“The problem is, we ended up, the government ended up helping a lot of people they shouldn’t have,” former U.S. Ambassador to the U.N. Nikki Haley says, commenting on the massively expensive coronavirus stimulus bills being rushed through Congress.
“Obviously, no one predicted this pandemic and we needed to help people; we need to help small businesses,” Haley conceded Monday in her interview on Newsmax TV. But, much of the money is going to people who don’t need and shouldn’t get it, Haley explained:
We are primarily funded by readers. Please subscribe and donate to support us!
“The problem is, we ended up, the government ended up helping a lot of people they shouldn’t have.
“You saw large companies that have access to capital and have investors who get profits when they win. We shouldn’t socialize their losses and have the taxpayers pay for it.
“You had universities that have massive endowments suddenly start to get money.
“You had hospitals that have low caseloads getting higher dollars than hospitals that have high caseloads.”
Corporate leverage cited as a significant problem that could be exposed due to problems created by the coronavirus
Risks are lingering in the U.S. financial system despite unprecedented actions taking by the Federal Reserve in recent weeks to limit the damage wrought by the COVID-19 pandemic, according to a recent report.
The Fed’s semiannual update of financial conditions provide a near-term account of concerns shared by corporate, financial insiders and others who have insight into how the coronavirus is ravaging the economy.
As expected, the coronavirus took the spotlight in the stability report, with worries prevailing that a premature easing of lockdown measures could lengthen the viral outbreak and that vaccines or other treatments wouldn’t be available when a second wave of infections hit, according to surveys and other information obtained from insiders across businesses, banks and universities used to gain insight into the risks facing the financial system.
Federal Reserve
Corporate leverage was cited as a significant problem that could be exposed due to problems created by the coronavirus.
A litany of sectors, including private credit and loans rated below investment-grade, also were cited as vulnerable. The triple-B rated segment of the corporate bond market, the largest slice of investment-grade issuance, was highlighted.
Investors exposed to those sectors could come under pressure. Insiders said outflows from corporate-bond mutual funds could result in limits to redemptions, while global insurance companies that relied on overseas bonds to pay for premiums could become significant sellers of corporate debt.
When and how to reopen the American economy is not only plaguing Donald Trump, who tweeted all-caps in March that, “We cannot let the cure be worse than the problem itself.” Seven weeks later, with an unemployment rate at 14.7%, and counting, with manufacturing output down a record 13.7% in April, and retail spending collapsing a record 16.4%, Trump likely has concluded that his only chance for reelection is if the economy—somehow—starts to improve. As more than 86,000 people in the U.S. have died from COVID-19, the question of opening or not is also preoccupying governors of the 50 states; of the states, four are closed for the foreseeable future, while the other 46 are either open or in the process of reopening.
The question is also preoccupying Wall Street bankers, whose livelihoods, like hundreds of millions of other Americans, depend upon an economy that at least has a pulse. Since no one seems to be consulting Wall Street bankers and traders about when and how to reopen the economy, I convened an impromptu circle of Wall Streeters I know well to get their views. The consensus among them is: We can’t continue any longer in lockdown mode. Something has to give, because more than 36 million newly unemployed Americans are not going to be able to pay their monthly bills, feed their families, or maintain their mental health if the economy remains shut. And the problems are only going to get worse the longer so many Americans are out of work. They reference United Nations’ projections that 250 million people could be on the brink of starvation by the end of the year. They also cite a report by the Stop TB Partnership that if the COVID-19 lockdowns continue that an additional 1.4 million people will die from tuberculosis because they will be unable to get treatment. They note that roughly 37,000 Americans die every year in car accidents. But we haven’t outlawed cars; we have learned to live with the deaths.
Furthermore, the consensus among them also seems to be, there is a false equivalency in the debate being made—by politicians and in the media—between saving lives by keeping the economy closed and sacrificing lives by opening it up in order for people to once again make a living. “Saving lives versus saving jobs is the wrong debate,” says one senior Wall Street banker. “Isn’t there a middle ground?… How many lives are you willing to spend to bring the economy back to maintain people’s standard of living? How many lives are we willing to risk? How do you put a price on a life? Many lives were lost preserving American Democracy in the fight against Nazi Germany. There was no moral high ground then. And now they are remembered as the Greatest Generation.” He wonders, “How do you compromise between the pragmatic and the moral. There are shades of gray.” (Some hedge fund managers, according to my colleague Gabriel Sherman, aren’t waiting for the reopening of New York City, or of the Connecticut coastline; they are picking up stakes and moving to one of Texas, Colorado, or Florida.)
