After Blowing $4.5 Trillion on Share Buybacks, Airlines, Boeing, Many Other Culprits Want Taxpayer & Fed Bailouts of Their Shareholders

The Trump administration is putting together a rumored $850-billion stimulus package that will include taxpayer funded bailouts of Corporate America, according to leaks cited widely by the media. Trump in the press conference today singled out $50 billion in bailout funds for US airlines alone. A bailout of this type is designed to bail out shareholders and unsecured creditors. That’s all it is. The alternative would be a US chapter 11 bankruptcy procedure which would allow the company to operate, while it is being handed to the creditors, with shareholders getting wiped out.

So get this: The big four US airlines – Delta, United, American, and Southwest – whose stocks are now getting crushed because they may run out of cash in a few months, would be the primary recipients of that $50 billion bailout, well, after they wasted, blew, and incinerated willfully and recklessly together $43.7 billion in cash on share buybacks since 2012 for the sole purpose of enriching the very shareholders that will now be bailed out by the taxpayer.

Share buybacks were considered a form of market manipulation and were illegal under SEC rules until 1982, when the SEC issued Rule 10b-18 which provided corporations a “safe harbor” to buy back their own shares under certain conditions. Once corporations figured out that no one cared about those conditions, and that no one was auditing anything, share buybacks exploded. And they’ve have been hyped endlessly by Wall Street.

The S&P 500 companies, including those that are now asking for huge bailouts from taxpayers and from the Fed, have blown, wasted and incinerated together $4.5 trillion with a T in cash to buy back their own shares just since 2012 (...)

And those $4.5 trillion in cash that was wasted, blown, and incinerated on share buybacks since 2012 for the sole purpose of enriching shareholders is now sorely missing from corporate balance sheets, where these share buybacks were often funded with debt.

And the record amount of corporate debt – “record” by any measure – that has piled up since 2012 has become the Fed’s number one concern as trigger of the next financial crisis. So here we are. (...)

No one could foresee the arrival of the coronavirus and what it would do to US industry. I get that. But there is always some crisis in the future, and companies need to prepare for them to have the resources to deal with them.

A company that systematically and recklessly hollows out its balance sheet by converting cash and capital into share buybacks, often with borrowed money, to “distribute value to shareholders” or “unlock shareholder value” or whatever Wall Street BS is being hyped, has set itself up for failure at the next crisis. And that’s fine. But shareholders should pay for it since they benefited from those share buybacks – and not taxpayers or workers with dollar-paychecks. Shareholders should know that they won’t be bailed out by the government or the Fed, but zeroed out in bankruptcy court.

The eventual costs of enriching shareholders recklessly in a way that used to be illegal must not be inflicted on taxpayers via a government bailout; or on everyone earning income in dollars via a bailout from the Fed.

The solution has already been finely tuned in the US: Delta, United, American, and other airlines already went through chapter 11 bankruptcies. They work. The airlines continued to operate in a manner where passengers couldn’t tell the difference. The airlines were essentially turned over to creditors and restructured. When they emerged from bankruptcy, they issued new shares to new shareholders, and in most cases, the old shares became worthless. The new airlines emerged as stronger companies – until they started blowing it with their share buybacks.

Companies like Boeing, GE, any of the airlines, or any company that blew this now sorely needed cash on share buybacks must put the ultimate cost of those share buybacks on shareholders and unsecured creditors. Any bailouts, whether from the Fed or the government, should only be offered as Debtor in Possession (DIP) loans during a chapter 11 bankruptcy filing where shareholders get wiped out.

In other words, companies that buy back their owns shares must be permanently disqualified for bailouts, though they may qualify for a government-backed DIP loan in bankruptcy court if shareholders get wiped out. Because those proposed taxpayer and Fed bailouts of these share-buyback queens are just heinous.

by Wolf Richter, Wolf Street | Read more:
[ed. Debtor in Possession (DIP) loans. Or else, fund and nationalize. See also (previous): Boeing Seeks 'Tens Of Billions' In Bailouts After Fully Drawing-Down $13Bn Credit Line (Duck Soup). See also: Other options: How To Structure the Coronavirus Bailout (BIG/Matt Stoller).]

Chaz Hutton
via:

Bob Marley & The Wailers

[ed. See also: Annie Lennox's excellent version.]

Shelter in Place

[ed. We're all learning a lot of new pandemic phrases these days, and Shelter in Place (ominously) is one of them: Bay Area orders ‘shelter in place,’ only essential businesses open in 6 counties (SF Chronicle). See also: Life under 'shelter in place': long lines, empty roads, panic-buying cannabis; and, What does 'shelter in place' mean? California's coronavirus order, explained (Guardian).]
Image: Jeff Chiu/Associated Press

Boeing Seeks 'Tens Of Billions' In Bailouts After Fully Drawing-Down $13Bn Credit Line

A new disclosure on Tuesday afternoon details yet another troubling development for Boeing.

In its latest 8K, the plunging planemaker has completely drawn down its $13.8 billion credit line that it entered in October 2018 as it "navigates current business challenges" exposing just how fast this company is burning through cash.

"As of March 13, 2020, Boeing has fully drawn on the Credit Agreement, consisting of approximately $13.8 billion, which amount includes additional commitments made subsequent to the initial closing date.

For additional information on the terms and conditions of the Credit Agreement, see Boeing's Current Report on Form 8-K dated February 6, 2020. 

We continue to have access to revolving credit agreements entered into on October 30, 2019, which have also been disclosed. These facilities, which to date have not been drawn upon, provide us with additional liquidity as we navigate the current business challenges. For additional information on these credit facilities, see Boeing's Current Report on Form 8-K dated October 30, 2019."

This comes just hours after sources told Reuters that Boeing is seeking a bailout of 'tens of billions' in US government loan guarantees amid the Covid-19 crisis.

President Trump has already been on record telling airlines that his administration is prepared to pledge $50 billion in support after passenger activity has fallen off a cliff due to the virus scare.

Boeing was struggling before the virus outbreak, dealing with 737 Max groundings, production halts, and cancellation orders.

As we raged previously, this bailout demand comes after the company blew nearly $100 billion on stock buybacks since 2013 helping push its stock to all-time highs not that long ago, and instead of selling stock to get liquidity, they're asking the Trump administration for a massive bailout.

So, no, nobody in their right minds should give Boeing even one penny in "short term aid". Instead, management and the board should be ordered to sell as much stock as they need - you know, the opposite of buying it back - to maintain the business, even it means sending the stock price crashing far lower.

Because it's called capitalism, and because there is no reason why taxpayers should foot the bill for a company which instead of saving cash when times were good, was handing it out to shareholders and a handful of executives, and which should now for some insane reason be eligible for a bailout when times suddenly go bad.

No: force Boeing - and others like it that spent billions repurchasing its stock while incurring massive amounts of debt - to sell its stock. After all that's what a public company's stock is - a currency - and just as Boeing could repurchase it when it had cash, and lifted its stock price to all time highs, it should now sell its stock and use the proceeds to fund itself, like any other corporation does when it needs funding. Last time we checked, Boeing's market cap was $73 billion, and it certainly afford to drop much more as the company now does the buyback in reverse.

This is also a warning to Congress and the White House: if chronic stock repurchasers such as Boeing, are bailed out instead of ordered to find their own sources of liquidity, there will be a mutiny in America and rightfully so, because it was Boeing's shareholders that got rich on the way up, and now it is somehow up to taxpayers to make sure the company, loaded up with record amounts of debt used to fund buybacks, survives one more quarter.

That, in a word, is bullshit.

by Tyler Durden, ZeroHedge |  Read more:
Image: uncredited
[ed. With several massive stimulus programs in the works, sharks smell blood in the water. See also: Boeing, Which Repurchased Over $100BN In Stock, Is Downgraded To BBB, Seeks "Short-Term" Bailout (ZH). And it's not just Boeing: U.S. Airlines Spent 96% of Free Cash Flow on Buybacks (Bloomberg).]

Washington state to shut down restaurants, bars, and cap gatherings at 50 to stop spread of coronavirus (Seattle Times).
Image via:

Panic at the Fed

With Wall Street desperate for the Fed to announce emergency measures on Sunday (after disappointing last week), and ideally before the futures open, Jerome Powell did not disappoint and moments ago the Fed announced a barrage of emergency measures which included:

• Welcome back ZIRP: Fed cuts rates by 100bps to 0-25bps from 1.00 -1.25bps. This is in addition to the 50bps rate cut on March 3, which means that in just under two weeks the Fed has cut rates by 150bps to zero.
• Fed officially launches QE5 (no more "Non-QE" bullshit), consisting of "at least" $500BN in Treasury purchases and $200 billion in MBS.
• Boosting intraday liquidity: The Fed announces Measures related to the discount window, intraday credit, bank capital and liquidity buffers, reserve requirements, and—in coordination with other central banks—the U.S. dollar liquidity swap line arrangements
• Reserve requirements cut to zero: The Fed cuts reserve requirement ratios to zero percent effective on March 26.
• Coordinated swap lines: The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank announced a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. The pricing on the dollar liquidity swap arrangements is cut by 25 basis points, so the new rate will be the US dollar overnight index swap (OIS) rate plus 25 basis points.

Amusingly, the Fed announces that the emergency action wasn't unilateral, with Loretta J. Mester voting against the action, as she was "fully supportive of all of the actions taken to promote the smooth functioning of markets and the flow of credit to households and businesses but preferred to reduce the target range for the federal funds rate to 1/2 to 3/4 percent at this meeting."

The full statement is below (link): (...)

With all due respect to Thursday's massive repo expansion, this is the Fed's bazooka. It also means that after this, the Fed - which just cut rates to zero and launched QE5 - is now out of ammo, as Powell will have to cut rates to negative next and/or buy stocks outright for further monetary stimulus, something that would require the permission of Congress. And since that is unlikely absent a total collapse in the financial system, we are now down to fiscal stimulus and US politicians acting in a bipartisan fashion. Which may be a huge gamble.

Curiously, in this barrage of emergency actions, the one which arguably was most needed, a commercial paper facility, was missing. As such, it wouldn't be unthinkable to see the dollar funding squeeze worsen after the initial euphoria fades on Monday despite the launch of enhanced global swap lines.

The good news is that at least there is nothing more the Fed can announce on Wednesday, absent buying single stocks and ETFs of course, and as such all attention will now be on Congress and what additional fiscal stimulus the Fed can push through.

by Tyler Durden, ZeroHedge |  Read more:

Image: Eric Baradat/AFP via Getty Images

[ed. Futures market is tanking on the news. Probably because this was an emergency decision that couldn't wait two days for their next scheduled meeting. Smells like panic. I don't usually link to ZH, but they do stay on top of what's going on financially (if  you can ignore all the crackpot comments). See also: Fed Disaster: S&P Futures Crash, Halted Limit Down; Gold, Treasuries Soar After Hisotric Fed Panic (ZH); and Fed Cuts Rates To Near Zero As Coronavirus Rips Through Economy (NPR).]

The Struggle To Bring Up Better Boys

Dominance. Aggression. Rugged good looks. Sexual prowess. Stoicism. Athleticism. These are attributes of “the ideal guy” according to the young American men who spoke to author Peggy Orenstein for her new book, Boys & Sex.

In contrast surveys reveal that teenage girls are now more comfortable about rejecting stereotypical roles, thanks in part to simple slogans such as “Girl Power” and “Yes She Can”, coupled with the liberating message of the popular Frozen animation franchise. Music, sport and young adult literature have all been happily singing from this feminist hymn sheet for some time.

How about the boys then? Now the daunting task of exposing and exploding some of the equally damaging conventional pressures on male children and teenagers has received a boost with the publication of two striking new studies and the arrival in cinemas of Disney-Pixar’s recent release, Onward.

All attempt to show that boys need urgent help to express their feelings and deal with what society expects of them. And all three have met with a negative reception in some quarters.

The two books, Orenstein’s Boys & Sex, available here in paperback on Friday, and Cara Natterson’s Decoding Boys, out last month, argue that unless parents move swiftly to tackle their sons’ adolescent confusion and alienation, their daughters will soon leave them far behind when it comes to coping with emotions. Sex education for boys, they warn, has been left to the pornographers and football coaches, while the effects of changing male hormones are commonly misunderstood.

The aims of these twin examinations of modern boyhood sound pretty laudable, but they have already prompted accusations of bias and a suspicion that they’re designed to berate men, rather than help them.

Writing angrily in the conservative online magazine The Federalist, Glenn T Stanton alleges that Orenstein and Natterson’s books have only been welcomed by the liberal press, as represented by The Atlantic magazine, because they appear to support the idea that “toxic masculinity” is running rampant. By concentrating on examples of poor, insensitive male behaviour, Stanton believes the findings of the authors are just fuelling calls for current ideas of manhood to be ripped up and chucked away. Defining any social group, including young men, by its extremes is wrong, he argues.

Another male critic, who wrote in from Chicago in response to an article by Orenstein in The Atlantic, suggested that symptoms of “toxic masculinity” tend to be shrugged off by men as they grow up. He also felt that Orenstein’s choice to study young white “jocks”, or college sportsmen, had skewed her results: “Had she spoken with members of the debate team, for instance, or the drama club, or the school band, she might have opened a window to a very different landscape.”

Orenstein’s book, which has the full title Boys & Sex, Young Men on Hookups, Love, Porn, Consent, and Navigating the New Masculinity, is a follow-up to her 2016 hit, Girls & Sex, and its frank attitude to discussing sex means it is likely to appeal well beyond academic circles. Before writing, she took two years out to talk to boys across America, mostly college-bound and between the ages of 16 and 21. What she found was that when these intelligent young men were asked to describe “the ideal guy”, they frequently “appeared to be harking back to 1955”.

It made Orenstein wonder if parents have been looking the other way for too long: “Feminism may have provided girls with a powerful alternative to conventional femininity, and a language with which to express the myriad problems-that-have-no-name, but there have been no credible equivalents for boys. Quite the contrary: the definition of masculinity seems to be in some respects contracting.”

In Natterson’s book, which has the subtitle, New Science Behind the Subtle Art of Raising Sons, a series of useful bits of advice have been crafted from the author’s long practical experience as a paediatrician. The New York Times has judged it a good guide for all parents of boys and praised its “zippy, big-hearted” tone as it explains that puberty starts much earlier in boys than we used to think. It also argues that teenage boys should not be allowed to retreat into monosyllabic and fleeting family interactions. According to Natterson they need more emotional and physical reassurance than we ever realised.

by Vanessa Thorpe, The Guardian |  Read more:

Image: Allstar/Disney/Pixar

Sylvie Fleury, Step on it
via:

Blowing In The Whirlwind

... I sorely hate undercutting any argument against Biden, I do believe it is possible for old Joe to defeat Trump. Here’s how it’s likely to play out, if Biden is the nominee.

Both he and Trump will lumber around the country for months, dribbling out word salad to adoring supporters who don’t have the slightest interest in what the doddering old men at the rostrum are saying. Both will spout inane and barely coherent platitudes without offering anything remotely resembling actual policies or programs or solutions to the myriad of dire crises we face. Both will have their contentless, incoherent ramblings presented as cogent “debating points” and “policy positions” suitable for “deep analysis” by the shallow savants of the national press. There will be various gaffes, outrages, mini-scandals, along with a crazy quilt of polling numbers changing wildly by the day, even by the hour.

And none of it will matter. America’s electoral politics are so far removed from the actual reality of how power is really exercised in our society – and from the actual state of degeneration our dying society is really in – that it is nothing more than a badly rendered cartoon, a medicine show with clowns and con-men, a white noise machine howling down any genuine thought and feeling. It is, quite literally, sound and fury, signifying nothing: precisely because it no longer has any connection to the true operations of power and the reality of decay.

Trump recognized this first, but the Democrats have caught up. You don’t have to have any real policies. You don’t have to offer any real hope. You don’t even have to make any sense. Most people are so battered by the decay and tormented by the white noise that all they can do is grab hold of some emblematic figure offered to them by the system and project all their hopes and dreams and fears and desires onto them. (...)

There seems to be the feeling that we can’t really do anything at all about the problems that are bearing down on us like a runaway train – climate disruption and all its ever-rippling repercussions; the rise of hyper-powerful rich elites manipulating our increasingly hollowed-out institutions for their own benefit; the economic demise of industry after industry, region after region, community after community; the endless wars, covert and overt, with their gargantuan corruption and pointless cycles of violence; the healthcare atrocities that leave millions of people literally begging on the internet to obtain even the barest minimum of medical help, and so on. In the face of all this, many people long to embrace some figure or another who promises us a return to the “status quo”: either some mythologized post-war era when America was “great,” or just back to the Obama years, when things were “normal.”

Overwhelmed, battered, beset, anxiety-ridden, suffering, confused, many people don’t want to hear that hard work and big changes will be necessary if we are to have a chance for things to get better. They just want to latch on to something that will let them feel – if only for a moment – that the anxiety can go away, that someone up there in the circles of power will take care of it for us.

This is not the wisest course when faced with overwhelming crises – but it is an entirely natural and understandable one. When you couple this natural reaction to extremity with the aforementioned systematic effort to undermine and thwart the Sanders’ campaign, then it’s not surprising you end up with a blank screen like Joe Biden as your candidate.

And consider this: the blank screen of Donald Trump has now had four years in power, yet still those overwhelming, battering, confusing anxieties have not gone away – indeed, they’ve only multiplied. In this situation, it’s entirely possible, perhaps even likely, that enough people will turn away from the torn screen of Trump and try a new cure for their anxiety. (...)

What matters that he is a fresh screen where our most unworthy fears and unrealistic hopes can be projected, for a time; where we can forget, for a time, the massive disasters that are looming ahead and pretend that things can somehow go back to “normal.”

Of course, this can only be done by ignoring that it was the previous “normality” that brought us here in the first place – and by ignoring the fact that big changes and upheavals are coming no matter who is elected. We can’t escape it. The only question is: do we want to try to manage these big changes for the greater common good – or will we just allow them to ravage our lives in the worst way possible while we pine for a status quo of peace and quiet that never was, and thus can never return?

by Chris Floyd, Counterpunch |  Read more:

Image: Nick Roney

[ed. With all the virus panic these days, thought it might be nice to lighten things up with a little politics. See also: Coronavirus Is the Perfect Disaster for ‘Disaster Capitalism’ (Vice).]

A Week at the Epicenter of America’s Coronavirus Crisis

We stopped touching one another on a Wednesday. Or was it Tuesday? Information came at us so fast—confirmed cases, public-health warnings, deaths—you could swear the days of the week had been transposed, their order jumbled like everything else. Certainly by Wednesday the handshakes stopped. Hugs weren’t far behind. Even among longtime friends and family. This would soon happen elsewhere in the country, to a degree, but here in the Seattle area, where by week’s end covid-19 would kill nearly twenty of us, evading physical contact carried extra urgency. Every avoidance felt like an act of heroism. You told yourself you were saving lives, and you were probably right.

Days earlier, on Saturday, February 29th, we woke to news of the first U.S. death from the virus, a man in his fifties, at a hospital in Kirkland, eight miles northeast of Seattle. At nearby Life Care Center of Kirkland, two patients tested positive. The number of confirmed cases tripled within twenty-four hours. By Monday, five were dead, four of them patients at Life Care in their seventies and eighties. Out came declarations of emergency, from the Seattle mayor, Jenny Durkan; the King County executive, Dow Constantine; and Governor Jay Inslee.

We didn’t know it yet, but we were living in a kind of laboratory of the country’s future. We were the first. The first to see bus drivers don face masks; the first to take seriously, citywide, singing “Happy Birthday” twice in a row as we washed our hands. The first to experience a unique kind of isolation. Circumventing handshakes helped avoid spreading disease—the elbow bump won out as the preferred alternative—but it also fostered a sense that none of us should be anywhere near one another. On the bus you chose to stand rather than share a seat with a stranger. You thought about crossing the street when approaching too many other pedestrians on a sidewalk. Officials would eventually advise—then demand—that we avoid large public gatherings. We were still out in the world, but barely of it. Alone together.

In that isolation, you had time to notice just how many objects your fingers touch throughout the day. Door handles, crosswalk-signal switches, elevator buttons. Every surface was suspect. The elbow bump diversified, became an all-purpose tool. You elbow-tapped to select your floor, and used the same elbow to hold the sliding doors for someone rushing to get to work on time. (Then stood as far away from her as possible on the ride up.)

We also contended with Seattle’s new role on the world stage. We’re used to being in the news for our innovations, here in the home of Amazon, Microsoft, Starbucks, and the original Boeing. If we’re lucky, the Seahawks play a decent enough season for everyone else to hear about it. Now we were known as ground zero of a deadly epidemic poised to sweep the continent.

On Tuesday night, NBC News, sharing its story on the crisis, tweeted, “Seattle a ‘ghost town’ as residents face uncertainty of growing coronavirus outbreak.” We laughed it off and clapped back. It was a gross exaggeration. Those of us downtown could see the city wasn’t empty. But we recognized some truth in it, too. The weekday bustle was there, but anesthetized.

All the while more news issued out of Kirkland. In daily briefings, officials from Public Health—Seattle & King County shared the vaguest of details. “A female in her 80s, a resident of LifeCare, was hospitalized at EvergreenHealth. She is in critical condition.” “A male in his 70s, a resident of LifeCare, hospitalized at EvergreenHealth. . . . The man had underlying health conditions, and died 3/1/20.” The death toll kept rising, but without names and specifics the epidemic could feel unrelated to any real danger, as if it only consisted of inconvenient rules, an invisible event that merely compelled people to bruise elbows and hoard toilet paper and Purell. Then the families started talking.

by James Ross Gardner, New Yorker |  Read more:

Image: Chona Kasinger
[ed. See also: Why Washington state is at the center of the US coronavirus outbreak (Guardian); Saying Goodbye to Your Favorite Seattle Restaurant (The Stranger); and finally, 'He's an idiot' (Guardian).]

Roy Lichtenstein, Reflections on Interior with Girl Drawing (1990)
via:

via:

The Fed Did Not Just ‘Spend’ $1.5 Trillion

This week, the Federal Reserve announced that it would inject as much as $1.5 trillion into the short-term money markets, an intervention designed to ease the pressure on the financial system and lower the chances of a financial crisis.

This action received a lot of criticism from the left. The progressive standard-bearer Alexandria Ocasio-Cortez argued that “the amount that the Fed just injected almost covers all student loan debt in the U.S.,” and that “we need to care for working people as much as we care for the stock market.” Senator Bernie Sanders said, “When we say it’s time to provide health care to all our people, we’re told we can’t afford it. But if the stock market is in trouble, no problem! The government can just hand out $1.5 trillion to calm bankers.” Others described the injection as a gigantic subsidy for Wall Street.

The progressive frustration was understandable: The Fed is a technocratic institution that has offered immediate resources to aid the markets. Yes, that makes bankers better off. No, that does not feel fair, not given the administration’s flailing, too-little, too-late response to the viral pandemic, something that is costing lives and livelihoods already. Broker-dealers get instant help; families get to wait for a meager expansion to food stamps.

Still, the online commentary was inaccurate both about what the Fed was doing and about why it was doing it. And there is a good progressive case for the Fed doing as much as it can to help the financial markets—and for Congress doing even more to help regular people.

A few technical points: The Fed did not spend $1.5 trillion. This was not a $1.5 trillion bailout. It did not cost Americans $1.5 trillion. It was not a $1.5 trillion subsidy for hedge funds and the like. It did not use up $1.5 trillion in resources that could have gone to another cause, whether Wall Street bailouts or Medicare for All.

The Fed works in weird ways, but here goes: The central bank announced that it would offer financial firms up to $1.5 trillion in short-term, collateralized loans. A firm can borrow $100 in cash overnight, for example, but only if it gives the Fed $100 in Treasury securities backed by the full faith and credit of the American government, and pays a small amount of interest too. Doing this costs the Fed nothing, and costs the American taxpayer nothing; when all is said and done, the central bank will probably make a small amount of money off the interest payments.

The Fed chose to do this not as a payoff for Wall Street or to calm the stock market. (It has nothing to do with the stock market at all, though equities crashing is in part a sign of the very financial strain the Fed is attempting to soothe.) It did it to help make sure that the market for Treasury bonds continues to function normally. It was not using taxpayer dollars to juice a money-losing industry, but instead acting as an emergency backstop for the markets writ large.

Signs indicate that it needs to do more, not less, in the coming days: The markets continue to act in strained and strange and erratic ways. Investment banks expect the central bank to drop interest rates to zero soon, and to begin purchasing huge sums of assets, something called “quantitative easing.” There is some chance, as well, that the Fed might end up setting up special facilities to supply liquidity to the financial system, as it did during the 2008 debacle.

There’s a lot for average folks to like about what the Fed is doing, as much as it might seem arcane or technocratic or unfair. For one, recessions complicated by financial crises are much, much harder to fight, and much, much worse than plain-vanilla downturns: If the Fed and other central banks keep the markets functioning, that benefits everybody. But a credit crunch would hurt everybody. Businesses are already seeing revenue evaporate. Many will seek loans to help tide them over. Low interest rates and liquid markets will help those businesses, the families that rely on them for work, and the communities they serve.

That said, there’s a lot not to like too. Morgan Ricks, a law professor at Vanderbilt University and an expert on financial regulation, questions why markets needed this kind of emergency oxygen now, and whether the Fed should be doing more to make markets work, even in times of crisis, without the government’s help. The Fed’s repo transactions may not cost anything, but the Fed is still propping up the financial sector.

More broadly, one could argue that the extraordinary measures the Fed has taken in the past and is taking today contribute to the country’s inequality. There’s a deep, intuitive unfairness to monetary policy going to the mattresses when fiscal policy has not even gotten out of bed: The Fed is helping rich financiers, while poor families are unsure whether aid is coming.

But the economy needs both monetary policy and fiscal policy. The trillion-dollar repo facility did not create some kind of either-or scenario, with aid to hedge funds and financiers crowding out aid to student-loan borrowers and gig workers. And the real fault here—both during the Great Recession and now—lies not with the Fed, but with Congress, particularly Republicans in Congress.

Democrats, acting with panicked muscle memory from the miserable exercises of the previous crisis, have proposed very aggressive fiscal policy, up to and including sending large monthly checks to every American household. A proposed rescue plan includes expanded unemployment insurance, paid sick leave, and more money for the Supplemental Nutrition Assistance Program. Republicans, still dismissing the severity of the pandemic, have suggested wan policies and slowed down the process. That means monetary policy is acting on its own. That means more joblessness and a sharper slowdown. That means lower-income families reliant on temporary work have no chance of recovering as fast as high-income families reliant on dividends and market returns.

Why couldn’t the Fed get creative and get into the fiscal-policy game? Why couldn’t it create $1.5 trillion and shower it on Americans? No less an authority than Ben Bernanke, the Fed chair who helped the country muddle through the Great Recession, has considered that scenario. It is possible, and at some point might become necessary. But it is not an option open to the Fed at the moment, since it would likely require a new legal framework and definitely require a lot of new policy infrastructure. (In one scheme, every American would incorporate as a kind of bank, then seek zero-interest loans. It would be weird.) Fed intervention in fiscal policy would also require, I imagine, Congress flat-out refusing to do its job and letting a downturn become a severe recession.

by Anne Lowry, The Atlantic |  Read more:

Image: Scott Applewhite

[ed. I can't figure out the Fed. Initially, it was supposed to alleviate financial crises by maximizing employment, stabilizing prices, and moderating long-term interest rates. That's it. A Bank for banks. However, over time its function evolved (without corresponding legislation) so that now it pretty much has free reign to do whatever it wants with US dollars - including propping up the stock market, causing severe price discovery problems, unknown risk, distortions in valuation, and inherent moral hazard. Even the Fed itself can't seem to decide what it's role should be: one component says it has three functions, another says five, and all are extremely broad.]

C.D.C: Worst Case Estimates

Officials at the U.S. Centers for Disease Control and Prevention and epidemic experts from universities around the world conferred last month about what might happen if the new coronavirus gained a foothold in the United States. How many people might die? How many would be infected and need hospitalization?

One of the agency’s top disease modelers, Matthew Biggerstaff, presented the group on the phone call with four possible scenarios — A, B, C and D — based on characteristics of the virus, including estimates of how transmissible it is and the severity of the illness it can cause. The assumptions, reviewed by The New York Times, were shared with about 50 expert teams to model how the virus could tear through the population — and what might stop it.

The C.D.C.’s scenarios were depicted in terms of percentages of the population. Translated into absolute numbers by independent experts using simple models of how viruses spread, the worst-case figures would be staggering if no actions were taken to slow transmission.

Between 160 million and 214 million people in the U.S. could be infected over the course of the epidemic, according to one projection. That could last months or even over a year, with infections concentrated in shorter periods, staggered across time in different communities, experts said. As many as 200,000 to 1.7 million people could die.

And, the calculations based on the C.D.C.’s scenarios suggested, 2.4 million to 21 million people in the U.S. could require hospitalization, potentially crushing the nation’s medical system, which has only about 925,000 staffed hospital beds. Fewer than a tenth of those are for people who are critically ill.

The assumptions fueling those scenarios are mitigated by the fact that cities, states, businesses and individuals are beginning to take steps to slow transmission, even if some are acting less aggressively than others. The C.D.C.-led effort is developing more sophisticated models showing how interventions might decrease the worst-case numbers, though their projections have not been made public.

by Sheri Fink, NY Times |  Read more:

Image: Erin Schaff/The New York Times
[ed. See also: The Extraordinary Decisions Facing Italian Doctors (Atlantic).]

Masters Tournament Postponed

Augusta National Golf Club is postponing the 2020 Masters amid concerns for the coronavirus pandemic, according to a statement released by tournament chairman and club president Fred Ridley on Friday.

Sources told Golf Digest Thursday that Augusta National was reviewing contingencies include limiting patron access or banning patrons from the course entirely, as well as cancellations of practice rounds, the Par-3 Contest, the ANWA and the DCP. Multiple sources insisted that canceling the tournament "is not expected at this time."

However, as every major sports league suspended its operations—including the PGA Tour, which cancelled the Players Championship and its next three weeks of events—and awareness grew of the battle ahead against COVID-19, the club altered its approach to the 2020 tournament.

"Unfortunately, the ever-increasing risks associated with the widespread Coronavirus COVID-19 have led us to a decision that undoubtedly will be disappointing to many, although I am confident is appropriate under these unique circumstances," said Ridley in a statement. "Considering the latest information and expert analysis, we have decided at this time to postpone the Masters Tournament, the Augusta National Women’s Amateur and the Drive, Chip and Putt National Finals.

by Joel Beall, Golf Digest | Read more:
Image: David Cannon

[ed. Oh, no. Also: Players 2020 canceled after one round, along with next three tournaments (Golf Digest).]

Neon
via:

Talks on a Sweeping Aid Package Stumble

Talks on a sweeping aid package stumble on paid sick leave and, improbably, abortion.

Senator Mitch McConnell, Republican of Kentucky and the majority leader, canceled a recess that had been planned for next week, as House Democrats and the administration continued to negotiate a deal on a sweeping coronavirus relief package.

House Democrats delayed a scheduled vote on their package on Thursday as their negotiations with the White House continued behind the scenes. A vote could still come later in the day.

Speaker Nancy Pelosi, Democrat of California, and Steven Mnuchin, the treasury secretary, spent Thursday negotiating privately over the contours of the measure, which would provide a substantial new paid sick leave program, enhanced unemployment insurance, free coronavirus testing and food assistance.

Many Republicans are opposed to the paid sick leave proposal, complaining that Democrats are using the coronavirus crisis to accomplish a long-held domestic priority that is exceedingly costly.

But another improbable sticking point has emerged: Republicans are trying to insert abortion restrictions into the emergency bill. The Republicans want to include the Hyde amendment, which would bar the use of federal funds for abortions, according to a person familiar with the deliberations. Republicans routinely push to include the language in legislation that governs the distribution of federal money.

by NY Times |  Read more:

[ed. No comment.]

Reza Afrookhteh, 1957
via:

Symptoms Are Not Enough: Strict Rules Limit Who Gets Tested

Matt McNamara, 46, was concerned when he developed a sore throat, cough and fever last Friday.

“Those were the three things that were markers for me to say this is definitely different,” he told Yahoo News.

McNamara is a field operations manager at Spectrum and drives for Uber on weekends, so he was concerned about showing up to work sick and possibly infecting others. After going to Adirondack Urgent Care in Queensbury, N.Y., he tested negative for seasonal influenza and was told he had an unknown virus before being sent home.

But after reading that a pharmacist at a local CVS where he shops had tested positive for COVID-19, McNamara wondered why he hadn’t been tested for coronavirus himself and decided to follow up with the urgent care unit.

The frustrating response he received gives an insight into the experience of many Americans who are seeking the tests, which continue to be in limited supply despite reassurances from the Trump administration.

“They said, ‘Well, we didn’t test you because, No. 1, we don’t test for it here. You’d have to go somewhere else,’” McNamara recounted. “‘But we didn’t recommend any testing because you did not meet the CDC’s criteria of having traveled outside the country to a known nation or place that has it, and you also have not been in contact with anybody who has it.’”

Still concerned, McNamara said he followed up with the Warren County Health Services. But they also told him he did not meet the CDC’s criteria for testing.

J'nelle Oxford, public health program coordinator at Warren County Health Services, told Yahoo News, “It's still cold and virus season,” and symptoms of coronavirus alone are currently not grounds for coronavirus testing. She said they are still prioritizing those who are “high risk” and “high exposure,” including those who had been to a country with a level 2 or level 3 travel health notice or in close contact with someone who has been diagnosed with coronavirus.

The CDC defines “close contact” as being within six feet of an infected person for a prolonged period, or having direct contact with “infectious secretions” of a COVID-19 patient.

"Frequenting” the CVS where a pharmacist tested positive “does not qualify," Oxford said.

So what can you do if you think you should be tested for coronavirus?

Federal health officials insist that Americans cannot seek out a test for coronavirus on their own — contradicting a claim by President Trump that “anyone who wants a test can get a test.”

“You may not get a test unless a doctor or public health official prescribes a test,” Health and Human Services Secretary Alexander Azar said at an off-camera briefing at the White House on Saturday. “That is our medical system in the United States, in the same way that you may not get a cardiac medicine if your doctor doesn’t prescribe that.” (...)

But at present, the odds that a doctor’s visit or concerned phone call to your physician will result in a test are incredibly low. Only 6,563 Americans have been tested as of Tuesday morning, according to the CDC.

And for many Americans, the unpredictable process of determining who gets tested and who doesn’t can be frustrating. After returning from a work trip involving stops in Thailand and South Korea, Washington, D.C. native Maggie McDow wrote on Facebook that her doctor was “furious” when the Department of Health refused to run a coronavirus test after she showed respiratory symptoms, despite her travel history. Her post received over 28,000 shares.

“Do I have Covid-19? Who knows. Do we have a broken public healthcare system that is utterly failing during a health pandemic? Absolutely,” McDow wrote in her Facebook post on Saturday.

by Rebecca Corey, Yahoo News |  Read more:

Image: California Department of Public Health via AP

[ed. Hard to tell with so much disinformation floating around, but 6,500 tests is woefully inadequate. CDC says the number is closer to 11,000 but that's still a very small number (Coronavirus: US admits 'failing' on testing, says Fauci - BBC). See also: 'We are flying blind': Lawmakers fume amid lack of coronavirus testing and answers (CNN). Finally, it's  not just tests that are limiting but a lack of ventilators and ICU beds as well (NY Times). [Update: White House Knew Coronavirus Would Be A 'Major Threat' — But Response Fell Short (NPR).]