The PPP Bubble!

With everything else going on during the Covid-19 crisis, it's been easy to miss what might be one of the biggest financial consequences of Trump's mismanagement: the financial bubble caused by the government's Paycheck Protection Program, or PPP.

The PPP was formed as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to help businesses cover payroll and other expenses while customers self-quarantine at home. So long as certain criteria are met regarding how the money is spent - 75% percent of it on payroll, for instance - the loan would be completely forgiven.

Sounds great, right? Certainly some of it has worked. It's the main reason May's job report showed an employment rate which was much higher than expected. Employees who were furloughed, but still got a paycheck through PPP loans, were listed as "employed," even though they were actually laid off. That looked great for Trump's numbers, at least temporarily. Isn't that a good thing?

Not so fast! Because the loans are not being administered by the government! They are being administered by private banks! The Trump administration, which hates government bureaucracy, made sure that these loans would not add to the government's paperwork. So PPP loans got funneled through private banks instead, which actually issue the loan. The banks handle the application process, the banks pay the money, and the banks receive the loan forgiveness money - IF the applicant meets the criteria.

But will the small business meet the criteria? That's the catch! The banks have not been forthcoming about what the requirements are for such forgiveness! They've been very helpful with getting small businesses to apply for the loan. They've been very ready to get the funds into the hands of the small businesses, themselves. But they have not been very good at all about informing the businesses about what they need to do in order to have the loan forgiven.

There's a specific reason for that. If the criteria are not met for loan forgiveness, the bank has the power to demand that the loan be repaid - at interest!

Surprise! That money wasn't free! You OWE it!

And, of course, the bank makes a tidy profit every time one of these loans fails to meet the criteria.

Holy shit, right? How could this story not be one of the biggest? Because, as usual, it bets bogged down in the details. It's not sexy. But it has the potential to bring down the economy yet again. After suffering the initial blow of the first coronavirus wave, and now currently experiencing the second, the PPP loan bubble bursting has the potential to hit our economy with a THIRD shock-wave!

And this shock-wave could very easily hit in October! How's that for an October surprise?

Some people on Capitol Hill have spotted this problem, and even acted on it. To help prevent the bubble, Congress passed the Paycheck Protection Flexibility Act, which the president signed into law back in early June. It loosens the requirements for loan forgiveness. So, for example, only 60% of the money needs to be used for payroll, and businesses have 24 weeks to spend the money instead of the original eight weeks.

But did it go far enough? Probably not, because most small businesses aren't even being made aware of what the criteria is! Loosening the criteria might mean a few more businesses meet that criteria, but it doesn't guarantee that they know what pitfalls to watch out for! And, I should also point out, 24 weeks is six months. Since most PPP loans were applied for in late April, that means most loans that fail to meet criteria will get hit with this new debt in late October!

Right. Before. The. Election!

Did I say holy shit? I meant to say holy FUCKING shit!

I became aware of this huge problem during my prolonged job hunt this past April and May. Like many people, I found myself out of work due to the Covid-19 crisis, and tried to quickly bounce back. (Normally, in such circumstances, I take work whenever and however I can to bridge the gap in my income until I find more permanent work, but this time, my wife begged me to stay home and take unemployment benefits instead. She couldn't stand the thought of me exposing myself to Covid-19 by driving groceries for Shipt or delivering pizzas.) By late June, I had some interesting job prospects on the line, and one of them was with a small accounting firm which liked my experience and expertise with Quickbooks. While interviewing at this firm, the wizened, old accountant quizzed me about various things.

"What do you know about PPP loans?" he asked.

"Not much," I admitted. "I haven't had time to research it, yet."

"Well, they're a big deal," he told me. "These small business owners aren't being told what they need to do to qualify for loan forgiveness." And then he described to me just how the application process was being pushed so quickly, but how small businesses were falling for it left and right.

"But why wouldn't they be told about this?" I asked.

"Because the banks don't want them to know about it," he answered.

"The banks?"

"Oh, yes. These loans don't come directly from the government. So the banks only ask, 'Do you qualify?' and if the answer is 'yes,' they say, 'Sign here!'"

And that's when the penny dropped, and I understood. Since private banks were administering the loans, they had a vested interest in small businesses being fooled into spending their money in a way which disqualified them for forgiveness. That way the banks could demand a payment plan, and, of course, interest on that payment plan!

Lemming? Meet cliff.

I think I said something like, "That's cold!"

"Yes it is," he agreed. And then he went on to describe how his was one of the few accounting firms which tried to help its clients avoid these types of financial traps. "I want someone who will help me guide these businesses to better decisions for their money," he said. And he pointed out how other accounting firms who did this sort of thing tended to charge far more for their services.

I admire him, I really do. But his quixotic campaign to save small business owners from themselves was one of the reasons I opted not to take the job, and go with my current employer instead. One, lone accounting firm, working itself to death against the riptide of unscrupulous banks did not sound like the sort of job that would last very long.

Sort of like the jobs that won't last long when these PPP loans come due right before the election.

I seldom say this, but if you believe in a god, now might be a good time to pray.


Eric

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Defund? No, Defend!

I really hate it when the wrong message gets stuck to the right message.

Example: In Glendale recently, one of the employees of Jet's Pizza set up the sign in front of his place of business to read: "The only race is the human race. All lives matter."

Damn it, if it weren't for those last three words!

The owner later took the sign down and apologized, putting up a "Black Lives Matter" sign.

I have no problems with the first part of the ill-advised sign. There IS no race but the human race! When neo-Nazis dared to demonstrate in front of the Federal Building in downtown Milwaukee in 2002, I carried a sign which said nearly that exact same thing. It read: "The human race is the only race." I still have that sign, and I still agree with its message.

Which is why I'm so disappointed that message got pissed on.

Oh, it's not like all lives don't matter. Of course they do! But right now, and in the decades leading up to this moment in history, black lives do not matter, and have not mattered! (Or at least, generally matter a lot less than white lives do.) Which is why, when someone comes back at "Black lives matter!" with the phrase, "ALL lives matter!" it comes across as completely tone-deaf! Goddamn it, the time to assert that all lives mattered was before! You know, when the doctrine that "all lives matter" should have led you to defend black lives way more than you did! To say "all lives matter" now is too little, too fucking late!

And those recent examples of the wrong damned message getting attached to the right one is why I'm so pissed off at the constant refrain of, "Defund the police!"

Oh, I get it. "Defund" does not mean, "destroy." It does not mean "delete." It doesn't mean we have no police at all. I know perfectly well that it means that policing needs to be restructured in a fundamental way, and that some policing must remain for bank robberies, homicides and the like. "Defund the police" simply means to radically restructure it. Spend the bulk of its budget on law enforcement which does not prey upon malfunctioning tail lights and expired license plates. Have a police force with roots in the community instead of one at war with the community. Demilitarize what policing is all about.

Great. That's what we mean....

THEN WHY NOT FUCKING SAY THAT INSTEAD?!!!

Trumpists are jumping all over this. It sounds crazy to them, and that's because it sounds crazy to me too! Hell, I'm firmly entrenched on the Left, and even I think it sounds crazy! Defund the police?! What, are you nuts?! Someone breaks into my house and I call - what, nobody?! What kind of a solution is that?!

Of course, that's not how the proposal will work. Cooler heads on NPR have been explaining exactly what the protesters are calling for in a nice, rational way. But nearly half of our nation does not get its news that way. They get their news in five-second sound-bytes, they get their information in Fox News distortions, and they will be absolutely convinced that "Defund the police!" means that Democrats are unhinged radicals who cannot be trusted to lead the nation, and that four more years of Trump is far better than that level of crazy.

It's. The. Worst. Possible. Move.

How about a cry of, "Demilitarize the police!" Isn't that what we mean? Or how about, "Replace the police!" We could even borrow one of Trump's phrases and say, "You're fired! Hire new cops!"

Isn't that a more rational-sounding message?!

Opinions are made based on simple slogans and bumper-sticker-ready catch-phrases.

Why, oh why, did we have to pick one so goddamned stupid-sounding as "Defund the police!"?

Are we TRYING to blow this thing?


Eric

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Protests! Reopening! And Covid-19!

I'll open by simply stating my premise right out: We need to let the reopeners have their way. Because we would be fools to think the protests are really about the death of one African American in Minneapolis. No, what makes it bigger this time is the economic depression we are currently living in. The shutdowns resulting from the Covid-19 crisis have led to massive unemployment, most of it in the Black community. THIS, more than anything else, is fueling the anger, the frustration, and the desperation behind these riots. Blacks have gone from trying to make it on two low-income jobs to having no jobs at all, waiting for a stimulus check which may never come. They've gone from getting by on a wing and a prayer to not even having a prayer. THAT'S why they're willing to face armored vehicles and tear gas! That's why they're looting businesses whose prices have not come down in spite of everything.

Was it all necessary? Is the hardship needed? Or did we panic for nothing?

The right-wingers say yes. Many of them are (still!) calling Covid-19 a "hoax." And they want the economy re-opened NOW.

We have to let them. We need to show, by example, that the shutdown was not just some academic exercise. It was necessary to save the lives of many, many people.

"What?!" You might ask. "Are you seriously willing to sacrifice innocent lives to Covid-19 just to prove a political point?!"

No! Let me make this abundantly clear: I, myself am not willing to sacrifice anyone. But THEY, on the radical Right, are! And we simply can't stop them. Their minds are made up. We couldn't police it if we tried. All we can do is warn people, and warn them we will. And after having warned them, c'est la vie.

Then, when the virus rebounds, and the casualties begin to mount in red states, we on the Left will be there, saying, "We told you so!"

Again, we have no choice.

And the reason we don't have a choice isn't only because the wing-nuts on the Right are so gung-ho for reopening. The African American  communities are hurting, and they're seriously wondering whether any of it is necessary. It was a powder keg long before Derek Chauvin ever leaned on George Floyd's neck for nearly nine minutes. The anger and frustration were vented on those businesses who charged the most and paid the least: Walgreen's, and Target. No, not those businesses exclusively, and not nearly so calculated. Some of the looting was just sheer opportunism. There is some evidence that looting may have been set up by agitators on both sides. Stories of loose bricks appearing at protest sites are troubling. But the agitators wouldn't be able to do anything much, if there wasn't so much actual anger to take advantage of.

So it's time to let the reopeners have their way, as if we have any other option. When the virus resurges, the pro-Trump cult will finally be out of excuses. I know, I know, I've been saying that for a while, but this time it counts more than ever before. Because no political party has ever bet so many chips on one throw before.

"But what if you're wrong?" someone may ask. "What if the virus isn't nearly as deadly as we thought? What if the number of Covid-19 cases doesn't spike, and the death toll doesn't mount like you predict?"

Well, the early numbers show that the numbers are spiking already, so that's a silly question at this point. But just for shiggles, let's say that the virus doesn't spike, and the death toll doesn't mount, or at least not as much as we thought. What then?

Well, that will make for a slightly more interesting November.

But we can't sacrifice the well being of our African American brothers for nothing. We can't march with them on the one hand, and deny them jobs with the other. Not without damned good reason.

Let's give them that damned good reason! Let's prove we were right! And lean on the neck of the Alt-Right for a change!


Eric

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