As I have said before, it is an iron rule in the US that any law or regulation that deals with taxes or economic or business regulatory issues will have loopholes that enable the rich to get richer, while at the same time placing increased hurdles in the path of the poor. We saw how the stimulus package supposedly meant for small businesses had most of the money immediately snapped up by big companies, including publicly traded ones and even professional basketball teams because they had the lawyers to quickly file the paperwork and the big banks that were tasked with disbursing the money found it most profitable and least work to shovel it to their bigger clients. Small companies who were the intended beneficiaries got shut out before they knew the doors were even open.
After getting much criticism for the fact that many small businesses were shut out of the first stimulus package, people were dismayed to see that the second package had not addressed those problems.
Despite mounting criticism of the small business relief scheme, after large and publicly traded firms received huge loans, the second round of the Paycheck Protection Program will have essentially the same structure, with desperate companies scrambling for cash and banks deciding who gets it based on their own preferences.
“I can count on one hand — literally on one hand — the number of businesses in my district who have received assistance,” Rep. Adriano Espaillat (D-N.Y.), who represents Upper Manhattan, said Thursday during a hearing on Capitol Hill. “They got bamboozled. They are mad as hell. I am mad as hell.”
There are a bunch of things Congress could also do to make this program work more equitably and keep the money out of deep-pocketed companies’ hands, said Amanda Fischer, policy director at the Washington Center for Equitable Growth.
First, there should be a ban on any public company receiving money, Fischer said. Those businesses have other ways of raising cash — public businesses can easily sell shares. Shake Shack, for example, was able to turn down its $10 million loan because it could tap another line of credit. More than 80 other publicly traded companies tapped the fund before it ran dry last week, according to a Financial Times analysis.
Fischer also suggested prohibiting financial service companies from tapping the program, following some reports that hedge funds ― which are technically small businesses ― were applying. A hedge fund’s business is raising money.
Another way to keep the money out of the hands of the biggest and most well-resourced businesses would be to require a certain number of small dollar loans. During the last wave of lending, 4% of the loans represented 44.5% of the $349 billion lent out. In other words, close to half the money went to the biggest companies in the form of large loans.
“It’s a case of a very tiny number of companies making up a very high percentage of the total of money,” she said.
And right on cue, we see further evidence of this where millions of poor people are finding themselves facing delays in getting their stimulus checks. These were customers of Citi Tax Financial in Augusta, Georgia. (Thanks to reader Chris for alerting me to this story.)
Citi Tax’s clients — just like some clients of big tax brands such as H&R Block, Jackson Hewitt and TurboTax — didn’t get their money for the very reason Congress wanted to get money to them quickly in the first place: They are poor. The Georgia customers, almost all black women, are among the likely millions of Americans who are having trouble getting the stimulus funds they are owed. The IRS’ difficulty in swiftly getting payments to Americans has a basic, root cause: There are multiple private actors sitting between the IRS and tax filers.
“Because we have an entire industry that survives on — and is a huge force in maintaining — this system in which they are third-party intermediaries, you end up with these delays and complications,” said Chi Chi Wu, an attorney at the National Consumer Law Center.
Meanwhile, the wealthy are getting windfalls in the form of tax breaks that wee added to the stimulus bills.
As the federal government dispenses trillions of dollars to save the economy, small businesses and out-of-work individuals are jostling to grab small slices of aid before the funds run out.
But another group is in no danger of missing out: wealthy individuals and big companies that are poised for tax windfalls.
As part of the economic rescue package that became law last month, the federal government is giving away $174 billion in temporary tax breaks overwhelmingly to rich individuals and large companies, according to interviews and government estimates.
Some of the breaks apply to taxes have long been in the cross hairs of corporate lobbyists. They undo limitations that were imposed to rein in the giveaways embedded in a $1.5 trillion tax-cut package enacted in 2017. None specifically target businesses or individuals harmed by the coronavirus.
Lee Fang writes that the finance industry is using th crisis to push for more deregulation
REPUBLICAN LAWMAKERS and finance industry lobbyists are using the coronavirus pandemic to press regulators into rapidly waiving financial safeguards for community banks.
And so far, banking regulators have obliged, lifting rules imposed after the 2008 crisis that limit risk-taking and require banks to undergo more strenuous audits.
But experts are warning that the deregulatory blitz, sold as a fix to stimulate business by encouraging more lending, raises the potential for a flood of small bank failures, potentially lengthening economic woes and risking the need for future bank bailouts.
Lowering the Community Bank Leverage Ratio means hundreds of banks can hold onto less capital while avoiding standards that restrict the types of risk they take on.
“The industry and regulators love to use jargon and impenetrable language but the leverage ratio is nothing but a capital buffer that a bank has to have to absorb losses itself so it won’t have to be bailed out by taxpayers,” said Dennis Kelleher, president of the financial reform group Better Markets.
“It would really turn logic on its head to now say the banks should not have to comply with those other rules and they should get a lower leverage ratio,” added Kelleher.
“The whole idea of lowering capital requirements to respond to a pandemic is wrong,” said Jeremy Kress, an assistant law professor at the University of Michigan School of Business.
The rich never let a crisis go to waste.