, the $4 trillion of credit in this bill that will go to big business and Wall Street is equivalent to a $13,000 loan to every single man, woman, and child in America.

Now that the bailouts are law, these provisions represent a massive, enduring transfer of power to billionaires and big businesses. It’s critical to seek opportunities to blunt this power transfer and be clear-eyed about the economic and social implications for workers, small businesses, communities, and society over the longer term. […]

The Fed has, accordingly, opened a variety of new lending programs. Last week, it opened seven new ones, on top of what it had already put out. The Fed can make up to $2.3 trillion in additional loans through these seven programs. Some of the programs are meant to help cities, states, small businesses, and so on. But they will also bail out private equity funds, which invest in riskier companies in search of bigger profits for rich and powerful investors. […]

WHO EXACTLY WILL GET MONEY THROUGH THE FED’S NEW LOAN PROGRAMS?

1. Private equity investors. One of the Fed’s new programs provides $750 billion, or $2,500 for every man, woman, and child in the U.S., to a junk bond-buying program, which the Fed calls the Secondary Market Corporate Credit Facility. Junk bonds, or “high-yield corporate bonds,” are risky loans that powerful financiers known as private equity funds use to take over corporations. The Fed can also use this program to lend to safer, well-managed corporations.

2. Big corporations and businesses. The Fed will also provide up to $750 billion, or $2,500 for every man, woman, and child in the U.S., to corporations through a program called the Primary Market Corporate Credit Facility. Specifically, the Fed will lend money to large businesses by buying bonds from corporations.

Etc.

As Matt Stoller has written:

Large banks, private equity corporations, and foreign central banks get dollars through the capital markets, by trading bonds and stocks. It turns out that the Federal Reserve is very good at working in these markets, and can move trillions of dollars relatively quickly. So that’s why the real estate arms of the largest private equity funds in the world are skyrocketing today. They know that the Fed turned the spigot on, and that spigot is instant and functional.

However, the Small Business Administration, unlike institutions in the 1930s and 1940s, does not have the workforce or ability to make direct loans to businesses. They have to guarantee loans made by banks, who in turn are supposed to make loans. Or that’s the theory, but in America, commercial lending institutions have hollowed out dramatically. Neither the banks nor SBA nor anyone else have the people to originate loans. We can’t do it. And our unemployment offices aren’t much better. The only functional bureaucracy that touches business and people is the IRS.

Never let a virus go to waste.

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